Axiom Theorem
A decentralized prediction market built on XRP rails
Market Lifecycle
Axiom’s prediction markets follow at minimum 3 stages with an optional 4th and 5th stage plus the final settlement stage:
Creation
Only top 50% Axiom Prime stakers may create markets, specifying:
Title, outcomes, Bets Close time, Resolution time, settlement asset (XRP during bootstrap, with stablecoin settlement enabled as liquidity becomes available).
Commission structure: staker commission (protocol-level default 1%, governance-adjustable 1–3%) + fixed 1% to development team + 0.15% creator quality bonus if unchallenged (total: 2.15%–4.15%).
Evidence URIs for outcome verification.
Trading (Tiered Parimutuel)
Axiom launches with a Tiered Parimutuel trading mechanism—a pure pool-based system where all bets on the winning outcome share the total prize pool proportionally. Early exit is not supported at launch; users commit capital until market resolution.
Why Tiered Parimutuel?
Zero Seed Liquidity
Markets launch instantly with no capital requirement from creators
100% Capital Efficiency
All funds (minus protocol fee) go to winners—no LP losses
Excellent Price Discovery
Implied odds update in real-time as bets flow in
Price-Based Share Rewards
Low-price bettors get more shares—rewards conviction on long shots at any time
Time Bonus Rewards
Additional multiplier for early participation
Simple Implementation
Minimal smart contract complexity and gas costs
Manipulation Resistant
No exit = no wash trading or pump-and-dump schemes
MEV Resistant
No sandwich attacks on exits
Battle-Tested
Builds on horse racing/sports parimutuel with enhanced price mechanics
Pool Structure:
All bets for each outcome flow into a shared pool. The implied probability and potential payout are derived from pool ratios:
Implied Probability for Outcome X = Pool on X / Total Pool
Current Multiplier for Outcome X = Total Pool / Pool on XExample:
YES pool: $60,000, NO pool: $40,000, Total: $100,000
Implied odds: YES = 60%, NO = 40%
Current multiplier: YES wins → 1.67x, NO wins → 2.50x
Share Issuance Mechanism:
Shares are issued based on the average price (implied probability) over the size of the bet. This ensures that large bets which move the price significantly pay a fair average price, rather than the cheap starting spot price. This mechanism (Trapezoidal Rule) protects existing liquidity providers from dilution.
Shares = Amount * (StartRate + EndRate) / 2
Where:
StartRate = 1 / StartPrice = Total Pool / Pool on Outcome
EndRate = 1 / EndPrice = (Total Pool + Amount) / (Pool on Outcome + Amount)Examples:
Pool: YES $100, Total $200 (Start Price $0.50)
Bet: $100 on YES
Start Rate: $200 / $100 = 2.0
End Rate: ($200 + $100) / ($100 + $100) = 1.5
Average Rate: 1.75 shares per dollar
Shares Received: 175 shares (vs 200 at spot price)
Time Bonus (Additional Reward):
On top of price-based shares, bettors receive a time bonus multiplier that decays over the betting period:
Time Bonus = 1.5 - (0.5 × elapsed_time / betting_duration)
Where:
betting_duration = Bets Close - Market Open
elapsed_time = Current Time - Market OpenAt market open: 1.5x multiplier (50% bonus)
At bets close: 1.0x multiplier (no bonus)
Linear decay between open and close
Payout Calculation:
Winner's Payout = (Prize Pool × User's Weighted Shares) / Total Weighted Shares on Winning Outcome
Where: Prize Pool = Total Pool - Protocol FeeExample Flow:
Market: "Will ETH hit $5K by Dec 2025?"
Betting Period: 200 hours
Initial Pool: YES $20K, NO $20K (Total $40K)
1. Alice bets $10K on YES at Hour 1
• Start Rate: $40K / $20K = 2.00
• End Rate: ($40K+$10K) / ($20K+$10K) = 1.67
• Avg Rate: 1.835
• Base Shares: $10,000 × 1.835 = 18,350
• Time Bonus: 1.50x
• Weighted Shares: 18,350 × 1.50 = 27,525
2. Bob bets $50K on YES at Hour 100
• Pool before Bob: YES $30K, NO $20K (Total $50K)
• Start Rate: $50K / $30K = 1.67
• End Rate: ($50K+$50K) / ($30K+$50K) = 1.25
• Avg Rate: 1.46
• Base Shares: $50,000 × 1.46 = 73,000
• Time Bonus: 1.25x
• Weighted Shares: 73,000 × 1.25 = 91,250
Total YES Weighted Shares: 27,525 + 91,250 = 118,775
Final Pool: $100,000 (assuming no other bets for simplicity)
If YES wins:
Alice: $100K × (27,525 / 118,775) = $23,174 (minus commission)
Bob: $100K × (91,250 / 118,775) = $76,826 (minus commission)
Alice bet 5x less ($10K vs $50K) but gets ~23% of the payout.
Her early entry and better price protected her from dilution.Virtual Seed for Initial Odds:
To provide smooth odds from market open (avoiding 100%/0% jumps from the first bet), each outcome starts with a small virtual seed (e.g., $100) used only for odds calculation—not for payouts:
Market opens (virtual seed = $100 per outcome):
Display: YES 50% / NO 50%
Real pool: $0
Alice bets $1,000 on YES:
YES: $100 (virtual) + $1,000 (real) = $1,100
NO: $100 (virtual) + $0 (real) = $100
Display: YES 92% / NO 8%
At payout: Only real pools distributed—virtual seed ignored.Multi-Outcome Markets:
The mechanism scales to any number of outcomes (2, 3, 10, 100+). Each outcome maintains its own pool and weighted shares. The entire prize pool goes to winners of the single winning outcome.
