Decentralized Market Maker
Protocol Documentation

Introduction

Decentralized Market Maker (DEMMM) is a permissionless prediction market protocol built natively on Solana. It enables anyone to create, trade, and resolve markets around real-world events — from crypto prices and macroeconomic outcomes to politics, sports, and culture.

Traditional prediction markets suffer from slow settlement, high fees, centralized control, and limited market selection. DEMM solves all four: Solana's sub-second finality enables near-instant settlement, network fees average $0.001, market creation is fully permissionless, and a social layer rewards quality forecasters and creators.

Core Properties

• Permissionless — any wallet can create a market, trade, or apply to be a resolver
• Transparent — all rules, positions, and resolutions are onchain and auditable
• Composable — markets and positions are represented as SPL tokens, integrable with any Solana DeFi protocol
• Credibility-aware — an onchain reputation system rewards accurate forecasters and honest resolvers

Quick Start

Get started trading on Decentralized Market Maker in three steps.

1. Install a Solana wallet

You need a Solana-compatible wallet. We recommend Phantom or Solflare.

# Install Phantom browser extension
# https://phantom.app

# Or Solflare
# https://solflare.com

2. Fund your wallet

DEMM markets use USDC on Solana for trading. You will also need a small amount of SOL to cover network fees (~$0.001 per transaction).

3. Connect and trade

// Using the DEMM SDK (coming soon)
import { DEMMClient } from '@dem-protocol/sdk';

const client = new DEMMClient({ network: 'mainnet-beta' });

// Connect wallet
await client.connect(wallet);

// Browse markets
const markets = await client.getMarkets({ category: 'Crypto' });

// Buy YES shares on a market
const tx = await client.buyShares({
  marketId: 'btc-150k-dec-2026',
  outcome: 'YES',
  amount: 10, // USDC
});

How It Works

Every market on DEMM is a binary outcome question. Participants buy YES or NO shares representing their belief about the outcome. Share prices reflect collective probability estimates — a YES price of 67¢ means the market believes there is a 67% chance the event occurs.

When a market resolves, holders of the correct outcome receive $1.00 per share. Holders of the incorrect outcome receive $0.00. This creates a direct financial incentive for accurate prediction.

Market Lifecycle

Architecture

DEMM is built as a set of composable Solana programs. Each market is an independent program account — isolated state, independent liquidity, and standalone resolution logic.

Program Accounts

// Market account structure (simplified)
pub struct Market {
    pub id: Pubkey,
    pub creator: Pubkey,
    pub question: String,           // max 256 chars
    pub resolution_source: String,  // URL or oracle address
    pub deadline: i64,              // Unix timestamp
    pub yes_supply: u64,            // Total YES shares minted
    pub no_supply: u64,             // Total NO shares minted
    pub yes_reserve: u64,           // USDC in YES pool
    pub no_reserve: u64,            // USDC in NO pool
    pub status: MarketStatus,       // Open | Pending | Resolved | Disputed
    pub outcome: Option<Outcome>,   // None | Yes | No | Invalid
    pub resolver: Pubkey,
    pub reputation_stake: u64,      // Resolver's staked reputation
}

Program IDs

Solana Integration

• Markets settle in USDC (SPL Token) — no wrapped assets or bridges required
• YES and NO shares are standard SPL tokens — tradeable on any Solana DEX
• Resolution uses Pyth Network oracles for price-based markets and a decentralized resolver network for event-based markets
• All instructions are versioned transactions with address lookup tables for low compute costs

Market Creation

Any wallet with a minimum reputation score (or a creation bond) can propose a new market. The creator defines the question, resolution criteria, deadline, and resolution source.

Requirements

Creator SDK

const market = await client.createMarket({
  question: 'Will BTC exceed $150,000 before Dec 31, 2026?',
  resolutionCriteria: 'BTC/USD closing price on Coinbase on Dec 31 2026',
  resolutionSource: 'pyth:BTC/USD',
  deadline: new Date('2026-12-31'),
  category: 'Crypto',
  tags: ['bitcoin', 'price', 'crypto'],
});

console.log('Market created:', market.id);

Liquidity Model

DEMM uses a hybrid AMM + orderbook model. A constant-product AMM provides baseline liquidity and ensures markets are always tradeable, while a central limit orderbook allows sophisticated traders to place limit orders and tighten spreads.

AMM Pricing

The AMM uses a modified CPMM where YES and NO reserves multiply to a constant. Price is determined by the ratio of reserves:

YES_price = NO_reserve / (YES_reserve + NO_reserve)
NO_price  = YES_reserve / (YES_reserve + NO_reserve)

// Prices always sum to 1.00 (ignoring fees)
YES_price + NO_price = 1.00

Orderbook Layer

Limit orders are matched against the AMM or other limit orders. The orderbook is fully onchain using the OpenBook v2 program. Liquidity providers earn a share of trading fees proportional to their contribution.

