OptionRoom Finance – Is the Hype Around Polkadot’s Would Be Oracle Justified?

OptionRoom Logo

OptionRoom Finance Project Brief

Polkadot is one of the main altcoins to ride the current wave of crypto-hopetimism (it’s $Dot token rising almost tenfold from $5 early January to almost $50 mid April). As with many altcoins, the rise of the platform is soon followed by a flock of A-on-B projects, with A being an existing Ethereum-based DeFi niche and B – the alt in question. Such is the case with OptionRoom which is the would-be oracle/prediction market protocol for the Polkadot ecosystem. While there are a number of other X-on-Polka projects, OptionRoom seems to have attracted an unusual amount of attention (it has over 42k twitter followers, a notable amount for a pre-launch project) OptionRoom’s services are managed through a dual token mechanism where $Room is the utility token while $Court is a governance token.

Oracle mechanism

According to its whitepaper, OptionRoom’s Oracle mechanism is based on human participant votes on Oracle requests. A user can submit an oracle request (apparently in free text form) and state thresholds for minimum number of voters and minimum percentage for consensus votes.  The Oracle question submitter pays a fee in $Room plus an incentive to be paid to voters if the request is fulfilled meeting all thresholds.

Authenticity Score

Voting power of OptionRoom participants is affected by both the amount of $Court they stake and an accumulated score called Authenticity score. Authenticity Scores have a value in the range of 0-100 and are affected by correct voting history and duration of staking among other factors.

Prediction Markets

Prediction market implementation on OptionRoom is rather standard. Markets are submitted for review by users and added to the protocol based on the votes of $Court holders. Once added, users can buy Yes/No tokens using $Room, where the odds at any given point in time are determined by the ratio of the Yes to No pools. The markets are settled by a governance vote at the expiration of the market deadline (66% consensus required to settle the market). Based on the market’s accepted result, the winning result token owners get their pro-rata share of the market’s pool as a reward.

OptionRoom Analysis

OptionRoom’s main available sources of information are its whitepaper and its github repository, both of which are surprisingly scant in information or depth. The white paper describes a simplistic mechanism for Oracle/prediction markets based on human participant voting and token incentives. This seems overly generic compared to the current state of the Oracle niche on Ethereum. As demonstrated by the thriving DeFi ecosystem on Ethereum, the main use case for Oracles at present is price oracles for DeFi applications. For an oracle to satisfy the needs of this use case is has to be fast (every seconds delay in price input can mean huge losses for traders), accurate, privacy aware and temper proof. Compare for example Chainlink’s original whitepaper from three years ago to OptionRoom’s, noting the level of detail it goes into to tackle these points, to get an idea of how inadequate OptionRoom’s mechanism seems for this use case. It seems unlikely that transaction heavy DeFi protocols that require sub-second Oracle results will rely on OptionRoom participants manually settling the oracle question. In addition, there is no specification on the whitepaper of the mechanism through which the client smart contact can automatically consume the Oracle result. The same holds when considering possible future Oracle use cases such as hardware-based Oracle information or API based information. OptionRoom offers little information on how its oracle mechanism should tackle the specifics of these use cases.

The same is true for prediction markets that have been around since Augur’s launch and have gone through a long and steep learning curve since, which OptionRoom seems to ignore (The whitepaper does not mention existing solutions and how OptionRoom plans to differentiate, innovate or gain market share from them).

A quick glance at the project’s recently released github account doesn’t provide more clarity into the details of the project. Currently the account contains a few basic smart contracts implementing standard ERC20 functionality and a couple of staking/LP mining mechanisms. It should be noted that OptionRoom recently started a private beta which indicates further development, however the Beta code apparently hasn’t been released to GitHub yet.

OptionRoom prediction markets sneak peak UI (Credit: OptionRoom)

It seems that OptionRoom’s sole competitive edge is its choice of Polkadot as its platform. If this is the case, OptionRoom is expected a hard battle as Polkadot matures, considering incumbent oracles and prediction market protocols will only need to make marginal efforts to support Polkadot and other blockchains (and some are already engaged in these efforts) and will bring with them the market maturity and technology depth developed on Ethereum.

OptionRoom’s recent social media announcements are centered mainly around staking/liquidity providing of it’s tokens, and partnerships with other protocols. On the latter, OptionRoom seems to be particularly active, with some known names on the list of partners (Union, ChainSwap, Bridge Mutual).

Summary

OptionRoom set out to bring oracle and prediction market functionality to the Polkadot ecosystem, however thus far demonstrated little evidence as to how it plans to do so in light of the current maturity of both these verticals and the ever-reducing cost of taking incumbent Ethereum projects cross-chain. While Crypto’s history can provide some examples of simplicity winning  over complexity (i.e. Uniswap vs. previous Dex implementations) there doesn’t seem to be any indication that this will be the case here. As a final reservation, this analysis is based on publicly available information only. If there is more going on with OptionRoom under the surface I would be happy to learn and adjust this report.