How Veyra Works

A comprehensive guide to understanding prediction markets and how Veyra operates.

Prediction Market Fundamentals

What is a Prediction Market?

A prediction market is a marketplace where participants trade contracts whose payouts depend on unknown future events. Essentially, you're buying and selling "shares" of potential outcomes.

The Wisdom of Crowds

Prediction markets leverage collective intelligence:

Key Principle:

When many people with different information and perspectives trade on an outcome, the market price tends to reflect the true probability better than any individual expert.

Why It Works:

1. Financial Incentive: People put money behind their beliefs

2. Information Aggregation: Diverse perspectives combine

3. Self-Correction: Errors are arbitraged away

4. Continuous Updates: Prices adjust to new information

Market Structure

Binary Markets (YES/NO)

Structure:

Question: "Will Event X happen by Date Y?"
Outcomes: YES or NO
Price Range: $0.01 to $0.99
Resolution: YES = $1.00, NO = $0.00

Example:

Market: "Will Bitcoin reach $150K by Dec 31, 2025?"
YES shares: $0.68
NO shares: $0.32
Total: $1.00 (always)

Interpretation:

• Market implies 68% probability of YES

• Market implies 32% probability of NO

Multi-Outcome Markets

Structure:

Question: "Who will win the 2026 NBA Championship?"
Outcomes: Multiple teams
Prices: Each outcome has its own price
Resolution: Winner gets $1.00, others get $0.00

Example:

Boston Celtics: $0.22 (22% chance)
Los Angeles Lakers: $0.18 (18% chance)
Denver Nuggets: $0.15 (15% chance)
Milwaukee Bucks: $0.12 (12% chance)
Other Teams: $0.33 (33% chance)
Total: $1.00

Trading Mechanics

Order Types

1. Market Order

Execute immediately at current price

Action: Buy 10 YES shares
Type: Market Order
Execution: Instant
Price: Best available (e.g., $0.68)
Total: $6.80

Pros: Fast, guaranteed execution Cons: Price may vary slightly

2. Limit Order

Set your own price

Action: Buy 10 YES shares
Type: Limit Order
Limit Price: $0.65
Execution: Only when price reaches $0.65

Pros: Control price Cons: May not execute

Order Book

Bid/Ask Spread:

Bids (Buy Orders):          Asks (Sell Orders):
$0.67 - 50 shares          $0.69 - 100 shares
$0.66 - 100 shares         $0.70 - 200 shares
$0.65 - 200 shares         $0.71 - 150 shares

Spread: $0.69 - $0.67 = $0.02 (2¢)

Trading:

• Buy at Ask: $0.69 (immediate)

• Sell at Bid: $0.67 (immediate)

• Place limit order: Wait for your price

Liquidity

High Liquidity Market:

Spread: $0.01 (tight)
Volume: $1M+
Depth: Large orders available
Slippage: Minimal

Low Liquidity Market:

Spread: $0.10 (wide)
Volume: $10K
Depth: Limited orders
Slippage: Significant

Pricing Dynamics

How Prices Form

Supply & Demand:

1. More buyers → Price increases

2. More sellers → Price decreases

3. Equilibrium → Current market price

Information Impact:

Before News: YES at $0.50
Positive News Released: Buyers flood in
After News: YES at $0.75

Price Movements

Example: Election Market

Day 1: Candidate leads polls
→ YES: $0.60

Day 30: Scandal breaks
→ YES: $0.35 (-25¢)

Day 60: Strong debate performance
→ YES: $0.55 (+20¢)

Day 90: Election victory
→ Resolution: $1.00

Arbitrage

Keeping Prices Honest:

If YES + NO ≠ $1.00, arbitrage opportunity exists:

Scenario: Pricing Error
YES: $0.55
NO: $0.50
Total: $1.05 (impossible!)

