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How a functionSPACE market works
functionSPACE is the economic primitive for pricing numerical outcomes. This page explains what that means in plain terms: how one pool prices the whole range of a number, the ways to trade it, who creates and distributes it, and what the contract guarantees. The worked example throughout is a market on a film's opening weekend.
Status: functionSPACE is building on Arbitrum. Updated: .
Introduction
What functionSPACE is
Build markets on anything measurable, for apps, desks and traders.
Most of the numbers that businesses plan around have no market. A studio plans around an opening weekend, a coffee chain around rainfall, an AI lab around how its next model will score, a DeFi team around next month's protocol fees. People hold views on these numbers all the time. There is rarely anywhere to put a view on, see what everyone else expects, or hedge against being wrong.
A functionSPACE market is a question with a numeric answer and a range it can land in. One pool of capital prices every possible answer in that range at once. The prices add up to a forecast, drawn as a curve. A trader chooses how precise to be, from a plain yes or no to the whole shape of what they expect, and every one of those trades lands in the same pool. Any app can show the market to its users.
Six words this page uses
- Question
- A number that will be published. Where will the film's opening weekend land?
- Range
- The lowest and highest answers the market covers, cut into equal steps. In the example, $20M to $300M in $5M steps.
- Share
- Pays $1 if the answer lands in its step and nothing otherwise. Its price is the market's chance of that step, so a share on a 4.5% step costs about 4.5 cents.
- Pool
- The capital every share is priced against. A liquidity provider seeds it, and every buy adds to it.
- Forecast
- All the share prices together. They add up to 1, so read across the range they are a probability curve.
- Close
- The moment trading stops, set when the market opens. After it the outcome is reported and winning shares are paid.
The market
One pool prices the whole range
The example for the rest of this page: a market on a film's domestic opening weekend, $20M to $300M in $5M steps, with the forecast the market might show a week before release. Move along the range to read it.
The market's forecastchance per $5M step
This step
Above this step
Drag or use the arrow keys on the chart.
Illustrative. An invented forecast for an invented film, drawn as a curve so the page has one example to work with.
Every step is priced against the same pool, so a trade on any part of the range deepens the market for every other part. There is no order book and nobody quoting. The contract works out the price of any set of shares from the state of the pool, which means a trade is quoted exactly before it is signed, and the pool is the counterparty at every moment until the market closes.
Read every price across the range and you have the market's forecast. On the example above it puts the median near $120M and about a 7% chance of a weekend over $200M. Where a yes-or-no market can only say whether $120M will be beaten, this one says how likely every outcome is, and a trader who expects about $110M, give or take, can trade that view in one go.
Trading
Four ways to trade one market
Every way to trade is one shape over the range. A yes or no is a single step. A range is a box. A forecast is a curve. The shape is what you are paid, by outcome, and the pool prices any of them. Pick one and move it.
The market's forecastyour pick, shaded
What $100 pays, by outcome
Illustrative. Prices are read off the forecast curve above, for a trade small enough not to move it, before the commission. Every tab is one trade in the same market.
The yes or no is the question the market was opened with. The line is the same trade with the threshold moved to wherever you want it. The range pays inside a band you can move and resize, or everywhere outside it. The whole shape is your own forecast: a budget spread across the range in the proportions you choose, which pays most where your curve sits furthest above the market's.
The same device covers shapes that are not on the tabs. Buy more shares on each higher step and the payout rises with the number, which is what an options desk would call a call. Buy around two different outcomes and you hold both. The market does not care which product a trader came from. It prices the set of shares.
Who does what
Create, distribute, trade
Every functionSPACE market has three sides, and each is open to anyone building or trading on Arbitrum.
Create
Market creators turn a number into a market: the question, the range of answers, the step size and when trading closes. Liquidity providers and market makers put capital behind it and set the opening forecast. The market opens at that forecast, and from then on the contract quotes every outcome from the pool. The provider never posts or cancels an order.
The provider earns a commission on every trade, and at settlement keeps whatever the winning step leaves in the pool. Its loss is capped at the capital it put in. What decides that result is how far the crowd's closing forecast ends up from the opening one; the volume traded in between adds commission and nothing else. The more capital in the pool, the less any single trade moves the price. In the current version each market has one liquidity provider.
Distribute
Developers build on the same pool. One market can appear in a wallet, an app, an exchange or a prediction venue, and every one of those products trades against the same pool. A weather app can show the rainfall market next to its forecast. A wallet can show the box office market under a balance. A DeFi dashboard can show a market on a protocol's monthly fees beside the protocol's own numbers.
