# Conditional Tokens - Road to Futarchy by Friederike Ernst, Stefan George (Devcon5)

- Speakers: [Stefan George](https://streameth.org/speakers/stefan-george)
- Channel: [Devcon](https://streameth.org/devcon)
- Date: 2020-10-09
- Duration: 23:17
- Topics: blockchain, smart contracts, distributed ledger, ethereum
- Watch: https://streameth.org/watch/yt-SHmi6MdNmFo
- YouTube: https://www.youtube.com/watch?v=SHmi6MdNmFo

## Description

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https://archive.devcon.org/archive/watch/5/conditional-tokens-road-to-futarchy

Conditional tokens are a new crypto primitive which in the broadest sense allow for the incorporation of conditions into fungible assets. There are a myriad use cases for these conditional tokens, ranging from conditional payment to synthetic derivatives and event futures. Conditional tokens also elegantly capture the fundamental concept behind prediction markets: Conditional tokens allow tokenization of future events and make their outcomes tradable. We developed a new smart contract framework for conditional tokens which allows seamless combination of conditions for multiple future events. This concept lays the foundation for taking prediction markets beyond the PoC stage by natively allowing (1) markets to show dependencies between events in a scalable manner and (2) showing how the value of a specific asset is impacted by a possible future. Showing these dependencies is one of the core mechanisms used for Futarchy, a governance model reliant on decision markets. In our presentation we will explain the implementation of our framework and how it can be utilized for Futarchy.

Speaker(s): Friederike Ernst, Stefan George
Skill level: Intermediate
Track: Society and Systems
Keywords: technical

