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1 sat \ 3 replies \ @220522c2c4 OP 26 Aug \ parent \ on: Non-custodial prediction markets on Ark? bitcoin
If people buy conditional DLC-VTXOs and still have some sats remaining in their wallet balance, can they do a unilateral exit with those sats? And people cannot exit the Ark once they've purchased some conditional VTXO at market price, but they can exit after claiming those DLC-VTXOs?

You can always use Ark's unilateral exit for your VTXOs, locked with a DLC or not. You cannot exit the DLC contract. Does this make sense? This confused me too, but it's a very nice property.

Have you given any thought to this liquidity constraint under a DLC model? I have been wondering for some time if it's possible to do LMSR based prediction markets on Ark without a DLC type construct, due to this liquidity limitation.

I definitely see liquidity as a major problem here, but because of Ark, not because of DLCs. I haven't thought much about this yet, though. So maybe I will arrive at the same conclusion later.

Happy to chat here: https://calendly.com/james-birkeland/30min. Not available this week, but next week I have some time.

Don't have much time myself currently. Will get back to you! I'm also planning to post about this on Delving Bitcoin soon, but with some math and numbers regarding liquidity requirements.

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1 sat \ 2 replies \ @HYPERBITCOINZATION 27 Aug

How is the DLC enforceable if anybody can do a unilateral exit from the VTXOs that are stored within the DLC? If it's LMSR based, then the AMM needs liquidity from the losing bets to pay off the winning ones. If people know they're on the losing side of a wager, then what's stopping them from exiting the Ark? Like would they exit the Ark but still be locked into the DLC on-chain somehow?

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1 sat \ 1 reply \ @220522c2c4 OP 27 Aug
Like would they exit the Ark but still be locked into the DLC on-chain somehow?

Yes! Unilateral exit means you broadcast the chain of presigned transactions, so your VTXO turns into a UTXO, but spending this UTXO still requires the correct unlock script. In the case of a 2-party DLC, there would be three ways to unlock it: one for each winner with the correct attestation, and a delayed refund for both. This means the Ark operator as the market operator is still part of the DLC, just onchain now instead of in a VTXO.

Did this help?

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101 sats \ 0 replies \ @HYPERBITCOINZATION 28 Aug

Fascinating, that's really cool.

If you have a way to solve the liquidity problem, so that the volume is not constrained by how much liquidity the AMM has available, then Ark-based DLCs could work for an LMSR type AMM.

I wonder if it's possible to reuse liquidity across mutually exclusive outcomes. For example, outcome A and outcome B are mutually exclusive, and any traders that bet on outcome A, their payouts need to be committed beforehand to that DLC.

If it's possible to re-use the liquidity that's committed to the A outcome CET to the B outcome CET, then the volume of the prediction market is not constrained by the liquidity available in the AMM (besides the subsidy committed beforehand).

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