Arbitrage Trade:
1. Buy 1 YES share: -$0.55
2. Buy 1 NO share: -$0.50
Total cost: -$1.05

Guaranteed payout: $1.00
Guaranteed profit: -$0.05

Market corrects: Prices adjust to $0.52/$0.48

Market Resolution

Resolution Process

1. Event Occurs

Market: "Will Bitcoin reach $150K?"
Date: December 31, 2025
Bitcoin Price: $165,000
Result: YES

2. Market Resolved

Winning outcome: YES
YES shares → $1.00 each
NO shares → $0.00

3. Automatic Payout

You held: 100 YES shares
Purchase price: $68 (at $0.68)
Payout: $100 (100 × $1.00)
Profit: $32

Resolution Sources

Trusted Sources:

• Government agencies (elections, economic data)

• Sports leagues (game results)

• Financial exchanges (prices, trading data)

• News organizations (major events)

Example Sources:

Election Results → Federal Election Commission
Sports Outcomes → Official League Website
Stock Prices → Major Exchange (NYSE, NASDAQ)
Weather Data → National Weather Service

Dispute Resolution

If outcome is unclear:

1. Community Review: Stakeholders can challenge

2. Evidence Submission: Provide proof

3. Governance Vote: Token holders decide

4. Final Resolution: Binding outcome

Risk & Reward

Risk Factors

1. Event Risk

What you're betting on doesn't happen
Result: Loss of investment
Mitigation: Research, diversify

2. Liquidity Risk

Can't sell shares when you want
Result: Forced to hold or accept bad price
Mitigation: Trade high-volume markets

3. Time Risk

Capital locked until resolution
Result: Opportunity cost
Mitigation: Shorter-term markets

4. Platform Risk

Technical issues, hacks, or bugs
Result: Funds at risk
Mitigation: Platform insurance, security audits

Reward Calculation

Simple Formula:

Profit = (Payout - Cost)
ROI = (Profit / Cost) × 100%

Example 1: Winning Trade

Bought: 50 shares at $0.60
Cost: $30
Event happened: YES
Payout: $50 (50 × $1.00)
Profit: $20
ROI: 66.7%

Example 2: Losing Trade

Bought: 50 shares at $0.60
Cost: $30
Event didn't happen: NO
Payout: $0
Loss: -$30
ROI: -100%

Example 3: Early Exit

Bought: 50 shares at $0.60
Cost: $30
Sold: 50 shares at $0.70
Proceeds: $35
Profit: $5
ROI: 16.7%

Advanced Concepts

Expected Value (EV)

Formula:

EV = (Probability × Profit) - (Probability × Loss)

Example:

Your belief: 70% chance of YES
Market price: $0.60

If YES:
Profit: $1.00 - $0.60 = $0.40

If NO:
Loss: -$0.60

EV = (0.70 × $0.40) + (0.30 × -$0.60)
   = $0.28 - $0.18
   = +$0.10 per share

Positive EV → Good bet!

Kelly Criterion

Optimal Bet Sizing:

Kelly % = (p × b - q) / b

Where:
p = probability of winning
q = probability of losing (1-p)
b = odds received (payout/stake - 1)

Example:

You believe: 70% chance
Market price: $0.60

p = 0.70
q = 0.30
b = ($1.00/$0.60 - 1) = 0.67

Kelly = (0.70 × 0.67 - 0.30) / 0.67
      = 0.169 / 0.67
      = 25% of bankroll

Recommended bet: 12.5% (half-Kelly)

Correlation

Correlated Markets:

Market A: "Democrats win Presidency"
Market B: "Democrats win Senate"

Correlation: High (events likely move together)

Diversification: Limited
Risk: Both can lose

Uncorrelated Markets:

Market A: "Bitcoin reaches $150K"
Market B: "Lakers win NBA Championship"

Correlation: Low (independent events)

Diversification: Good
Risk: Spread across different areas

Platform Economics

Fee Structure

Trading Fees:

Solana network fee: ~$0.01
Platform fee: 2% on winning shares
Withdrawal fee: None

Example Calculation:

Winning payout: $100
Platform fee (2%): $2
Net payout: $98
Network fee: $0.01
You receive: $97.99

Market Creation

Anyone can propose markets:

1. Submit market question

2. Define outcomes clearly

3. Set resolution source

4. Provide initial liquidity

5. Community votes to approve

Requirements:

• Clear, unambiguous question

• Verifiable outcome

• Set end date

• Stake required

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• Markets & Trading - Trading strategies

• Solana Integration - Technical details

• API Reference - Build on Veyra