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## Transcript

[Applause] your hands just don't know how to who knows where each mechanism progress okay so that's I'll be like more than half so I fascinating also let me know and I know faster so I guess for those who don't know so first question but what actually is a market a rich market is a market on heavy metal in the future that is the result of which is antia and again absolutely yes example so the skillet Christmas with the airplane if you have five two now for 2020 and the others specify when you set up a market you also need to specify how you're going to resolve this so in this in this case you're resolving this I say you accounting on official press release from the nth or the office of the mayor of New York and so you have these two problems and pain and they trade individually so anyone they had up to one because basically at the time of when that comes true will pay out lemon the other one will not pay or anything anytime in any contract some of these two tokens will be one and at the resolution the value the market value of these tokens were both words what resolution is are actually is so what a traditional market so a conditional market is rich market that allows trading on assets that are contingent upon the size of allocations let me go into that so we might have interview but there are many many examples of things that can actually it's raining so this is an example so these three markets will magically going without a minute i november 18 will my special guy over take single metric i and how much dye is generated with it and and with the stability people single who actually died go out from today's and my 5% to these markets they they all work together he was making ourself that sacred we'll run in parallel with that when I wear these six months so including the answers these are all yes/no questions and hearing the answers of these are correlated with each other right so so yes basically if you have no hitting on this this will probably influence your opinion on the other one and the next one so in the year so we've we've just put out a new framework for that so let me explain you haven't used to having your framework and so in the old framework consequences in our life and you put it into an event contract so meal and contraction being well since we might have to tie when I have made up an evasion and then that would have two options yes/no you know this is not STR conveyance II and and if you buy a computer and then each of these outcomes you can trade individually so each of these outcomes actually have a price at any one time and you can always take a full outcome set and convert it back to pleasure and I can wait until he got this result and then one of these outcomes will pay out one of the other ones would pay out Europe and there's difference-maker when it was gala basically you can go long shorten and it's not binary whether they prepare 1-0 but they can pay off somewhere between one and zero basically in years exactly and so they actually had these nested market so maybe we might have left an angle I would mean America 18 and we might actually buy wood heating up naturally and what you will in your back when you would have had to us and you would have taken the first event made it main market out of it so uh so basically you can have India and then you can put these other proteins in to ask as a collaborative into a new event contractor basically use Q instead of putting either in the end you put the conditioner or comes over we went in for the album trouble and on the first prediction in has natural open and lately here the first event has a contingency and second should've done and if you end up with six teeth and a pencil and in high and no answer and you may not respect you you could also do this the exact other way around so you could also switch these around and you could also say basically now head for a news event and two as the first as the first mayor and I get to twelve movements on the first layer and then I put this it with a second event contract and I get three outcomes on this day I end up with six of India and the connection context will find that is exactly equivalent basically the payoff function of a and hi is exactly the same function as high a and in this framework these tokens are not fungible so they don't you can't the system doesn't know that it's actually the same tokens and this is just for to this is just first two separate pens obviously this gets way worse if you had way that don't yes it is and we did this new first but it's quite the condition of in Franklin and and our at reality this is you can specify any number so in this case who would specify two conditions the first one and has three opposites AT&T and the second one has two offense levels are high and low and you pick left open and put in and then you get these probabilities enunciated that we only get one cell out of words so what are the conditional prefer cash so aim high and high a analogy open you can do a partial Redemption so really if you have it open aim high and high occurs so basically I can then paste the other ones that are low they become white because no didn't happen and other one that were high with the contrast am i comes a in Heineken speed cn9 I can see it so you can actually resolve some conditions before other conditions without actually strangling higher things what you cannot do is you can buy glasses so you can say I would like to buy not a so so I basically I would like my B and C instead positions the very historic have the two specified conditions they have and why and you can depend another condition saying with the three outcomes that's one two and three and then you will get to get a by 1/8 y2 and you can nurse position so basically if you have if you actually have hold it one of these will be screen out so you have a my one being wired to where you might read you can actually just get you a my token better how does it work so it's actually one it kind of goes a little bit against traditional smart contract designs but it's actually just one speak smart contract to which anyone can attend conditions so the market one big advantage of this is that there are tremendous gas improvements and the and you can actually see that token that should be found a book how to put funny work because they are identical absolutely whenever you actually add and events or any registry entry to this is my contract you can specify a maximum of twenty two hundred fifty six Comstock starts prior condition and this is commissioners they are no fees and anything can be said specified at the market by the customer actually pens to that contract so this is this is something it's a spin on it and you can you can add your own conditions to death if you choose to do so and so let's go back to this example so so now at least three markets and SV ah yes no much so how many atomic outcomes whatever just to Cooper 3 right so basically 2 times 2 times 2 so that would be yes yes yes yes yes no yes no yes yes no no that one so that's it and these 8 atomic probabilities of what we have in the future this is actually going to give you so basically these these probabilities the a probabilities of what could happen in the futures future these are actually going to be consistent so basically if one of these changes so if say obviously these are correlated so if my collection guy does not go like my people Ahmed I will not overtake single pressure guy either so basically lifts the probability for this change then automatically the probability for this changes depending on how the market actually traded his previous view and I bet I give I give you yes this is when you guys do better than that and so it is this is a different example I'm sorry I should have used the same so we see here the questions I will you sacrifice of October with no yet with a vote of no confidence of imagine humanity's government be passed before the manifesto October and with it your heart would it be to be Northern Ireland and the Republic of Ireland on the faculty member so obviously these are began its range so what you can do now as you can say I want to have this yes in