For a long time prediction markets have promised a superior way to aggregate information, often yielding more accurate forecasts than polls or pundits. In practice, however, today’s platforms remain a niche. Adoption has been hamstrung by gatekeepers restricting what events can be traded, fragmented liquidity in obscure markets, and user experiences that alienate all but crypto insiders. The result is that the wisdom of crowds, despite empirical successes, has yet to reach the mainstream.
XO Market introduces Conviction Markets as a new standard to fulfill this promise. A Conviction Market transforms strongly held beliefs into investable assets; any user can create a market on a question they care about, stake their belief, and let the crowd trade to price its odds in real time. By permitting open market creation, XO enables long-tail topics and community-driven questions that traditional platforms miss.
Under the hood, an adaptive Liquidity-Sensitive LMSR market maker dynamically scales liquidity with participation, ensuring even a small seed pool can grow into a deep market as interest rises. Outcomes resolve quickly and reliably via MODRA, a hybrid oracle combining AI-speed with decentralized human finality, so traders aren’t stuck waiting days for payouts. These systems run on a high-performance rollup chain with sub-second blocks capable of executing thousands of trades per second, while a familiar social feed interface and account abstraction hide blockchain complexity to welcome mainstream users.
In short, XO Market turns any well-posed question into a real-time, liquid forecast - accessible to anyone, priced by everyone, and settled within minutes. By aligning incentives for traders, creators, and resolvers, and by leveraging a modular blockchain stack for speed and security, XO aims to establish Conviction Markets as a widely-used tool for insight and investment.
Several pertinent issues have meant that prediction markets remain underutilized. Even the leading crypto prediction dApp, Polymarket, saw monthly volumes under $12 million for most of 2023, spiking to ~$59 million only during the U.S. election hype in late 2024. Outside of special events, liquidity and engagement are shallow. The faults include:
On most platforms, only the operators or a central authority can list new markets. This top-down control means everyday users cannot pose their own questions, stifling diversity and excluding niche or community-specific topics. Many interesting ideas from the crowd never get a chance to be priced. The market selection remains narrow, failing to engage broader user interest.
Traditional prediction markets often suffer thin liquidity spread across too many or too narrow markets. Order-book exchanges require a counterparty for every trade, so obscure questions languish with wide spreads and volatile prices. Even automated market makers (AMMs) with fixed liquidity parameters struggle to efficiently support long-tail events. Platforms focus only on a few mainstream bets, leaving most markets shallow. Overall participation stays low, and odds can be erratic outside of popular events.
Resolving market outcomes both quickly and fairly has proven difficult. Some platforms rely on a single arbiter or centralized oracle for speed, at the cost of user trust. Others use community voting (e.g. Augur’s token-weighted disputes) that can take days or weeks to finalize. This delay and unpredictability make the user experience frustrating - participants might wait ages for payout or worry a biased crowd could override reality. Knowing they may be stuck waiting 24-48+ hours for winnings on some networks dampens user enthusiasm.
The complexity of crypto-based markets - from managing wallets and private keys to understanding market mechanics - has kept most casual users away. Non-intuitive interfaces, clunky onboarding, and fragmented token ecosystems (needing a different token for each platform) create steep learning curves. For a new user who just wants to bet on an event, there are simply too many hoops to jump through. The result is that even though prediction markets work in theory, they struggle to retain users beyond crypto insiders.
In summary, today’s prediction markets have not lived up to their potential as open, liquid, and reliable forecasting tools - a reality that XO Market set out to change.
Conviction Markets are XO’s answer to the above shortcomings - a new class of permissionless prediction market where anyone’s strongly held belief can become a tradable market. In a Conviction Market, a creator poses a clear question about a future event, defines the possible outcomes and resolution criteria, and seeds the market with initial stake. Traders then buy and sell outcome tokens based on their beliefs, pushing prices up or down to reflect the crowd’s collective probability estimate in real time. In essence, convictions (strong beliefs) are turned into measurable assets that anyone can long or short. If you’re sure something will happen, you can put capital behind that belief - and if you’re right, earn returns commensurate with how underpriced it was.
