In this section, we guide readers to relevant background DeFi research as well as how our financial innovation works.
When coming up with a concept for the Chainlink Fall 2022 Hackathon, our team couldn't help but notice the absurd decisions that governments and central banks have taken around the world, as well as how poorly traditional markets were forecasting the effects of these decisions on our economy.
Attempting to make a solution to this problem seemed ambitious at best – and impossible at worst. For this reason, we knew we had to explore new approaches. DeFi, in particular the spectacular array of innovations in Predictions Markets and Automated Market Makers (AMMs), caught our attention.
First, our team noticed how much potential prediction markets have. A leading example of such a platform is Polymarket, which offers users the ability to bet on the outcome of real-world events such as election results. However, we knew that there was room for innovation in such a nascent part of finance.
By combining our understanding and research into prediction markets with AMM technology, we were able to innovate in the DeFi derivatives space, making an entirely new category of prediction markets. We call this Forecast Markets.
In order to understand our innovation, we advise readers to familiarize themselves with perpetual futures and prediction markets. We have laid out some useful material about these two topics in the next tab.