Market Risk Disclosure

1. Resolution Risk

What can happen: A market may not be resolvable because the required data is never published, the data source becomes unavailable, or the event does not occur within the expected timeframe.

What we do about it:

• Every market has a defined resolution date and explicit resolution criteria written before the market goes live.

• If the first oracle voting round does not produce a clear result (insufficient margin or too few voters), the market automatically proceeds to a second oracle round with an extended voting window. This gives voters more time to gather evidence.

• If a market still cannot be resolved after the final oracle round (e.g., the data source no longer exists or results remain unclear), the market is voided automatically. In that case, all deposits and stakes are returned to traders in full.

2. Ambiguous or Vague Markets

What can happen: A market's question or outcomes may be interpreted differently by different people, leading to disputed resolutions.

What we do about it:

• Every market goes through an AI-assisted clarity check before publishing. Headlines and descriptions that are too vague are flagged and must be made more specific.

• Resolution criteria are generated based on structured multiple-choice questions answered by the market creator, ensuring the oracle knows exactly how to resolve the market.

• Outcomes are validated to be mutually exclusive (no overlaps). Partial lists of specific named outcomes are intentionally allowed.

• Forbidden outcome labels like "None of the above", "Other", "Someone else", "Field", "Sonstiges", and similar catch-all terms are automatically blocked.

3. Incorrect Resolution (Oracle Error)

What can happen: The oracle voters may select the wrong outcome due to misunderstanding the question, misinterpreting evidence, or simple human error.

What we do about it:

• Resolution is performed by a decentralized group of oracle voters, not a single person. The outcome with the most votes wins, provided it meets a minimum margin requirement (the gap between the top outcome and the runner-up must exceed a configured threshold) and a minimum number of distinct voters.

• Oracle voters must pass a comprehension quiz about the market before they can vote on applicable markets, ensuring they understand what they are resolving.

• If the margin requirement is not met in the first voting round, a second round is automatically triggered with an extended voting window, giving more voters time to participate and evidence to surface.

• If the result still remains unclear after the final round, the market is voided and all traders receive a full refund.

• Oracle voters are incentivized to vote correctly through the Oracle Score system: accurate voters earn score increases (+0.1 per correct vote) while inaccurate voters see a larger decrease (-0.15 per incorrect vote). Voters below a minimum score threshold (0.7) are excluded from future voting.

• Evidence (including photos and links) submitted during voting rounds is preserved.

4. Market Manipulation

What can happen: A user or group of users may attempt to manipulate market prices by placing large trades to mislead other traders, or by creating markets they can influence the outcome of.

What we do about it:

• Neostake uses a Logarithmic Market Scoring Rule (LMSR) for pricing. This means large trades have diminishing price impact, making manipulation expensive and inefficient.

• Slippage protection is built in: trades that would move the price by more than 30 percentage points are automatically blocked.

• Resolution is handled by independent oracle voters through a decentralized voting process. No single person can unilaterally determine the outcome of a market. Admin-level resolution is restricted to platform administrators and used only for specific market types.

• Markets with suspicious patterns can be reported by any user.

5. Data Source Reliability

What can happen: The official data source referenced in the resolution criteria may publish incorrect, incomplete, or contradictory information.

What we do about it:

• Resolution criteria specify the exact data source and how it should be interpreted (e.g., "official university website," "Studierendenwerk menu," "official exam results portal").

• If multiple official figures exist, the resolution criteria define which one takes precedence.

• If the data source is unavailable and voters cannot reach consensus, the multi-round oracle system provides additional time. If the market still cannot be resolved, it is voided automatically.

6. Late Results

What can happen: Official results (e.g., exam grades, event attendance figures) may be published significantly later than expected, delaying market resolution.

What we do about it:

• If oracle voters cannot reach a clear consensus in the first voting round, the market automatically proceeds to a second round with an extended voting window, allowing more time for results to become available.

• Resolution criteria include the fallback instruction: "If the required official evidence is still unavailable by the resolution time, the market proceeds into the next oracle round if one opens; if it still cannot be resolved after the final oracle round, it is voided automatically."

7. Market Cancellation (Void)

What can happen: A market may be voided (cancelled) if it becomes clear that it cannot be fairly resolved, or if the market was created in error.

What we do about it:

• When a market is voided, all traders receive a full refund of their deposits and stakes. No one loses money on a voided market.

• Oracle deposits (10% security deposit per trade) are also returned in full.

• Voiding occurs automatically when the oracle voting process cannot produce a clear result after all available rounds (e.g., insufficient voters, margin not met, or grade market criteria not satisfied). It is a last resort to protect traders.

8. Liquidity and Slippage

What can happen: When you place a trade, the price may move against you between the time you see the price and the time your trade executes, especially for large positions.

What we do about it:

• The LMSR pricing model provides continuous liquidity. There is always a price available for every outcome.

• Before confirming a trade, you see the exact cost, potential return, and effective odds.

• Trades with price impact above 30 percentage points are automatically blocked.

• The oracle deposit (10%) is returned after market resolution regardless of outcome, reducing your effective risk.

9. Technical Risks

What can happen: Software bugs, server downtime, or calculation errors could affect trade execution, portfolio display, or market resolution.

What we do about it:

• All financial calculations (LMSR pricing, payouts, settlements) use deterministic server-side logic with mathematical invariance checks.

• The platform runs automated market lifecycle processing every minute and LMSR consistency health audits on active markets.

• Error monitoring is active 24/7 with automated alerts via BetterStack heartbeats and Slack notifications.

• In case of a confirmed calculation error affecting payouts, the platform team will manually correct affected positions.

10. Oracle Multi-Round Voting

What can happen: A single round of oracle voting may not produce a clear result due to insufficient participation, close vote margins, or ambiguous evidence.

What we do about it:

• If the first round does not meet the minimum margin or voter requirements, a second round is automatically triggered with an extended voting window.

• If the result is still unclear after the final round, the market is voided and all traders receive a full refund.

• Oracle insights and individual vote details are only visible once the market is fully resolved and no longer in an active voting phase, preventing bias during active rounds.

11. Biweekly Competition and Prize Risks

What can happen: Biweekly leaderboard rankings, prizes, or Hall of Fame entries may be affected by timing of market resolutions or data delays.

What we do about it:

• Biweekly snapshots are taken at the start of each 14-day competition slot to establish a fair baseline.

• Rankings are based on verified net worth calculations using the same LMSR model as trading, adjusted by oracle score.

• Prize distribution is automated and based on archived Hall of Fame rankings, ensuring consistency between what you see and what you receive.

• Prize status (Pending/Received) is visible in both the Hall of Fame and your Settings.

General Notice: Prediction markets involve risk. You may lose some or all of your staked amount. Past performance does not guarantee future results. Neostake is an educational campus platform and does not involve real money. All stakes are virtual currency (stakes) with no cash value. Prizes are offered on a voluntary goodwill basis with no legal entitlement.