Penalty and Incentive Model

Axiom enforces honesty through stake penalties; parameters are governance-adjustable.

Parameters

Symbol	Meaning	Default	Adjustable
β	Losing voter penalty	0.10%	Yes
γ	Losing proposer penalty	0.20%	Yes
ε	Idle voter penalty	0.00%	Yes
MAXp	Max per-market penalty	0.25%	Yes
MAXe	Max per-epoch penalty	1.00%	Yes

Parameter changes proposed by Top 50% stakers require >⅔ of total staked value to execute.

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Pool Formation

Each finalized market forms a penalty pool:

Pool = Σ(β * Vl) + Σ(γ * Pl) + Σ(ε * idle)

Distribution

• Unchallenged: no penalty pool; proposer receives fixed consensus bonus.

• Challenged: 60% to correct proposer, 40% to correct governance voters.

• Creator quality bonus (0.15% of market pool) applies only if market resolves without challenge (unchallenged optimistic resolution).

Governance voters are stakers (not market traders). Traders receive market payouts in settlement token; governance voters receive share-token rewards/penalties.

Enforcement

Penalties and rewards applied via share burns/mints:

Δshares = (usdDelta / sharePrice)

Examples

Challenged resolution and unchallenged optimistic resolution examples are provided in the full spec illustrating penalty pool formation and distribution.