in 1867, a parisian perfume shop owner built a betting system so good france nationalized it 150 years later, @meleemarkets just evolved it into something no prediction market has ever had here’s how the PMM works. 🧵

permissionless prediction markets have long been a coveted goal, but historically they haven't worked due to a few hard structural problems the PMM is a totally new mechanism designed to solve them really excited to see it go live soon, & check out the paper in the meantime

Really excited to finally unveil this!! We built the Parimutuel Market Maker - PMM to address one of the core unsolved problems in permission less prediction markets: liquidity bootstrapping. Liquidity attracts traders <> Traders attract liquidity. But when a market is brand new, neither exists. In traditional order book markets(eg: polymarket, Kanshi), professional market makers continuously quote bids and asks, ensuring traders can buy and sell with minimal friction. In permissionless, user created markets, you can't assume a professional market maker will show up for every new market. That chicken and egg problem has been one of the biggest obstacles to building permissionless prediction markets. PMM introduces a fundamentally different approach to market making that's designed to break this feedback loop by: - Bootstrapping liquidity from scratch. - Enabling continuous trading from day one. - Eliminating the need for any liquidity subsidies. If you're interested in prediction markets, I encourage you to read the full lite paper. Huge shout out to @zen_llama and @NickPreszler. It's been an incredible roller coaster over the last few months building this together.

How this feels to trade on is truly unique. Watching your position’s value passively grow and accumulate rewards as the market trades is a paradigm shift. Countless hours have gone into designing the rewards mechanics of the PMM. It’s been the most challenging and rewarding endeavor I’ve ever worked on. The PMM pays what are essential liquidity rewards for simply being in the market. Rather than requiring a secondary party to bootstrap and market make, the parimutuel model lets us reward participants for simply holding their positions. This creates a system where LPs are traders, and the traders are the LPs. Whether you want to interact as a passive or active participant, express an opinion or stay hedged, everyone in the market benefits from being counterparty to everyone else. It’s some kind of magical UX when the market moves against you temporarily and you see your position directly reward you for diamond handing. Simultaneously getting more valuable as the risk of holding goes it up the market adjusts to new information. Believing in something truly pays, and the freedom to move feels like an opportunity to stay ahead of the crowd and make money as others converge on your beliefs. Being able to do things like buy a hedged position and then consolidate it into a winner as the market evolves and coming away with a larger position for doing it, or being rewarded exponentially when your team makes a comeback, it adds a whole new dimension the the way prediction markets feel to use. The experiences the PMM enables is one of a kind, its flexibility enables Melee to power countless different market types, and we can’t wait to show you all what we have in store.

Today, we introduce the PMM. A new liquidity primitive that bootstraps prediction markets from first dollar and the first significant update to parimutuel systems in 160 years. Permissionless prediction markets will become a trillion-dollar category. The PMM is the market structure that gets them there. I am incredibly proud of the Melee team for building the PMM from zero to one in just six months. Special shoutout to @NickPreszler and @zen_llama for the creativity and grit that made this possible. We will look back on this as prediction markets’ AMM moment.