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Using the Thales AMM
Thales has built a completely novel AMM (Automated market maker) contract that offers users on-demand liquidity of Positional Tokens from the Positional Markets in the trading phase.
Traders can now buy/sell Positional Tokens from/to the AMM, which uses a Black–Scholes pricing algorithm in combination with spread and price impact logic.

Orderbook trading-> Peer versus Peer AMM trading -> Peer versus AMM

Thales AMM Mechanism

Thales AMM uses the Black–Scholes algorithm to derive a realistic price for a certain Positional Token of a specific asset's Positional Market.
The Thales AMM algorithm uses the following inputs to price Positional Tokens:
  • Current Asset Price
  • Strike Price
  • Time to Maturity
  • Implied Market Volatility
In addition to these inputs, Thales AMM also uses novel inputs that are needed to offset the risk the AMM takes on when offering on-demand liquidity on both ends of a Positional Market. These inputs are:
  • min_spread - Minimal price impact possible on a derived price for a trade using Thales AMM
  • max_spread - Maximal price impact possible on a derived price for a trade using Thales AMM (In case a trade depletes all liquidity of a certain side of the AMM)
These last two parameters introduce a Skew mechanism that serves as an incentive to keep the AMM liquidity balanced between UP and DOWN side. The Skew makes "overbought" Positional Tokens from a certain market more expensive than their opposite side, keeping the AMM in balance and unexposed to risk of market maturing in an unfavorable direction for the AMM.
Additional safety mechanisms that are introduced are Cap per Market and Price Range Limits.
  • Cap per Market is introduced for the first iteration of the AMM to keep the AMM's exposure to individual markets limited. It is denominated in how much USD per market the AMM is risking.
  • Price Range Limits are set to a range between 0.10 USD <-> 0.90 USD per Positional Token to avoid potential edge cases in large market swings and front-running instances.
Important disclaimer: AMM trading is disabled 24h before Market Maturity of any given market since the pricing algorithm cannot provide optimal results in such short timeframes until Market Maturity, as it could lead to potential front-running opportunities and edge-case exploits.

Using the Thales AMM

Inputs:

  • TYPE - Dropdown menu where you choose if you wish to BUY positional tokens from the AMM, or SELL Positional Tokens to the AMM
  • UP or DOWN buttons - Choosing between trading UP or DOWN tokens with the AMM
  • AMOUNT TO BUY/SELL - Input field for how many UP or DOWN tokens you wish to BUY or SELL from/into the AMM
  • SLIDER - Slider acts the same as the AMOUNT TO BUY/SELL input field but it also shows how much max liquidity is available for these specific Positional Tokens in this specific market
  • SLIPPAGE TOLERANCE - Selects the percentage of tolerance to have towards price change when confirming your transaction. If the change is larger then your percentage input, the transaction will revert

Indicators:

  • PRICE PER UP/DOWN - Price derived from the AMM algorithm for your BUY/SELL of UP/DOWN (SKEW IMPACT included)
  • TOTAL TO PAY - Indicator showing how much USD the trade cost
  • POTENTIAL PROFIT - Indicator showing potential profit of this trade if your Positional Token wins on Market Maturity
  • SKEW IMPACT - Indicator showing the percentage of how much premium from calculated price you have to pay for this trade because of the AMM imbalance (more info on SKEW IMPACT mechanism in the Thales AMM Mechanics section of this page)

AMM Trading Incentives

Round 1

Initial launch of the Thales AMM on December 22nd of 2021 came with volume-based trading incentives. The rationale for incentivizing trading and driving volume is to ensure Thales Core Contributors were able to collect sufficient data and properly assess the AMM performance.
First round of incentives was reserved for all markets that had a maturity date until Jan 7, 2022. The amount was 20,000 THALES tokens distributed pro rata for buy volume only. Any user who bought UP or DOWN tokens from the AMM was eligible for a portion of these trading rewards.
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Round 2

Second round of AMM trading incentives started on Jan 10, 2022 and lasted until Jan 26, 2022.
For this round the total amount of rewards distributed was the same as for Round 1 (20,000 THALES), but this time they were split into two separate buckets:
  • 10,000 THALES for UP buyers
  • 10,000 THALES for DOWN buyers
Rationale behind this split was to create an organic balance between UP and DOWN buyers and this way incentivize further balancing of the AMM.
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Thales AMM Mechanism
Using the Thales AMM
AMM Trading Incentives