I'd like to introduce two possible prediction market setups for implementing futarchy. First I will review 3 types of prediction markets. Then I will apply these to 2 different Futarchy models.
If you already have a good understanding of categorical, scalar, and conditional prediction markets, feel free to skip this section.
Each prediction market has a question, a collateral token, and at least two outcome tokens covering the possible outcomes of the question. At any point one collateral token can be locked up in exchange for one of each outcome token and likewise, a complete set of outcome tokens can be exchanged back for a collateral token.
- Categorical markets - Categorical markets have a set of possible outcomes. When the market is resolved to one of those outcomes, that outcome token can be redeemed for a collateral token.