Clearmatics, one of the first new companies to explore how financial instruments can live in blockchains, is presenting a completely new class of decentralized future products, which is calling prognosis markets.
These instruments totally in chain take the form of futures contracts with date that can trace any public time series data, whether they are cryptography, inflation or temperatures indices, giving the appearance of something more similar to prediction markets such as the policy market than traditional derivatives.
The forecast markets will be compatible with the autonity of Blockchain of layer 1 that soon to the loop and the protocol of autonomous future (AFP) recently developed. The debut of the new chain compatible with Ethereum and the future protocol will coincide with a “prognosis” next month, a way of inviting the quants, engineers and enthusiasts to participate in the creation of prototype products on autonity.
“AFP supports the creation without permission from outdated futures contracts that can track any underlying temporary series of interest, not only market time series, but a time series without market, such as GDP, inflation, global temperature, blockchain metrics, etc.,” said CEO Robert Sams in an interview. “Basically, in any series of time that the market cares enough to speculate or cover, you can create a product for autonity.”
Despite sounding similar to prediction markets, currently popular due to the success of the Polymarket, the two do not work in the same way. Forecast contracts move one by one with some underlying factor that provides a symmetrical payment profile. Prediction markets offer a unique payment.
When a prediction market event occurs, the winning team is paid and the market disappears. However, a sequence of futures contracts in an underlying data series can continue to perpetuity, Sams said. This allows liquidity to accumulate over time, tracking the risks that persist, while prediction markets are more focused on current narratives, he said.
Forecast markets are not destined to compete with prediction markets, Sams said.
“We see the forecast and prediction markets as complementary to each other, according to different needs in a shared and growing space of market -based mechanisms to manage uncertainty.”
The space of cryptographic derivatives, which has been heating lately when some large exchanges acquired derivative companies, remains largely dominated by products of perpetual futures. Cryptographic perses will be supported in a future version of the AFP, Sams said, but in the chain, futures with the ability to track any real and measurable risk factor can create much more social value and social utility than the protocols focused on cryptographic asset markets, he said.
“There is a community of people in quantitative research and automatic learning who would love to prove if their systems have an advantage in the prediction of things that currently cannot be marketed,” Sams said. “The long value creation tail will occur when people discover how these instruments could be used to reduce the volatility of asset portfolios. Each portfolio has exposure to risk factors for which there is no corresponding financial coverage instrument.”
Stanley Yong, head of the Autonity Foundation, the decentralized governance entity of the blockchain, offers the price of the Law Certificate (COE) of Singapore (COE) for cars as an example of a real -world risk that cannot be covered today.
“Singapore controls the amount of cars on their roads rationing the supply of COES through COE periodic auctions,” said Yong. “All cars need a COE, so the prices of used cars fluctuate with the prices of COE auctions. A prognosis contract that tracks COE auctions would allow someone to sell their car to cover the amount it receives in advance.”
An element of market structure somewhat more Geek for the Autonity block chain and the AFP is the separation of the exchange part, where buyers and sellers agree a price and execute a trade, and the compensation part where intelligent contracts have guarantees, handle margin and auction requirements. In other DEFI protocols, this is generally done in an integrated architecture vertically where a product can only be negotiated in a specific negotiation place.
The AFP allows the products to appear without permission in multiple negotiation places, but with all the guarantees and the cross margin made in the chain, Sams said. This makes it very efficient in capital, and also solves one of the key structural problems with decentralized derivatives, which is the fragmentation of open interest through exchange silos.
“We believe it is strange to call a ‘decentralized’ market when you can only exchange it through a commercial place, even if that monopoly place is a DEX,” Sams said. “We believe that a market is only decentralized when participants can enter a position through any place they choose and get out of a position through any place they choose.”
