Injective’s fully on-chain orderbook allows users to launch various financial instruments such as spot, perpetuals, expiry futures and binary options. Prediction markets have lately attracted a vast interest across the industry but none of the key players have achieved meaningful traction due to capital inefficiency present in AMM designs and high gas fees.
Frontrunner is a protocol focusing on sports-betting set to launch on Injective’s orderbook in the coming weeks.
We propose a more generic implementation of the binary options primitive akin to Augur and Polymarket which don’t focus on a specific niche (i.e. sports betting). Injective’s orderbook and extremely low gas fees would enable high retail engagement and capital efficiency. Even though bootstrapping liquidity on an orderbook is a major problem, Mito set to launch in the upcoming months will allow users to bootstrap liquidity through vaults. Users can pull their capital into a vault which is going to be controlled by a sophisticated market-maker and provide liquidity to these markets.
Injective incentivizes vault LPs, exchange dApps and market makers through a unique design. Protocol fees are split in two portions: the auction and the fee recipient. 60% of the fees go to the auction pool whereby users can bid for a basket of tokens (mostly stablecoins) with INJ tokens. The winner receives the basket with all generated fees and the INJ used to bid, are burned.
The rest of the 40% can be set to a unique address which can be modified accordingly from the sender.
Users who LP into Mito vaults will generate APY through Injective’s incentives programs, namely Trade & Earn and OLP as well as the strategy’s performance. Market makers will make money off the bid-ask spread, thus utilizing the capital more efficiently and distribute it back to the LPs.
The exchange dApp (the deliverable in this project), will set the fee recipient to an address of its choosing on the frontend page. Thus, all retail users who trade on the dApp will pay the full market fee but you will effectively receive 40% of those fees immediately to you wallet.
Market makers who faciliate the trading activity of the vault, will set fee recipient to an address of their choosing. All LPs will pay the full protocol fees for each trade that will be faciliated by the market maker but 40% of the fees will go back to an address the market maker owns.