Conditional tokens
Conditional Tokens are ERC‑1155 assets issued by the Conditional Tokens smart contract, a battle‑tested primitive for representing collateral claims that depend on a future event. Butter relies on this contract for every market position.
When collateral is deposited, the contract can split it into two fungible positions:
Up tokens – claim value when the reported metric is near or above the upper bound.
Down tokens – claim value when the metric is near or below the lower bound.
(In binary yes/no markets the same mechanism applies, with UP ↔ IF-TOKEN and Down ↔ IF-NOT-TOKEN.)
Holder operations
Split
Creates outcome positions from collateral.
Example Deposit 100 USDC ⇒ receive 100 UP tokens and 100 DOWN tokens, together worth 1 USDC.
Merge
Reverses a previous split.
Requirement: Hold equal quantities of UP and DOWN tokens in the same conditional market. Effect: Both tokens are burned; the underlying collateral is re‑created within the contract. Purpose: Simplify your portfolio or prepare for withdrawal.
Note that merge works as well for IF and IF-NOT tokens.
Redeem
Available once the oracle posts the final outcome.
Decision markets – Only the winning side (IF/IF-NOT) is redeemable; the opposite side expires worthless.
Scalar markets – Both UP and DOWN tokens receive a payoff that is linear in the reported value between the predefined lower (vmin) and upper (vmax) bounds.
Redeeming burns the tokens and transfers the corresponding collateral to your account.
Contract highlights
Security record – Live since 2019 with zero exploits; multiple independent audits.
Interoperability – Compatible with any ERC‑20 collateral and oracle scheme.
Adoption – Core primitive for markets such as Omen, Polymarket, Azuro, Zeitgeist, and Butter.
For the formal specification, consult the Conditional Tokens documentation.
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