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Pm-AMM: A Uniform Automated Market Maker for Prediction Markets
Introducing pm-AMM: A new automated market maker designed for prediction markets. It provides more consistent liquidity and lower losses than traditional AMMs by adapting to the unique behavior of prediction market tokens.
The volatility of outcome tokens is dependent on the current probability of the event and the time until the prediction market expires, meaning that the pool provides inconsistent liquidity. This model is a potential fit for prediction markets on whether some underlying random walk (such as the score difference of a basketball game, the vote margin in an election, or the price of some asset) will be above some value at a particular future expiration time. The authors wish to thank Benedict Brady, Leo Lau, Allan Niemerg, Storm Slivkoff, Shouqiao Wang, Dave White, and Bill Zhang for helpful comments.
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