Key concepts

Prediction market

A market where participants trade on the outcome of future events. Prices reflect the crowd's aggregate estimate of what will happen. Financial incentives reward accuracy and punish speculation without basis.

Binary market

A prediction market with two possible outcomes: yes or no. The contract pays $1 if your prediction is correct and $0 if it's wrong. The trading price of a "Yes" contract directly represents the market's implied probability of that outcome. A "Yes" contract trading at $0.70 means the market estimates a 70% chance of "Yes."

Binary bracket

Dark Markets' approach to price discovery. Instead of a single binary market, 10 binary markets run simultaneously at different price thresholds, spaced from -5% to +5% around the previous day's settlement price. The set of probabilities across the 10 markets forms a price distribution from which a precise price estimate and confidence range are derived.

Automated market maker (AMM)

Software that provides guaranteed liquidity by algorithmically setting buy and sell prices. Each of Dark Markets' binary markets uses the Logarithmic Market Scoring Rule (LMSR), a well-studied mechanism designed specifically for prediction markets. The AMM adjusts prices based on demand: more "Yes" buying pushes the probability up, more "No" buying pushes it down.

Oracle network

A distributed group of independent data collectors who observe real-world conditions (in this case, darknet marketplace listings) and report their observations. The network uses cryptographic protocols and consensus mechanisms to produce a trusted settlement price without any single entity having control.

Commit-reveal protocol

A two-phase process where oracle nodes first commit to their observation (by submitting a cryptographic hash) and then reveal their actual data. This prevents nodes from copying each other's answers or adjusting their submissions based on what others have reported.

Byzantine fault tolerance

The system's ability to produce correct results even if some participants are dishonest or compromised. The oracle network can tolerate up to one-third of its nodes being compromised without the settlement price being affected.

Settlement

The daily process of determining the actual price via oracle consensus, resolving each of the 10 binary markets against their respective thresholds, and distributing payouts automatically through smart contracts. Yesterday's settlement price becomes the anchor for tomorrow's bracket thresholds.