CFM v1 contracts

Contracts description

Butter's first iteration of Conditional Funding Markets contracts is available at github.com/butterygg/cfm-v1.

The main contract, FlatCFM represents a CFM with a flat outcomes structure: each outcome represents the condition that a proposal gets funded. These outcomes are also called decision outcomes.

InvalidlessConditionalScalarMarket represents the scalar prediction market which is conditional on the parent outcome being selected. It contains outcomes Short (also called DOWN), Long (also called UP) and Invalid.

The InvalidlessFlatCFMFactory contract enables the creation of a FlatCFM and its related InvalidlessonditionalScalarMarkets. For a given CFM, it helps creating one FlatCFM instance per candidate project, one InvalidlessnditionalScalarMarket instance per decision outcome (Funded or Not Funded), asks the associated oracle questions and prepares the associated Conditional Scalar Tokens.

FlatCFMRealityAdapter implements an adapter pattern to access RealityETH from our contracts, with a normalized interface.

General flow

The system follows these general steps:

1. The InvalidlessFlatCFMFactory creates one FlatCFM per candidate project, with specific parameters. This enables the creation of InvalidlessConditionalScalarMarkets for each decision outcome. This submits the decision question to the oracle via FlatCFMRealityAdapter and prepares the decision condition through ConditionalTokens.

2. The InvalidlessFlatCFMFactory creates new InvalidlessConditionalScalarMarkets for an existing FlatCFM. This submits the scalar question to the oracle via FlatCFMRealityAdapter and prepares the scalar conditions through ConditionalTokens. This relies on a Reality template with a placeholder for the decision outcome name.

3. Users split their collateral into decision conditional tokens, then split again into scalar conditional tokens. These tokens are ERC20s and can be traded on AMMs.

4. When the oracle provides an answer to the decision question, the FlatCFM can be resolved and calculates payouts.

5. When the oracle provides an answer to the conditional scalar questions (all together), all InvalidlessConditionalScalarMarkets can be resolved and calculate payouts.

6. Users can redeem their positions for payouts.

Invalid decision question

In case the decision question is posted to Reality.eth fails to be processed correctly (either due to ambiguity or a technical error), it might return an Invalid response. In such a case, the FlatCFM decision question and its related condition will be marked invalid.

In this case, the related ConditionalTokens condition will be marked invalid, and both the Funded and Not Funded markets will be voided. In such a case, the INVALID decision outcome token will be worth 1 unit of collateral (1 USDC), and traders will return their original deposits.

CFM Reality.eth questions have been carefully reviewed by a panel of experts, including Kleros and Reality.eth. Previous CFM questions have never resulted in Invalid outcomes.

Invalid metric question

In case the metric question fails to be processed correctly, it might return an Invalid response. In such a case, the processing is different than the one reserved to decision questions:

A set of parameters defaultPayouts has been passed by the factory contract to initialize InvalidlessConditionalScalarMarkets . This parameter represents the proportion that is allocated to UP and DOWN tokens in case the question returns Invalid. By default, a ratio of 50%/50% is used.

In the unlikely case that the metric question returns Invalid, all traders will be rewarded as if the market closed at 0.5 USDC.

We expect this outcome to be extremely improbable, based on our deep understanding of how Reality.eth and Kleros courts' cryptoeconomics and their previous rulings. The CFM Kleros policy has been carefully crafted to prevent ambiguity even in the most adverse conditions (e.g., if DefiLlama is hacked).

CFM Reality.eth questions have been carefully reviewed by a panel of experts, including Kleros and Reality.eth. Previous CFM questions have never resulted in Invalid outcomes.

Audits

The cfm-v1 codebase has been audited by leading auditors, including Trust and a $30k Immunefi competition. See here for audit reports.