Mechanism LabONCHAIN MECHANICS
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Lesson 027 min
COLLATERAL · OUTCOME SHARES

100 Credits, Two Futures

See why YES and NO form a pair, and why the winning side can always redeem 100 credits.

OBJECTIVESAfter this lesson, you should be able to:
  • Explain how a complete set covers two mutually exclusive outcomes
  • Use a collateral invariant to check whether the settlement pool is funded
COURSE POSITIONStep 2 of 6
  1. PREVIOUSWrite a Question That Can Settle
  2. CURRENT100 Credits, Two Futures

    See why YES and NO form a pair, and why the winning side can always redeem 100 credits.

  3. NEXTHow Views Enter the Order Book
BEFORE YOU READ

Think about these questions first.

Choose an answer before opening the explanation. You can add anything unexpected to your review list.

Q01Why does locking 100 credits create both YES and NO?
SHORT ANSWER

They are not two new piles of money. One 100-credit claim is split into two mutually exclusive keys. Only one key opens the collateral at settlement, and merging both returns only 100.

Compared with your prediction:
Q02Why is YES + NO worth 100 before the outcome is known?
SHORT ANSWER

A complete set does not need to predict the winner: it always contains the winning key. That depends on mergeability, full collateral, and no invalid-market or settlement failure.

Compared with your prediction:
Q03I pay 70 for YES and later receive 100. Who funds the extra 30?
SHORT ANSWER

It is not a last-minute subsidy. When a complete set is split or matched, YES and complementary NO point to collateral already locked at 100; if YES wins, it takes the full claim while NO becomes worth zero.

Compared with your prediction:

YES and NO are not chips created from nothing. A simple design locks 100 credits and mints one YES share and one NO share. Whichever outcome wins can then claim exactly 100.

Split one future into two receipts

Deposit 100 credits into the market contract. It locks the credits and gives you two outcome shares:

  • YES pays 100 if the event happens and 0 otherwise.
  • NO pays 100 if the event does not happen and 0 otherwise.

Together, the pair covers every binary outcome. Before resolution, a YES and NO share can also be merged to recover the original 100 credits.

Complete-set minterAlways fully collateralized
Collateral pool300credits
→split
3YES
3NO
Assume the final result:

The winning 3 YES shares can claim 300 credits; the other side goes to zero. The system does not need to find payout money later.

Why not find the loser after the result?

If Bob only promises to pay later, he could leave, become insolvent, or refuse. A market for strangers cannot make payout depend on future creditworthiness.

Pre-funding turns credit risk into a state that can be checked now: every pair issued needs a matching 100 credits in the settlement pool. Anyone can verify the invariant.

Shares exist before prices do

A complete pair can redeem 100 in total, but that does not force YES to trade at 50 and NO at 50. Alice may bid 70 while Bob only bids 35. Price appears when different views arrive with real budgets.

Expand: how this step works
split(100 credits):
  collateral += 100
  mint(YES, 1)
  mint(NO, 1)

resolve(YES):
  redeem(YES) -> 100
  redeem(NO)  -> 0

Core invariant: locked collateral >= unsettled winning shares * 100.

KNOWLEDGE CHECK

Why does each YES/NO pair require 100 credits of collateral?

State passed to the next lesson

The system now has fully collateralized binary shares. Next Alice, Bob, and Carol translate their judgments into orders that can actually meet.

LESSON RECAPComplete the exercise and knowledge check first