Parimutuel Protocol

Overview

Parimutuel Markets are peer to peer, dual-outcome event markets where all positions are pooled together. The in-the-money (or winning) side shares the total pool on a pro-rata basis.
Hxro Network's Parimutuel Protocol is a pluggable network of markets and liquidity pools, designed to be tapped and bootstrapped on-demand by operators and liquidity providers. The Parimutuel Protocol runs on the Solana blockchain network to take advantage of the high throughput, trustless global ecosystem, and quick settlement times, which allows Parimutuel to match and outperform traditional use-cases.
For operators, Hxro's Parimutuel Protocol is a deep, varied, and time-bound network of contextual liquidity pools. The network has a low barrier-to-entry and can be extended to support markets based on a variety of factors, such as contract size, duration, and underlying assets.
Operators can offer their users a seamless, trustless, on-chain experience with the benefits of lower fees and aggregated network liquidity to improve efficiencies.
Parimutuel describes a payoff system in which all positions (or wagers) are placed together in a common pool. Consider an N outcome event, in this case the total pool will be the sum of all individual outcome pools. The fee is then deducted, and payoff odds are calculated by sharing the total pool (net of fees) amongst all winning entries on a pro rata basis.
Historically, parimutuel-style wagering is most commonly identified in horse racing. However, this system has powerful application in a market context across other arenas including trading, prediction markets and sports wagering. In these contexts, parimutuel markets are generally dual-outcome. A trader takes a position on an event's outcome and if correct, he will be distributed the payoff from the money lost by the traders who took a position on the losing side (plus his initial position).
For traders, parimutuel markets offer a simplified way to trade risk. Since the outcome of a trade is generally binary (in-the-money or out-of-the-money), a parimutuel market can remove many of the complexities associated with execution and position management in a traditional trading market. Additionally, because of the pooled nature of parimutuel markets, an imbalance in the distribution of assets to each outcome creates implied payoff odds. This creates the potential for asymmetric payoffs in cases where the imbalance becomes significant.
Hxro Network introduces a parimutuel protocol designed to support fully on-chain, peer-to-peer liquidity and market functions for a simplified dual-outcome parimutuel market. The protocol is designed to solve for the liquidity consistency problem typically faced in nascent markets and will support applications specializing in market segments including trading, prediction markets, and sports wagering.
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