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Exchange FAQ
Frequently asked questions about all things related to betting and prediction markets.
What is the difference between a prediction market and a betting market?
Prediction markets are markets where contracts that are contingent on the occurrence of events in the future can be traded. Betting markets are straightforward exchanges based on predefined odds.
What is a prediction exchange?
An exchange offers a platform for traders to trade the outcome of uncertain events, whether that be sports, politics or current affairs. It differs from traditional sportsbooks by allowing traders to take positions against each other, rather than a bookmaker or against ‘the house’ .
Instead of being limited to the odds set by bookies, and only having the option to back a certain outcome, an exchange allows users to go head-to-head against each other by either buying or selling (sometimes referred to as “backing” or “laying”).
In many ways a prediction market operates just like an asset (stocks, crypto) exchange - except the underlying assets have a known positive payout if the speculator is correct and a zero payout if the speculator gets it wrong - these are sometimes referred to as “binary outcome markets”.
Another key difference of prediction exchanges as compared to bookmakers sites and many asset exchanges is that users can also ‘sell’ positions (sometimes referred to as ‘laying’ ). This allows the user to profit if they believe the outcome won’t occur.
While the payout at the point when the market resolves is binary (i.e. a payout or no payout) it is possible to buy and sell (or sell and buy) to close out a position before the market resolves - meaning it is possible to make a profit trading fluctuations in the market over time - just like on an asset exchange.
Using an exchange versus a bookmaker
When betting with a bookmaker you can only take a position on the odds they offer, which includes their margin - sometimes as high as 20% - meaning they price markets in their favor with unfair odds.
Unlike bookmakers, a prediction exchange offers more competitive implied odds, due to its nature as a peer-to-peer platform and the ability for all users to both buy and sell. The market is driven by supply and demand, which results in better and more competitive odds compared to those of a bookmaker.
When you deal with a bookmaker, they are the only seller, and they can artificially fix the prices uncompetitively with no other sellers in a position to step in on their closed platform. With an open prediction market, where users are permitted to both buy and sell, there will exist arbitrage opportunities (risk-free profits) to sell contracts when prices go even slightly above (or buy when prices go below) fair price. So the market effectively ‘rewards’ clever participants for keeping prices incredibly competitive.
This means you generally have a much higher expected value (EV) when trading on a prediction exchange, as compared to placing a comparable bet with a bookmaker.
Instead of being limited to these prices, and only having an option to back the result, the betting exchange facilitates users to go head-to-head against each other and setting their own price (implied odds) - one buying/backing and one selling/laying.
The prediction exchange gives bettors more freedom, better price/odds and won’t restrict your account just because you’re winning, unlike traditional bookmakers.
What markets and events are available?
Aver will grow the list of events and markets offered over time.
Initial markets we support are: Major sports leagues across the globe - for example, European Soccer, US Major Leagues, Cricket, and Tennis Popular current affairs and political markets; eSports and gaming; Crypto and web3 betting - for example, NFT and token price predictions
You can browse the list of active markets on the app.
If you are interested in suggesting markets not actively traded currently, you can make a suggestion to the community via the social media channels.
How do odds (or prices) work?
Probability—
This is the default odds format on Aver (though others can be used by adjusting your preferences). In this scheme, a contract trades between 0 and 1 and where a unit of the contract represents $1 payout if correct. This is the inverse of decimal odds.
For example, a coin flip may trade at approx 0.50 (Probability Odds) because it has a 1-in-2 chance of being correct. You could ‘buy’ a contract for $0.50 and if correct, the contract resolves to be worth $1 (or double your money) if you are correct.
Decimals—
Whenever you see odds displayed in numeric form i.e. 9.00, with a value greater than 1, this is a decimal odd. Decimal odds allow you to calculate how much money you will be returned should your position win. Simply multiply your stake by the decimal number shown and that is how much you will receive - including your stake.
In a coin toss example, an outcome might trade at approximately 2.0 (Decimal Odds) representing the multiple on the amount staked that would be returned if the outcome is correct. In this case, a winning outcome would result in $2.0 being paid for each $1.0 staked.