What Users See:
┌─────────────────────────────────────────────────────────────────────┐
│ Betting on YES │
│ ──────────────────────────────────────────────────────────────── │
│ Current implied probability: 60% │
│ Current multiplier (if closed now): 1.67x │
│ Your time bonus: 1.35x │
│ ──────────────────────────────────────────────────────────────── │
│ If you bet $100 now: │
│ • Base shares: $100 × AvgRate ≈ 167 │
│ • With time bonus: 167 × 1.35 = 225 weighted shares │
│ • Your current share of YES pool: 0.19% │
│ • Minimum payout (if no more bets): $167 │
│ │
│ ⚠️ Final payout depends on total pool at market close │
└─────────────────────────────────────────────────────────────────────┘No Early Exit:
At launch, users cannot sell or transfer their positions before market resolution. This design choice:
Eliminates impermanent loss for the protocol
Prevents wash trading and manipulation
Guarantees liquidity (no bank runs)
Enables 100% capital efficiency
Anti-Manipulation Measures:
Bets Close Datetime: Markets enforce a strict "Bets Close" timestamp separate from resolution. This prevents last-second manipulation when the outcome becomes known (e.g., betting stops when the game starts, but resolution happens after it ends).
No Bet Caps: There are no maximum bet limits. The protocol relies on the Time Bonus decay and the "expensive participation" principle to mitigate manipulation. Large late bets receive minimal time bonus (1.0x) and dilute the winning pool, but they also significantly increase the prize pool for existing winners, making manipulation mathematically expensive and self-defeating.
Future Trading Mechanism Evolution:
The MarketFactory is designed as an upgradeable component (see Section 10.1) to support future trading mechanisms. The protocol roadmap includes:
Phase 1 (Launch): Tiered Parimutuel only—simple, zero-liquidity, manipulation-resistant
Phase 2: CFMM pools with early exit for high-frequency markets (requires LP infrastructure). This phase could be skipped depending on community demand and resource availability.
Phase 3: Hybrid CLOB (Central Limit Order Book) similar to Polymarket—combining off-chain orderbooks with on-chain settlement for professional trading
The upgradeable factory allows governance to transition between mechanisms without migrating existing markets or disrupting protocol operations.
For detailed analysis of the tiered parimutuel mechanism, time bonus calculations, edge cases, and comparison with alternative trading models, see: docs/tiered-parimutuel-design.md
Markets support a configurable settlement token. During the bootstrap phase, markets initially settle in XRP due to limited stablecoin liquidity on XRPL EVM Sidechain. Dev team may enable stablecoin settlement during bootstrap as liquidity develops. Post-bootstrap, governance controls which settlement tokens are whitelisted (USDC, USDT, RLUSD, or others).
Proposal (Optimistic Resolution - First Come First Served)
The first top 50% staker to submit an outcome proposal becomes the official proposal. They provide evidence URIs and the proposal immediately enters a challenge window (default: 6 hours, governance-adjustable).
If no challenge is submitted during this window, the proposal is automatically accepted and the market finalizes. The proposer receives a fixed consensus bonus (default: $10 USD equivalent in market settlement asset, governance-adjustable).
Any top 50% staker may submit a challenge during the window with an alternative outcome, triggering a governance vote between the original proposal and the challenger's alternative.
Escalation (if needed)
If the top 50% vote fails to reach consensus—due to no clear winner between original proposal and challenger's alternative (neither reaches 66.7%), insufficient quorum (<10%), or threshold not met—the market escalates to all Axiom Prime stakers.
The escalated vote uses the same quorum and threshold requirements but measured against total protocol stake rather than just top 50%.
An automatic 24-hour extension triggers if quorum isn't reached during the initial escalation period.
If still unresolved after extensions, the market defaults to "Invalid/No Contest" and all positions are refunded proportionally (minus processing fees).
Settlement
Once the outcome is finalized (either through unchallenged optimistic acceptance, voting consensus, or escalation):
Payout Calculation: Winners receive their share of the total market pool based on their outcome share holdings, minus commissions.
Commission Distribution:
Variable Axiom Prime commission (≥1%, set by market creator) routes to active governance vaults proportionally (XRP only initially, multi-vault once stablecoins are added)
Fixed 1% development team fee routes to the development treasury
Market Creator Quality Bonus: If market resolved without escalation, creator receives 0.15% of total market pool
Penalty Application: Incorrect proposers/challengers lose γ (0.20%) of their stake, incorrect voters lose β (0.10%). These penalties form a reward pool.
Reward Distribution:
Unchallenged (optimistic) resolution: Correct proposer receives fixed consensus bonus (default: $10 USD equivalent in market settlement asset, governance-adjustable)
Challenged resolution: Correct proposer receives 60% of penalty pool, correct governance voters receive 40% (pro-rata by stake)
Claim Process: Winners must actively claim their payouts via the market contract. Claims remain available indefinitely, with no expiration period.
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