The UMA Oracle
When a market expires, Predict queries UMA's optimistic oracle — a decentralized system that reports the correct outcome of a given event. The oracle acts as Predict's source of truth, leveraging a clever mechanism for settlement and dispute resolution.
How It Works
When an event occurs, Predict asks UMA for the outcome.
On the UMA side, users are financially incentivized to provide the correct response:
A user (referred to as an Asserter) puts forward an answer, locking up their own funds in a 'bond.'
A dispute period is initiated, where anyone can contest the answer provided.
If no one raises a dispute within this period, the answer is assumed to be true, and the Asserter's bond is returned plus a reward.
Should someone (a Disputer) wish to challenge the Asserter's answer, they will also put up a bond and trigger a dispute.
At this stage, Voters, who stake UMA's native token, determine the correct result independently and cast a vote to that effect.
Based on the outcome of the vote:
The correct voters receive additional tokens, while the incorrect ones have their staked amount slashed.
The losing Asserter/Disputer loses their bond, with half of it paid to the other party in the challenge and the other half paid to the protocol.
This system relies on a combination of incentives and sanctions to keep participants acting honestly.
Learn more over at docs.uma.xyz.
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