Prediction markets, like betting on sports outcomes or election results, are similar to coin-flipping – predicting whether a random event will end positively or negatively. A new model, the Gaussian score dynamics model, matches the market price to the probability of an underlying movement. A new automated market maker, focusing on loss-vs-rebalancing, aims to optimize liquidity provider costs. The concept of uniformity in AMMs ensures losses are consistent, appealing to sponsors and profit-seeking liquidity providers. This model differs from existing AMMs like Balancer or Uniswap, offering a unique approach to prediction market dynamics. The model is a starting point for further exploration in the field.
https://www.paradigm.xyz/2024/11/pm-amm