Shark's Price Prediction
Last updated
Last updated
In this section, we present what is the "classic" price prediction game and compare it to Shark's approach to understand how is Shark different.
A price prediction game, often involving assets like Bitcoin, revolves around participants making predictions by depositing amounts into a shared pot. These predictions speculate whether the price of Bitcoin will surpass or fall below a predefined target price within a specified future timeframe, such as five minutes, fifteen minutes, or one day.
Upon closure of the prediction window, the actual (closing) price of Bitcoin is compared against the target price. Participants whose predictions align with the actual price direction are declared winners and receive a share of the pot. Typically, a platform would levy a 1-3% fee on each prediction to ensure platform sustainability.
An issue of "classic" price prediction games is solved by Shark
When there are only bullish or bearish prediction within a game, it means there is no one taking a bet against the other. In such cases, the game would be cancelled, and players would be reimbursed as there were no opponents. This issue is effectively addressed by Shark Protocol.
Shark's price prediction game operates similarly to the description provided above. However, a key distinction lies in the involvement of $SHARK staking. Upon the the first prediction for a given game, $SHARK staking will automatically make predictions on both sides of this game. This proactive approach ensures that games proceed without cancellation, significantly enhancing the user experience.
To make sure this mechanism is viable, a 2% fee is levied on every prediction made, with 80% of this fee redistributed to $SHARK stakers as a reward for their contribution of $SHARK tokens to the protocol's operation.
For a visual representation of how this process functions, refer to the image below.
It is 11:04:00 (HH:MM:SS), the price of Bitcoin is 71,231.37 and you are confident it will be higher in 6 minutes. As you want to predict on a short time-frame, you can make a prediction on the 5 minutes timeframe on SharkProtocol.Bet. As there are 5 minutes predictions on Shark, you are able to make a prediction on the following window:
Bitcoin 5m window definition:
Start window time (target price is defined here): 11:05
End window time (closing price is defined here): 11:10
Time deadline for making a prediction in this window: 11:02:30
You always have up to half of the window to make your predictions. In that case, it is 2m30s after the start window as we are on the 5 minutes timeframe. You can always bet before knowing the target price as well.
It is now 11:05:30 and the price of Bitcoin at 11:05:00 was 71,229.11 (this is our target price). You firmly believe that the price at 11:10:00 will be higher than 71,229.11. Therefore, you make a prediction with 100 $SHARK.
It is 11:07:30, the deadline for making prediction during that window has closed and no one can make predictions regarding if the price will be higher or lower than 71,229.11 (this is our target price). There is 400 $SHARK in the pot where the participants (50 $SHARK from stakers) thought the price would be higher at 11:10:00 and participants that thought it will be lower added 800 $SHARK to the pot (50 $SHARK from stakers).
It is 11:10:06, the price of Bitcoin at 11:10:00 was 71,376.05 which is greater or equal to the price of 71,229.11 at 11:05:00. You won your prediction! How much did you get from that prediction?
You had 100 / 400 (25%) of the "bull" side of the window and the bulls won the bears amount which is 800 $SHARK. Therefore, you are getting 25% of 800 $SHARK which is 200 $SHARK + the amount you used as prediction which is 200 $SHARK. Which means you end up with 400 $SHARK minus the fees.
There is a 2% fees on all predictions made on SharkProtocol.Bet so the actual amount you would get is 392 $SHARK. This is a 96% ROI on your prediction as you were right on the future price of Bitcoin.
What happens to the $SHARK stakers?
$SHARK stakers get 80% of the fees: 19.2 $SHARK
Additionally, in the above the $SHARK stakers had 50 $SHARK on both sides:
Lost 50 $SHARK on the bear side (-50 $SHARK)
Won 50 / 400 (12.5%) of the bear side (+100 - Fees = +98 $SHARK)
Get their wagers (minus fees) back (+49 $SHARK)
In the end, for a wager of 100 $SHARK on this play, the stakers received 166.2 $SHARK which is a ROI of 66.2%!
What would have happened if the bears would have won in the above example?
The player who played its 100 $SHARK and thought it would go higher would have lost its 100 $SHARK.
The bears would've won the 392 $SHARK (2% fees on the 400 $SHARK) which is a ROI of 47% (as they get 98% of their 800 $SHARK.
The stakers would've get:
19.2 $SHARK from the fees
6.25% of the bulls side: 24.5 $SHARK
Their wager: 49 $SHARK
Which is a total of 92.7 $SHARK and a ROI of -7.3%.
We understand the first scenario is better for the $SHARK stakers but we expect that in the long run, $SHARK stakers should win half of their games and generate more revenues from the fees.
