What does an Oracle do?
An Oracle's role is to settle markets according to the details and source specified in the market title. The first step is to decide if a market is valid or invalid, and then only if the market is valid to answer the market's question. This document is a guide for Oracles to decide market validity.
Market Sequence
Understanding the market sequence and different phases of a market are essential to determining market validity. There are three sequential, non-overlapping phases to a Dublup market: the Primary Market phase, the Event phase and the Reporting phase.
The Primary Market phase begins upon market creation. During the Primary Market phase, participants can buy shares in the market using PAL, increasing the prize pool. The answer to the market's question must remain unknown throughout the Primary Market phase.
The Event phase follows the Primary Market phase. The final answer to the question happens during this phase; for example, an event occurs. During the Event phase, participants can only buy and sell existing shares on the secondary (peer-to-peer) market. The end of the Event phase is called Event Expiration.
The Reporting phase follows Event Expiration and is when Oracles settle the market. If the market is valid, the Oracles answer the market question by verifying the answer according to the third-party source specified in the market title. The reporting phase lasts 24 hours.
Valid Markets
A valid market asks a question regarding an unknown future event that can be independently verified and is not subject to undue influence. The criteria for a valid market are:
- A valid market poses a clearly defined question about a future event where the outcome remains unknown before the primary market phase ends.
- The answer to the market's question must be verifiable by the independent third-party source/s specified at market creation.
- The question and verification instructions must be clearly and unambiguously worded.
- The outcome cannot be influenced or manipulated by the market maker, participants, oracles or the third-party verification source.
To ensure Dublup is a consistent and fair platform, Oracles should not make exceptions to the criteria for valid markets.
Invalid Markets
Invalid markets do not meet all of the valid market criteria. For example:
- If the question has a final answer before the primary market phase closes, the market becomes invalid.
- If the third-party source does not provide information that gives the final answer to the question before the reporting phase begins, the market is invalid.
- If the title and the resolution instructions at the bottom of the market conflict or contradict each other, the market is invalid.
- If a market has a vague or ambiguous outcome, the market is invalid.
- If a market maker, participant, oracle or third-party verification source have unduly influenced the outcome, the market is invalid
An Example of Time frames
Let's work through an example that illustrates how the phases affect market validity.
Consider the situation where a question asks if TeamA will win at an upcoming game. However, the game is delayed due to the weather. The resumed game does not finish until after Event Expiration but concludes during the Reporting phase.
According to the validity criteria, the market is invalid because the final answer to the question remained unknown before Event Expiration. However, if the market has specific instructions for handling delays, the market may remain valid, and the Oracles should report according to the directions in the market.
The intention is that this document clarifies the concepts of market phases and market validity so that the Oracles act consistently when settling markets.