this test no and then it'll give you the payout structure surveys the West when is going to pay up it is going to pay out if this is yes and this is no and it's going to you're going to lose the investment if either the first one is no for the second one and this yes one cannot specify this one so well then you have wouldn't say no okay so what you cannot do now is you can make this traditional so say now this bit is as if Britain leaves the European Union on the first of October with no gear and with that you harder to be successful but within your heart would be between Northern Ireland and the Republic of Ireland on of November and you can now specify this and again give you a heart structure so basically if this happens then you've taken a position among this market but if this doesn't happen if Britain doesn't even know that you festival oh no we've not yet then if you just get a refund on your prediction so basically you can place a prediction on something that doesn't necessarily happen really it's just it's a contingent thing yeah so basically this is obviously it mainly put interface but this is super hard just because it's not an even for a simple bridge market making a good interface is high so this is this is currently still very much feature product and then you go back to how does it tie into a few tacky so basically can we do a quick show of hands again who knows what what few happiest two tangents basically magnet for governments so basically what you do is you do create a market on a question that you would like to find an answer on and you specify a metric for which you would like to optimize your decision and then you let keep your trade of this market and in the end you actually use this data through to to make a what I would actually like to do so this is something that's going to be big and ours and I learned it's a nice and decision-making and let me give you a concrete example okay so they have company and I I have the CEO and basically the company we wondering whether we should hire a CEO so basically then we find a metric that you would like to ask my squats on yes and what would the quantity bracket you be if we fire the CEO but we don't find Osito that's what we're going to about a mask we could also optimize something else so say you could optimize my employee happiness buttons so we mean that in any type of us we create market so what is would you rather you're going to be given than defiantly the CEO and what's the truth here and you're going to be given that we don't I the CEO and then we see which one of these works are better and we use this to actually make the decision of whether we should file see me also over here and turns out that the month believes that if we find the CEO the quality revenue will go up so we fire the CEO of people who said who trade on a sunny market so what's going to happen to the party ready movie fancy or they'll just be refunded and everyone traded on this market given that we fire the CEO they will make a profit or loss based on the quality of therapy nutrition soul is why our petition token is important for us and so we see for this kind of decision making having a consistent view on the futures actually super good so if you have different continuing events in the future or different events that are correlated having one consistent you are the future on which to actually base these decisions on and where is your information actually feeds into giving you an accurate depiction of the future and how will be faced with Superboy yeah so this is a useful manner of the future probability space regularity and consistency so basically if one thing is very change to actually want everything else in the model to change according to how these things are related right okay so then quickly check how much ten fine so the framework Network about the conditional Ito very much that's open anyone can attend to this anyone who used this but we actually build our own application on top of this and basically the British market is brought in regulations so what we've actually done is we have a license from a financial market regulator and to make sure that we don't actually get shut up though if you good things fast so easily the bridge markets and we can offer them on anything but sport to reach their customers which is super nice and they are not so new and unique electrolyte we have a market magnet that guarantees you liquidity and and it's dynamic because obviously if any weakness in his message makes things easier because otherwise you just complain to creation to our future we have to be a man and be messy because we have this license there's one percent rarity but this market as you can be friendly market and everyone and we all ordered because we're the ones so if we have we have York on this instance while back when Detective Comics TV must be well starters with negative cash flow and we reminisce enterprises a basic effect then that means that we can offer this to anyone in Europe and most of the world except for the ethic and I'm super sorry we are welcome at West once we have seen that this works in other parts of life so and the Vita went like this week and you can take part if you go to site OPM and sign up so basically there's a couple of markets right now and we started full of them 50/50 chances so basically right now view everyone about a you will have to go through him I see so big you will have no scam you have good and you cannot be a US or Canada or Chinese citizen I'm super super sorry about this will we're still working like that but if you're not from one of these three countries absolutely needs to take part and currently you have markets such as the price of either transparency the transaction fees on a Saturday and a stability so easy things within the ecosystem we were going to go to other markets political market honest we have so notice we have an ecosystem and and this run round just close but s going to be another one this year so now check that hub on github no secesh ago and we're also looking join our team so you can actually check that out green house and yes absolute those conditionals and I'm thinking that each additional traditional provides an opportunity for you to have started so can you see what I'm saying is that we had versus forgiving nature you mean if you would mean if that's no range resolve it yeah like unresolvable question yeah so basically I mean what you can do is you can buy up the end on it and then just match them together again right so basically if you have like an 80 question you can resolve that you can just but have both and just strike that off of your talk of your fear of the moment right because you could also you can you can spit in either than me even before the things happened if you actually have father on the different foundations yes but basically specifying good argument and burning it in a way that is sensible makes complete sense and s a person who actually registers a new a new token making who are people and you can say which which conditions you actually subscribe to so we see that's in you and especially as the person who creates this anatomy that outcomes okay but yeah obviously there's another there's another group for this to not quite how the market unwedded purchase an additional it's okay so you have those those out of compounds definitely big spots upper limits expansion of that because a single sentence describing to me there must be like a very deep description underneath them yes iceberg wants to understand mother but then it's like the deep descriptive exactly small friend right yes so if your people need direct immediate it's an effect and it's like a little contract that actually tells you how things are resolved in where we actually check for these things and way to the under so it's kind of a secured creditor on the condition for conferring or if you want to invest by the anonymity that's on them on the conditions that we register yes yes kind of like a it's it's literally like contract that actually says under which conditions this will resolving you also have to make sure that it will resolve in any case right person yeah so it's yeah absolutely very good question Jeff [Applause]