The permissionless, user-driven nature of Conviction Markets is key. Unlike traditional platforms that limit market creation, XO will allow any user to list a market in seconds, on virtually any topic, using almost any collateral token of choice. This open model dramatically broadens the spectrum of events that can be traded - from major elections and sports to niche community curiosities - unlocking the “long tail” of prediction markets. A helpful analogy is moving from a newspaper’s limited stock of polls to a social network of user-generated questions - akin to how Twitter unlocked user-driven content versus traditional media. The result is a far richer and more granular information market, where the price on virtually any well-defined question can signal the odds in real time.
Example: Imagine a scientist is convinced that a certain city will experience a record heatwave this summer. On XO, they can create a market: “Will City X exceed 40°C this summer?” - define “Yes/No” outcomes and the exact criteria (official meteorological data by Aug 31), and seed the market with, say, $50 of collateral at even odds (50/50). Once live, others who have insights (e.g. weather enthusiasts, locals) can buy “Yes” or “No” shares. If many believe a heatwave is likely, they’ll buy “Yes,” driving its price up (say to 70%, implying 70% perceived chance). Those skeptical can buy “No” (30%) if they think the crowd is overestimating. As the summer unfolds and temperatures rise or not, traders continuously adjust the odds by trading shares. The market thus becomes a real-time forecast. When the season ends, XO’s oracle checks the weather data: if City X indeed broke 40°C, the “Yes” shares pay out $1 each. The creator not only profits on any “Yes” shares they held, but also earns a fee from all the trading activity on their question. In short, the creator turned their personal conviction into a liquid market, the crowd collectively priced that insight, and everyone who was correct earned rewards for their knowledge.
Conviction Markets also bring technical advantages through XO market’s design. Each market runs on an AMM using the Liquidity-Sensitive Logarithmic Market Scoring Rule (LS-LMSR). This algorithm retains the proven properties of Hanson’s classic LMSR (continuous prices and bounded loss for the market maker) but dynamically adjusts liquidity based on trade volume. In practice, a market that starts with a small pool of collateral will automatically deepen its liquidity as more participants trade. Prices stabilize and large trades incur smaller slippage over time, without any manual intervention.
Studies show that such liquidity-sensitive market makers significantly outperform static liquidity models and constant-product AMMs in markets with variable or unpredictable volume. In other words, XO’s markets self-tune to activity: even a tiny seed (e.g. $10) can bootstrap a market that might scale to hundreds of thousands of dollars in volume if interest materializes. This adaptive liquidity is a game-changer for efficiently supporting long-tail markets.
Finally, XO wraps Conviction Markets in a user experience designed for accessibility and trust. The interface, called ‘CrowdFeed,’ presents markets as an infinite scroll of cards with familiar social media elements, so users can browse, share, and discuss predictions easily. Complex blockchain interactions are abstracted away: users can sign up with an email or social login and automatically get a smart account. Trades feel instant and free of gas fees, as transaction bundlers sponsor gas on the backend. Yet everything remains non-custodial and transparent on-chain, preserving Web3’s security and composability. This blend of Web2 simplicity with Web3 integrity means Conviction Markets are approachable.
The XO Market architecture marries a custom high-performance blockchain with off-chain services to deliver a seamless user experience. At a high level it has three pillars: the Marketplace, the Oracle, and the Treasury (Figure 1). Each component plays a focused role in ensuring markets are liquid, outcomes are resolved fairly, and the ecosystem is sustainable.
Figure 1: High-level architecture of XO Market’s modular platform (schematic). The application-specific XO rollup (top) runs Conviction Market contracts and UI logic. It leverages Celestia’s decentralized data availability layer for consensus (middle), enabling Web2-level throughput without sacrificing security. Bridges connect XO to external chains (bottom) so users can bring in various collateral tokens and external platforms can consume XO’s market data.
The marketplace encompasses XO’s user-facing platform and the AMM mechanism that powers trading. On the front end, XO is deliberately designed to feel familiar. Markets are presented through CrowdFeed, an interface inspired by social media feeds rather than clunky trading terminals. Users scroll through cards showing each question, current odds for each outcome, and recent price moves. With one click, a user can drill into a market page for details (description, resolution criteria, discussion) and an interactive price chart.
Placing a trade is as simple as choosing an outcome (“Yes” or “No”) and entering an amount; the UI then displays the cost, estimated slippage, and fees - abstracting away the complex math under the hood. Thanks to account abstraction, new users don’t even need a crypto wallet upfront - signing up with an email or Twitter auto-creates a smart wallet funded for gas fees. There are no seed phrases or browser extensions required, and built-in fiat on-ramps let users deposit USD directly. This mainstream-friendly UX ensures that Conviction Markets can attract the crowds needed to unlock the wisdom of many.
