Previous mechanism in ROI forecast and initial quote markets used closing price of the 30-minute candlepaying attention to tier 1 exchanges and/or exchanges with the highest reported volume of a specific token.
However, it can be criticized for only sometimes reflecting the most true or fair market price. This can lead to confusion and dissatisfaction among predictors, who sometimes need assist understanding the rationale behind selected benchmarks.
Why is decentralized validation better for markets predicting ROI and initial quotes?
Decentralized validation offers significant advantages over centralized validation in the ROI forecast and first-quote markets due to several inherent challenges with centralized methods:
- Tokens are often listed on multiple exchanges, but not simultaneously. This, over time, leads to discrepancies in the initial trading data.
- In the first minutes or hours after the token is listed, exchanges may block withdrawals. This restriction prevents arbitrage, which would assist equalize prices across platforms – so there can be significant price differences between exchanges.
- Initial circulation portions of the token may experience delays in unlocking to investors or the community. This delay means that the initial circulating supply is critically low, which can inflate the initial price.
- Technical problems on stock exchanges, such as delays in token deposits or trading halts, may impact trading data.
Using decentralized validation, the platform leverages the collective knowledge and vigilance of the community to deal with these complexities.
Validators collaboratively evaluate data from multiple sources, take into account listing times, factor in payout restrictions, and factor in tokenomic complexities. Decentralized validation reduces the risk of relying on potentially erroneous or incomplete centralized data, ensuring that the final results reflect comprehensive and reliable analysis.
The example described below shows why decentralized validation is necessary.
In a recent scenario involving listing Weight ($ALE) on cryptocurrency exchanges Bitget and MEXCThe Oriole Insights forecast market faced a unique challenge due to differences in closing prices across platforms.
Case details:
Weight $MAS was traded with a 30-minute close whose candle prices differed slightly on the two exchanges:
- Bitget: The 30-minute candle closed at $0.11
- Mexico: The 30-minute candle closed at $0.13
Possible prediction ranges were as follows:
1. 0.5x – 1x ($0.06 – $0.12)
2. 1x – 5x ($0.12 – $0.60)
3. And so on until:
10. 100x – 200x ($12-24)
So the prices of the 30-minute close candles were slightly different, but this had an impact on the decision-making process to get the right result. While the closing price on Bitget was in the first variant, the closing price on MEXC moved into the second variant. This discrepancy led to difficulty in definitively determining the correct prediction range.
Oriole Insights has determined that BOTH the first and second forecast results are correct to eliminate this discrepancy. However, this decision also highlighted the inherent challenges of relying solely on centralized decision-making and the need for a more nuanced approach, especially in scenarios involving multiple data sources with little variation.
Introducing a decentralized approach to validation
In response to these challenges, Oriole Insights will introduce a novel feature: Validation by authorized and trusted users. This approach aims to decentralize the decision-making process and escalate the reliability of results in prediction markets. So let’s consider what it takes to become a validator and what its responsibilities are:
Requirements for validators
Each market, whether ROI forecast and pre-quote markets, or binary and categorical forecast markets, has appropriate prediction requirements and, in our case, validator requirements. Only users with specified User type and/or level can be validators.
❗️Validators cannot participate as predictors in the markets they validate, thus ensuring impartiality.❗️
Reward system
Validators are incentivized by: Validator reward pool — each pool varies by market. The reward will depend on the specific validator Reputation and total number of Validators(disturbing rewards proportionately). Both agreeing and disagreeing reviewers are eligible for rewards, which promotes a balanced view.
Validation mechanics (Short)
Validators are given the proposed correct option and can either agree or disagree. AND Validation delta must be achieved before a decision can be final.
Note: Validation Delta – The difference required in validator votes to determine whether an answer is correct or not. This difference may indicate agreement or disagreement. Reaching the delta indicates a level of consensus among validators, leading to a reselection of the correct result or confirmation of the originally selected result.
Solution and rewards
If the validators reach a consensus, the market enters the final phase and the rewards are distributed between successful predictors from the accumulated pool of incorrect predictions and the Seed Pool.
Validators receive rewards from Validator Pool. If consensus is not reached, Oriole Insights proposes an alternative outcome and the process is repeated.
