Add outcomes after-the-fact

In some cases, it would be very useful to be able to add options to categorical markets after the fact. Take, for example, a market on the likely democratic nominee. As potential nominees enter and leave the race, it would be great to be able to add them.

This is possible in the conditional tokens contracts by creating a number of additional outcomes (up to 256 total) when the market is created, say 1, 2 and “other”. Where “other” is outcomes 3-256 merged. When a new outcome is added, we simply split one from “other”. So the market is now 1, 2, 3, and “other” (4-256).

Unfortunately, the oracle does not support this yet.

I would not do it with merged outcomes as a malicious party could unmerge outcome maliciously such that there is no slot left in other (in the example create other3, other4, … other255) but using conditional tokens.
Taking again this example, we could have some new market using the “other” token as collateral.
Ex:

A
Who will win the democratic nomination (DAI collateral):

  • Joe Biden
  • Hilary Clinton
  • Other

B
Who will win the democratic nomination (“Other” collateral):

  • Alexandria Ocasio-Cortez
  • Kamala Harris
  • Other

Potentially this new other could also be put as collateral in a new market. If Joe or Hilary win, the second market result wouldn’t matter (as it’d give valueless “other” tokens).
This would allow anyone to add new options.

New AMM (Automated Market Makers) could be added displaying the 5 outcomes. The user interface doesn’t need to show the technical subtleties.

While in this topic, I also think it would be good to allow market makers to remove some outcomes (when they are known not to happen to avoid people dumping those valueless tokens on them), this could be done by letting market makers to only put some of the outcome tokens in the AMM.

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Not sure I follow. Could you clarify the attack vector a bit more?

My assumption here is that splitting an outcome in the AMM probably needs to be handled by a DAO/court that is trusted by the market.

Yeah, but the idea with the scheme I proposed is to be permissionless and allow anyone to add options.