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faq
FAQ
What is Possum Finance?
Possum Finance is a decentralized finance (DeFi) protocol that introduces no-loss prediction markets, allowing users to speculate on asset price movements without risking their staked capital.
How do no-loss prediction markets work?
Users stake PSM tokens in a Signal Vault and make predictions on the direction of an asset's price (e.g. ETH) for upcoming epochs. If their prediction is correct, they earn a share of the epoch rewards in PSM. If incorrect, they can participate in the next epoch without losing their stake.
This is too good to be true! How can it be sustainable?
Stakers contribute their market intelligence to the system via predictions. The protocol aggregates and filters market intelligence of its users to trade shared capital in a vault (e.g. ETH/USDC). Profits acquired this way enable sustainable rewards for predictors via economic feedback loops involving PSM.
What is PSM?
PSM is the native token of the Possum Finance protocol. It serves as the staking asset in Signal Vaults and plays a crucial role in the protocol's economic feedback loops. PSM is originally deployed on Ethereum L1 with a fixed total supply of 10 billion tokens and bridged to Arbitrum via the official L1/L2 bridge.
Who provides the funding for the Asset Vault?
In the initial MVP version, the Possum Finance treasury provides the trading capital of the Asset Vault. Future versions will contain a permissionless system to enable external capital scaling.
Where do the staking rewards of the Signal Vault come from?
The Possum Finance treasury deploys the Signal Vault with an initial amount of PSM for staking rewards. During continuous operation, rewards are regenerated by permissionless PSM redemptions in the Asset Vault to ensure sustainability. (Redeemed PSM is redirected to the Signal Vault)
What happens if the signals from predictions are wrong?
Predictions by users are filtered by an algorithm inside the Signal Vault to arrive at the final trading signal for the Asset Vault. It is important to note that users, even in aggregate, don't need to be right for the system to be profitable since the filtered signal can, and often will be the opposite of user predictions. However, in case the trading signal is wrong continuously, the Asset Vault may decrease in value. This can negatively affect the redeem value of PSM. Though, the arbitrage relation between redeem value and market price only works one way: providing a floor price for PSM. In theory, the redeem value (floor price) of PSM can decrease significantly without affecting the market price. That said, the goal of the system is to increase the Asset Vault value over time which requires decent trading signals from the Signal Vault.