Multiplier
Multiplier as leverage
Some bets clearly favor either the issuer or the taker. For example, if the current price of BTC is $30,000, and the taker sees an Up bet with a strike price of$40,000 and a period of 1 hour, it is likely the issuer will win. In such situation a multiplier can be used to even out expected profits.
A multiplier allows both sides of a bet to put up different amounts of collateral. For a bet that is in favor of the issuer, they can choose to put up 5 times more than the taker. Logium supports the following multipliers:
• ${\frac 1 5} \times$
- for very probable bets
• ${\frac 1 2} \times$
- for probable bets
• $1\times$
- for bets with equal probability
• $2\times$
- for improbable bets
• $5\times$
- for very improbable bets
In a free market, users that take bets with a
${\frac 1 5} \times$
multiplier will win far more often than those that take bets with a
$1\times$
multiplier, but they will earn only a fifth as much as the latter on each win.
On the other hand, users who only take bets with a
$5\times$
multiplier will rarely win. However, their winnings will be 5 times higher than those of users who prefer a
$1\times$
multiplier.
To be matched, issuers and takers need to choose inverse multipliers. For example, if an issuer picks a
$5\times$
multiplier, the taker will see a
$\frac{1}{5}\times$
multiplier.
Only issuers and takers who use a
$1\times$
multiplier put up the same amount collateral on their bets. For example, for a bet with a
$1\times$
multiplier both the taker and the issuer would put up 1000 USDC. However, for a
$5\times$
multiplier from the perspective of the issuer, the issuer would put up 5000 USDC, and the taker would only put up 1000 USDC.
With any multiplier, the winning side always earns the entire collateral of the losing side. This constitutes 20% - 500% profit in relation to the winning side's collateral, depending on the used multiplier.