You can calculate the implied probability of a decimal odd by dividing 1 by it. For example, a decimal odd of 5.0 implies a probability of 20% (=1/5.0).
American Style–
American odds are centred around winning or wagering $100 on a given bet, though you don’t need to actually wager $100. It scales up and down depending on your position amount.
If you’re backing/buying a favourite: The odds for favourites will have a minus (-) sign in front, and indicate the money you need to risk to win $100.
So if you’re buying the Yankees to win at -130, you need to risk $130 and will win $100 if they win the game (plus your original $130 back).
If you’re buying an underdog to win: The odds for underdogs will have a plus (+) sign in front, and indicate the money you’ll win for every $100 risked.
So if you’re betting the Red Sox at +120, you’ll risk $100 and will win $120 if they win the game (plus your original $100 back).
What does the term "Lay" mean and why would I place a “Lay” trade?
To lay is to trade or speculate that something won’t happen. For example, to lay Manchester United to win their match is to bet that they will not win. In effect, hoping to profit from either the other team winning OR a draw occurring.
There are all sorts of reasons why people lay - some people find it easier to pick an outcome that won’t happen than one that will, while some lay because they think the price is too short.
Different types of orders, explained
Aver currently supports limit orders.
Support for more complex order types, including Market Order, ‘Fill-or-Kill’ (Immediate-or-Cancel) and Post-Only order types is coming very soon.
Limit Orders—
A limit order is an order to buy or sell at a specific price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. If there aren’t sufficient existing orders on the book to match your desired trades, your order will sit on the orderbook until other participants come along and are willing to trade at that price.
Market Order—
A market order is an order to buy or sell immediately. This type of order guarantees that the order will be executed (up to the amount currently available on the orderbook), but does not guarantee the final price. (i.e. depending on the size of the order, you may be forced to pay a much less competitive price to obtain sufficient counterparties to the trade)
What is a market maker?
The term market maker refers to a firm or individual who actively quotes two-sided markets in a particular security, providing bids and asks (offers to buy and sell) along with the market size of each.
Market makers provide the market with liquidity and depth while profiting from the difference in the bid-ask spread. They are generally willing to be both buyers and sellers of any given outcome in the market, for the right price.
Market making is a crucial function for a platform of exchange to operate, and it can be a very lucrative activity - if carried out correctly. However, it is not risk-free, as market makers are exposed to the risk of holding assets/positions that move against them seeing a decline in the value of a position after it has been purchased from a seller and before it's sold to a buyer.
What is a matched versus unmatched position?
For an order to be struck, it must be matched with another user who has an opposing opinion. If your position has been matched that means it has been successfully placed and accepted by another user - at a price which both parties are happy to trade.
As bets are matched against other users, once a trade has been matched, it cannot be ‘cancelled’ - although you could exit the position by trading in the opposing direction with another user. For example, if you ‘bought’ a position, you could ‘cash out’ by subsequently ‘selling’ it on to another user in the future to close out this position if you no longer desired to keep it.
If your order is has not yet been matched, (i.e. it remains an open order) then you will have a few options:
- Keep the order to see if someone is going to match your offer; or
- Cancel the order, the stake will be returned and you can try again with a more competitive price.
What are important considerations around placing orders and interacting with markets?
When using Aver, please have the following in mind:
- One winner from 2 and 3 outcome markets will be most common.
- Markets can be voided for certain reasons, eg. a date is moved by more than two weeks, an event is cancelled, there has been an unanticipated change to the outcomes listed, etc.
- Pay attention to the result you’re speculating on - is it the winner of a matchup? the score difference?, etc.
- Events are resolved using multiple third parties through our “Oracle”. Ultimately what is being traded is the consensus value that is achieved by the pre-specified oracle-feeds, and not the underlying event itself.
What is your dispute process?
Aver is currently in development, and positions opened on devnet do not carry any real value. Users are invited to use the platform at no risk. A clear dispute process will be in place with the launch of our Mainnet platform.
Last modified 4d ago
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