Bonding
Putting your money where your mouth is.
#Definition
Bonding is the act of locking up collateral (staking a bond) to participate in a prediction market's resolution process. When you bond funds, you're signaling confidence in your claim and accepting financial consequences if you're wrong.
#When Bonding Occurs
#Proposing Outcomes
After a market's event occurs, someone must propose the result:
Event: Election results announced
Action: You bond $500 USDC to propose "Candidate A wins"
Result: If correct, bond returned + reward. If wrong, bond forfeited.
#Disputing Proposals
If you believe a proposed outcome is incorrect:
Proposal: Someone claims "Candidate B wins"
Action: You bond $500 USDC to dispute
Result: If your dispute succeeds, you win their bond. If not, you lose yours.
#Becoming a Reporter/Oracle
Some systems require bonding to become a trusted reporter:
Role: Market reporter/oracle
Action: Bond $10,000 as collateral
Result: Earn fees for accurate reporting. Lose bond for dishonesty.
#The Bonding Process
- Identify opportunity: Market needs resolution or dispute
- Assess risk: Can you afford to lose the bond?
- Verify your claim: Double-check sources and criteria
- Submit bond: Lock collateral in smart contract
- Wait for outcome: Challenge period or voting occurs
- Receive result: Bond returned (with reward) or forfeited
#Why Bonding Works
#Economic Alignment
Bonding creates a direct financial stake:
- Right = Rewarded: Honest actors profit
- Wrong = Penalized: Dishonest actors lose money
- Spam prevented: Random guessing is costly
#Sybil Resistance
Without bonding, attackers could:
- Create unlimited fake identities
- Flood system with false proposals
- Overwhelm dispute mechanisms
With bonding:
- Each proposal costs real money
- Attack cost scales with attempts
- Economic security maintained
#Bonding Economics
#Expected Value Calculation
Before bonding, calculate if it's worth it:
EV = (P(correct) × Reward) - (P(wrong) × Bond)
Example:
- Bond: $500
- Reward if correct: $100 (proposer reward)
- Your confidence: 95%
EV = (0.95 × $600) - (0.05 × $500)
EV = $570 - $25 = $545
Positive EV → Worth bonding
#Risk Considerations
- Certainty level: Only bond when highly confident
- Bond size: Can you afford total loss?
- Opportunity cost: Funds locked during process
- Gas fees: Transaction costs on blockchain
#Platform Examples
#Polymarket (UMA)
- Proposal bond: ~$500 USDC
- Dispute bond: Matches proposal bond
- Lock period: 2 hours minimum
- Resolution: UMA token holder vote if disputed
#Augur
- Reporter bond: Variable by market
- Dispute rounds: Escalating bond requirements
- Final arbitration: Large bonds required
#Common Mistakes
#Bonding Without Verification
❌ "It's obviously YES, I'll bond now" ✅ Check resolution source, verify criteria, confirm data
#Underestimating Ambiguity
❌ "The rules are clear enough" ✅ Read exact wording—edge cases cause disputes
#Emotional Bonding
❌ "I want my team to win, I'll propose YES" ✅ Bond based on facts, not preferences
#Ignoring Opportunity Cost
❌ "It's only $500 locked up" ✅ Consider what else that capital could do
#Advanced: Bonding Strategies
#Conservative Approach
- Only bond on unambiguous outcomes
- Wait until after challenge period starts
- Let others take initial risk
#Active Approach
- Monitor for resolution opportunities
- Propose quickly to capture rewards
- Build reputation as reliable proposer
#Dispute Hunting
- Watch for incorrect proposals
- Research before disputing
- Calculate if bond risk is worth reward