Behind the scenes, the marketplace’s liquidity and pricing are driven by an advanced AMM. XO uses a Liquidity-Sensitive LMSR as its price engine. Every market starts with an initial collateral pool provided by the creator. Instead of an order book of bids/asks, the LMSR provides continuous liquidity. Prices are determined by a logarithmic cost function based on the relative supply of outcome shares, which guarantees the market price is always a valid probability between 0% and 100%.
Early on, when few trades have occurred, the market is intentionally shallow (so a creator doesn’t need to front a lot of money). But if the market becomes popular and traders pour in funds, the algorithm automatically deepens liquidity - large orders move the price less in an active market than they would in an inactive one. This means niche markets can be created with minimal capital, and if they strike a chord, the liquidity will grow along with usage.
Empirically, this adaptive design leads to more efficient pricing and higher capital utilization; simulations indicate LS-LMSR significantly outperforms static LMSRs and constant-product AMMs in prediction markets with fluctuating volume.
Accurate and timely resolution of markets is critical in a prediction market. XO’s Oracle is powered by the Market Outcome and Dispute Resolution Architecture (MODRA), combining fast AI-driven resolution with decentralized human validation to achieve both efficiency and trustlessness.
Here’s how it works: when a market reaches resolution, XO’s oracle system first uses an AI-driven process to quickly propose an outcome based on predefined criteria and verifiable data sources. For example, election results would be instantly fetched from official sources and verified by the AI. This typically delivers immediate results. However, this initial outcome can still be briefly challenged if participants believe there’s an error. In the rare event of a dispute, resolution moves to a decentralized panel of human jurors, who independently review the evidence and vote on the final outcome. Jurors are economically incentivized to judge honestly, and dispute costs scale proportionally with market stakes, making manipulation impractical. This two-tiered system ensures fast yet trustworthy market resolutions.
The end result is a hybrid oracle that delivers fast finality with fairness. Traders get near-instant results when outcomes are clear, creating a huge UX win over waiting 24-48+ hours as on some optimistic or vote-based oracles. At the same time, the process remains trust-minimized; no single entity can unilaterally force an outcome if the crowd disagrees. The decentralized court acts as a check on any erroneous or biased resolution. The combination of AI reasoning plus human judgment also boosts user confidence as every outcome comes with an explanation and recourse, creating trust that markets will be settled correctly.
In XO’s context, the Treasury refers to protocol-controlled stores of value that accumulate from market activity, and the mechanisms for managing fees and collateral flows through the system. The goal is to reinvest value back into growth, under the oversight of the community. Indeed, XO’s contracts include governance hooks so that in the future, control of key parameters and the treasury can be decentralized to users. The vision is to evolve XO into a DAO-governed network.
A potential future governance token could allow token-holders to adjust settings like the standard fee range, which collateral types are allowed, or oracle parameters (e.g. challenge window duration, juror rewards). Most importantly, the community would decide how to deploy treasury funds; whether for marketing, liquidity partnerships, or ecosystem grants. In essence, XO is embedding the seeds of a self-governed economy: the more the platform is used, the more value accrues to the collective treasury, and the community will eventually control that value to maximize network effects.
Notably, XO’s revenue is tied to high volume and honest outcomes. There is no rent extraction without value creation. In the long run, a well-capitalized treasury governed by the community becomes a shared asset: it can insure against black swan events, fund continuous improvements, and even pay dividends or buybacks if the community chooses. While such aspects lie beyond this litepaper’s scope, the key point is that XO’s architecture is built for sustainable growth, with a virtuous cycle between user activity, protocol value, and community governance.
XO Market’s Conviction Marketplace thrives only if all participants in the ecosystem are properly incentivized; traders must see profit opportunity, market creators must be rewarded for their contributions, and resolvers/oracles must be motivated to report outcomes honestly and quickly. XO Market’s incentive design aligns each role’s interests with the health of the platform, creating a positive-sum environment. Every trade, every market creation, and every resolution contributes to the system’s value, and in turn the system compensates those actions. Table 1 summarizes the incentive model by participant type, including how protocol fees and rewards are allocated.