Trade
Traders reach a market through the product they already use and choose the shape of their view. A fan of a film trades its opening weekend inside a cinema app. A desk takes a position across a whole range in one trade. Both are trading the same market at the same prices. A trader pays up front, can sell back at the current price until the close, and is paid $1 per winning share once the outcome is reported.
- Market creator
- Sets the question, the range and its steps, and the close.
- Liquidity provideralso called the market maker
- Seeds the pool and sets the opening forecast. Earns the commission on every trade and keeps what the winning step leaves in the pool. Can never lose more than the capital in the pool.
- Developer, venue
- Shows the market inside a product. Its users' trades land in the same pool as everyone else's.
- Trader
- Picks a shape and a budget, pays up front, then sells back before the close or holds to settlement. Paid $1 per winning share. Can never lose more than was paid.
- Resolver
- Reports the outcome once the number is published.
Distribution
One market, everywhere
Build the market once and it can show up in every product that wants it. The screens below carry the same box office market. Every trade, from any of them, is priced against the one pool.
One pool
One pool of capital prices the whole range. Developers build on it, and every screen above trades against it, so a market on a niche number never has to split its liquidity between the products that show it.
Illustrative screens made for our launch film. No real brands; every figure is an example.
The full set of screens, and a white-label preview you can try with your own logo and colour, is on the Explore page.
The contract
What the contract guarantees
These are properties of the mechanism. They hold in every market without anyone enforcing them.
You pay up front, and that is the most you can lose
A share costs its price and pays $1 or nothing. There is no margin and nothing to top up later.
Payouts are never negative
Shares on the winning step pay $1; the rest pay nothing. To trade against an outcome, buy the shares that pay everywhere else, or sell shares you hold.
The pool can always pay
Prices come from a cost function that cannot let the shares outstanding on any step exceed the pool. Winning shares are paid in full, with no reserve buffer needed.
The range is fixed when the market opens
An answer above the top or below the bottom lands in the end step, so every market settles.
You can sell until the close
The pool buys back at the current price, less the commission, at every moment until trading closes. There is no counterparty to find.
The price you see is the price you get
The cost of a trade depends only on the state of the pool before and after it, so it is quoted exactly before signing. Splitting or reordering trades gains nothing, and buying then selling the same shares costs the spread. The commission is the same at every state of the market and does not widen when the market is busy.
Every market has a close
Trading stops at a time set when the market opens. Then the outcome is reported, winning shares are paid, and the provider takes what is left in the pool.
Reference
Questions
functionSPACE is building on Arbitrum.
Not yet. The waitlist is where to tell us whether you want to trade, provide liquidity or integrate, and we will be in touch as markets open on Arbitrum.
What you paid for it. You buy shares that pay $1 or nothing, so there is no margin to post and nothing to top up. The payoff of a position is fixed when you trade and never changes.
Buy the shares that pay everywhere else. If you think the weekend will fall short of $120M, you buy the steps below $120M. If you already hold shares, you can sell them back to the pool at the current price.
A liquidity provider seeds the pool and sets the opening forecast, and every buy adds to the pool. Shares on every step of the range are priced from that one pool, so there is no separate book per outcome and no thin tail that nobody will quote.
It earns a commission on every dollar traded, and at settlement keeps whatever the winning step leaves in the pool. It can never lose more than the capital it put in. Its result depends on how far the crowd's closing forecast ends up from its opening one, so providers do well on markets that close while the answer is still unknown to everyone.
Moving the price costs more the further you push it, and the cost is quoted exactly before you sign. Buying and then selling the same shares back costs the spread, and splitting or reordering trades gains nothing. The larger the pool, the less any one trade moves it. The one exception is if the provider changes the pool between your two trades; then any gain comes out of the provider's own capital, with a cap on each action.
Yes, at any moment until the market closes, at the current price less the commission. If the forecast moved towards your shape you get back more than you paid; if it moved away, less.
The end steps catch it. An opening weekend of $340M settles in the top step of a $20M to $300M market, and one of $12M settles in the bottom step. Every market settles.
A market needs a question with a numeric answer, a range, a close time and capital behind it. In the current version one liquidity provider seeds each market and sets its opening forecast. If you have a number in mind, tell us through the waitlist.
No. A yes-or-no toggle, a slider for a line or a range you drag each map to a set of shares, and the SDK does that mapping. Users only see your interface, as in the widget above.
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