How it works
How Team Prices Move in DarkHorse Fantasy Markets
In DarkHorse Fantasy Markets, the price of a team changes based on their performance in real-world games. Here’s how it works:
For every point a team scores, the opposing team loses 1% of their current share price.
The value lost by the losing team is added to the winning team's price.
Let’s go through a few examples to illustrate:
Example 1: A Heavily Favored Team Dominates
Team A (Strong Team) starts with a price of 10.000.
Team B (Weaker Team) starts with a price of 0.09.
Game Outcome:
Team A wins 50-0.
Price Calculation:
Team B loses 1% for every point scored by Team A. Since Team A scores 50 points, Team B loses 50% of its price.
Team B’s new price = 0.09 - (0.09 x 50%) = 0.045.
The 0.045 value lost by Team B is transferred to Team A, slightly increasing their price:
Team A’s new price = 10.000 + 0.045 = 10.045.
Takeaway: Even though Team A wins by a large margin, their price only increases slightly because the gap in strength was expected. This prevents heavy favorites from being overly rewarded.
Example 2: The Underdog Wins a Close Game
Team C (Favorite) starts with a price of 7.000.
Team D (Underdog) starts with a price of 3.000.
Game Outcome:
Team D wins 21-14, meaning they win by a margin of 7 points.
Price Calculation:
Team C (the favorite) loses 7% of its price (since the score margin is 7 points):
Team C’s new price = 7.000 - (7.000 x 7%) = 6.510.
The 0.490 value lost by Team C is transferred to Team D.
Team D's new price is calculated by adding the value lost by Team C:
Team D’s new price = 3.000 + 0.490 = 3.490 (+16.33%)
Key Takeaways:
Underdog wins, and gains are proportional: When Team D (the underdog) wins, they receive the full value lost by Team C, which results in a 16.33% increase for Team D, reflecting the value shift.
Favorite loses, with proportional loss: Team C, as the favorite, loses 7% of its value due to the 7-point defeat. Their price falls from 7.000 to 6.510.
Strategic opportunities: This example shows how price changes are proportional to in-game performance. A small point difference results in a moderate price change, but because Team D started at a lower price, the percentage gain is larger.
Recap:
Team C (Favorite): Price drops from 7.000 to 6.510 (7% loss).
Team D (Underdog): Price increases from 3.000 to 3.490 (16.33% gain).
Example 3: Introducing Leverage
In DarkHorse Fantasy Markets, traders can amplify their gains or losses using leverage, but this comes with the added risk of liquidation.
Scenario Recap:
Team C (Favorite) starts with a price of 7.000.
Team D (Underdog) starts with a price of 3.000.
Game Outcome: Team D wins 21-14, a 7-point difference.
Price Movements:
Team C’s price drops by 7%: from 7.000 to 6.510.
Team D’s price increases by 16.33%: from 3.000 to 3.490.
Leverage Gains on Team D (Winning Team):
If you took a position on Team D (the DarkHorse) and applied leverage, your gains would be multiplied by your leverage ratio:
Key Takeaway:
The higher your leverage, the more amplified your gains are. In this case, if you had a 20x leveraged position on Team D, your total gain would be +326.6%. However, liquidations can happen in game if your team falls behind early before mounting a comeback. More on that below.
Leverage Losses on Team C (Losing Team):
If you had taken a position on Team C (the favorite), your losses would be amplified similarly by the leverage ratio:
Key Takeaway:
If you had a 20x leverage position on Team C, the 7% price drop would lead to a 140% loss, resulting in liquidation (your position would be closed, and all tokens would be burned).
In-Game Liquidation Example:
Liquidations CAN happen in-game, meaning that even before the final score, your position can be closed if your losses exceed 100%. Here's how it works:
Game Scenario:
Team C (Favorite) started with a price of 7.000.
During the game, Team D took an early lead of 14-7 before Team C made a comeback.
Price Movement During the Game:
At 14-7, Team C’s price dropped by 7%, falling from 7.000 to 6.510.
Leveraged Position on Team C:
If you had a 15x (or greater) leveraged position on Team C, this 7% drop in price would result in a 105% loss (7% x 15 = 105%).
Liquidation occurs once your losses exceed 100%, so your position would have been liquidated in-game at that point, even though Team C ultimately won the game.
Dynamic Leverage System: Balancing Risk and Reward
To ensure a balanced and fair trading environment, DarkHorse Fantasy Markets introduces a dynamic leverage system that adjusts the maximum allowable leverage based on the expected competitiveness of a game. This system is designed to prevent users from exploiting heavy favorites with excessive leverage, while still offering high-risk, high-reward opportunities for dark horse bets.
How Dynamic Leverage Works
The maximum leverage available to users is determined by the point spread between two teams, which reflects the expected margin of victory. The system automatically adjusts the leverage based on whether a team is the favorite or the dark horse, and how close or one-sided the game is projected to be.
Here’s how the leverage is calculated:
Leverage Calculation Based on Spread
Dark horses Always Get Maximum Leverage:
All Dark horses (underdogs) are allowed to use the maximum leverage of 20x, regardless of the point spread. This provides a strong incentive to bet on the dark horse, as the potential rewards are significantly higher when they outperform expectations.
Favorites Have Leverage Adjusted by Spread:
For favorites, the maximum leverage is reduced as the spread increases. The larger the expected margin of victory, the lower the maximum leverage allowed. This prevents users from exploiting heavy favorites with high leverage, where the outcome is more predictable.
Example:
Team A (Favorite) is expected to win by a spread of 7 points. As a result, the maximum leverage a user can apply to Team A is 5x.
Team B (Dark Horse) is playing against Team A, and users betting on Team B can use up to 20x leverage, since dark horse always receive the highest leverage.
Rationale Behind Dynamic Leverage
Preventing Exploitation of Heavy Favorites:
Without dynamic leverage, users could easily place 20x leverage on teams heavily favored to win, creating low-risk, high-reward scenarios that would imbalance the gameplay and drain the reward pool. By limiting leverage on favorites with high spreads, we ensure that rewards remain proportional to the risk.
Encouraging Strategic Plays on the Dark Horse:
On the flip side, allowing maximum leverage (20x) for dark horses incentivizes users to bet on riskier but potentially more rewarding positions. This adds a strategic layer to the platform, as users are encouraged to identify value in less favored teams where a small investment could yield significant returns.
Maintaining Balance in the Token Economy:
The dynamic leverage system also helps to maintain balance in the burn-mint model by limiting excessive minting of new $DRK tokens from predictable outcomes, while encouraging more strategic, risk-adjusted plays.
Team Share Price Re-Evaluation
At the start of every new season, team share prices will be re-evaluated and adjusted based on pre-season projections, rankings, and team performance expectations.
Higher-ranked teams will start the season with higher share prices, reflecting their projected strength.
Lower-ranked or rebuilding teams will have lower share prices to reflect their expected performance.
This re-evaluation ensures that the price dynamics remain accurate and fair as team strengths change from season to season, maintaining balance in the platform's trading environment.
It is crucial that at the end of the season, you close our any open positions on those teams or you will risk your tokens being burned when prices are reset.
Important Points to Remember:
Leverage amplifies both gains and losses. While high leverage can lead to massive gains, it also exposes you to liquidation if the team’s performance dips too far during the game.
Liquidations can happen during the game: Once the game starts, you can’t close or modify positions, but you can still be liquidated if your losses exceed 100%.
Risk Management is Key: High leverage can lead to quick liquidation even if your team ultimately wins, so managing risk is crucial.
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