Table 1: Incentives and protocol fee structure for key participants in XO Market.
| Participant | Incentives | Fee / Reward Mechanism |
|---|---|---|
| Trader | Profit from predictive trading; arbitrage mispriced odds; social recognition for performance. Continuous liquidity and fast settlement enable active trading. | Pays small trading fee on each trade. Can buy low and sell high as odds shift, earning the price difference. Low slippage in active markets lets skilled traders capitalize on an information edge. Near-instant resolution means quick payout on winning bets. Leaderboards and community status reward successful traders. |
| Market Creator | Fee income from trading volume; low-risk experimentation with new markets; reputation gains for high-quality markets. | Sets a creator fee (typically ~1%) on trades in their market - earns this on every trade. Provides initial seed liquidity (can be small, e.g. $50) and the AMM auto-scales it with trader volume. If a market fails to attract traders, creator keeps most of their seed (only a minimal oracle fee is spent). Successful markets can yield substantial fee income and boost the creator’s profile (attracting followers to future markets). |
| Resolver / Juror | Rewards for quick, accurate outcome reporting; economic penalties for dishonest behavior; community trust and visibility. | First reporter to finalize a market outcome earns from the final pool as a resolution reward, but must stake an equivalent bond (returned if correct). If a false outcome is reported, the bond is forfeited and dispute resolution begins. Disputed outcomes go to jurors: jurors stake tokens and earn fees or claim slashed bonds for voting with truthful consensus. This design makes honest resolution the rational strategy at all times. |
Every participant is thus incentivized to make XO’s markets thrive; traders inject information and liquidity (and profit by doing so), creators list compelling questions (and earn when they attract activity), and resolvers ensure integrity (earning fees for fast, correct outcomes).
XO Market is not building in isolation; it is positioned as a key player in emerging modular blockchain and Web3 social ecosystems. The project’s strategy involves integrating with infrastructure partners and fostering a community of developers, analysts, and complementary platforms around Conviction Markets.
One foundational partnership is with Celestia, which provides the data availability layer underpinning XO’s rollup chain. By building on Celestia, XO benefits from scalability and security primitives, and in turn XO showcases Celestia’s ability to support high-throughput dApps. This symbiotic relationship goes beyond technical integration: XO is part of Celestia’s growing network of modular chains, collaborating on research and cross-promotion within Celestia’s community.
Beyond the blockchain layer, XO is working with wallet and identity services to remove user friction. For example, XO has integrated Privy (for email/social login onboarding) and ZeroDev (for smart contract wallets) to streamline the signup and transaction experience. Privy’s secure user management allows one-click signups, while smart wallet frameworks enable features like gasless transactions and session keys.
On the data and integration front, XO is exploring connections with analytics and oracle networks. XO markets generate unique datasets of real-time probabilities on countless events, which could be valuable to researchers, DeFi protocols, and media outlets. Additionally, XO can feed its market prices into external oracle networks so that other applications can consume XO’s forecasts as inputs.
A key aspect of XO’s go-to-market is community partnerships. Rather than trying to attract every user one-by-one, XO plans to embed markets within existing communities and platforms that have built-in demand for forecasting tools. These integrations turn Conviction Markets into a service or “marketplace-as-a-service” offering for partners. XO will provide APIs and no-code widgets to make it plug-and-play for platforms to spin up their own branded prediction boards.
XO Market is currently in Closed Alpha, an invite-only phase focused on core product validation. Early adopters are testing essential functionalities, including market creation, liquidity mechanics, and oracle resolutions using simulated tokens in a controlled environment. The primary goals are refining user experience, verifying liquidity algorithms under realistic conditions, and optimizing AI-driven resolution processes. Feedback from this early community is instrumental in shaping XO’s near-term improvements and establishing product credibility.
Following Alpha, XO will progress to broader, community-oriented stages, sequentially introducing real-value trading, open market creation, and extensive user engagement features. Future phases will incrementally enhance scalability, decentralization, and market depth, carefully timed to balance innovation with risk management. As the roadmap unfolds, XO will disclose detailed plans and strategic milestones progressively, ensuring clarity and adaptability as the platform grows toward mainstream adoption.
The future of forecasting lies in harnessing collective conviction and making it investable. XO Market is pioneering that future by transforming how we price and trade knowledge. Currently the platform is moving from concept to reality, and we invite you to be part of this journey. Join us in building a future where anyone can turn their convictions into capital.