Resolution & Disputes

Market resolution is the most critical — and most trust-sensitive — part of any prediction market. DEMM handles it through a layered system of oracle data, staked resolvers, and community disputes.

Resolution Layers

Dispute Process

• Any participant can challenge a resolution within 48 hours by posting a dispute bond (50 USDC)
• Disputed markets enter a community review period where DEMM token holders vote on the correct outcome
• If the dispute is upheld, the resolver is slashed and the disputer receives the bond + a reward from the slash
• If the dispute is rejected, the disputer loses their bond to the resolver

Traders

Anyone with a Solana wallet and USDC can trade on DEMM. There are no KYC requirements, no minimum trade size, and no geographic restrictions imposed at the protocol level.

Trading Actions

Market Creators

Market creators define the questions that drive the protocol. A creator's reputation is built by the quality, engagement, and accurate resolution of their markets.

Creators earn a 0.25% fee on all trades in their markets. High-engagement creators with strong reputation scores are surfaced prominently in the discovery feed and earn additional protocol incentives.

Resolvers

Resolvers are staked participants who commit to resolve specific markets correctly. They must stake a minimum of 100 USDC worth of DEMM tokens per market they resolve, which is at risk of slashing for incorrect resolution.

Reputation System

Every wallet on DEMM has an onchain reputation score — a single portable number that reflects their track record as a trader, creator, and resolver. Reputation is stored directly on Solana and visible to all.

Score Components

Fee Structure

Tokenomics

The DEMM token powers protocol governance, resolver staking, and fee distribution. Token details have not been finalized. The following represents current design thinking and is subject to change.

Planned Utility

• Governance — vote on protocol parameters, fee rates, resolver admission
• Staking — resolvers stake DEMM as collateral; stakers earn a share of protocol fees
• Fee discounts — staked DEMM holders receive reduced trading fees
• Reputation boost — DEMM staking contributes to reputation score

Incentive Design

DEMM's incentive structure is designed to reward accuracy, quality, and honest participation — not just volume.

Security Model

DEMM is built with security as a first-class concern. The protocol is designed with defense-in-depth: each component is independently verified and isolated.

Program Security

• All programs use Anchor framework with strict account validation
• Integer arithmetic uses checked operations to prevent overflow
• Markets are isolated accounts — a bug in one market cannot affect others
• Admin upgrade authority will be transferred to governance before mainnet

Economic Security

• Resolver staking creates a direct financial penalty for incorrect resolution
• Dispute bonds prevent spam disputes
• Oracle price feeds use Pyth's confidence intervals — markets pause if confidence is insufficient

Audits

DEMM will undergo multiple independent security audits before mainnet deployment. Planned audit scope includes all core programs (market factory, AMM, orderbook, resolver registry) and the oracle integration layer.

SDK Reference

The DEMM TypeScript SDK provides a high-level interface for all protocol interactions.

Installation

npm install @dem-protocol/sdk
# or
yarn add @dem-protocol/sdk

Client Initialization

import { DEMMClient } from '@dem-protocol/sdk';
import { Connection, PublicKey } from '@solana/web3.js';

const connection = new Connection('https://api.mainnet-beta.solana.com');

const client = new DEMMClient({
  connection,
  wallet,          // AnchorWallet compatible
  network: 'mainnet-beta',  // or 'devnet'
});

Fetching Markets

// Get all open markets
const markets = await client.getMarkets();

// Filter by category
const cryptoMarkets = await client.getMarkets({
  category: 'Crypto',
  status: 'Open',
  sortBy: 'volume',
});

// Get a specific market
const market = await client.getMarket('btc-150k-dec-2026');
console.log(market.yesPrice);  // e.g. 0.67

Trading

// Buy YES shares
const buyTx = await client.buyShares({
  marketId: market.id,
  outcome: 'YES',
  amount: 50,      // USDC
  slippage: 0.02,  // 2% max slippage
});

// Sell position
const sellTx = await client.sellShares({
  marketId: market.id,
  outcome: 'YES',
  shares: 100,
});

// Redeem after resolution
const redeemTx = await client.redeem({ marketId: market.id });

API Endpoints

DEMM exposes a REST API for read-only data access. Write operations must go through on-chain transactions.

Base URL

https://api.dem.markets/v1

Endpoints

Example Response

// GET /markets/btc-150k-dec-2026
{
  "id": "btc-150k-dec-2026",
  "question": "Will BTC exceed $150,000 before Dec 31, 2026?",
  "category": "Crypto",
  "status": "Open",
  "yesPrice": 0.67,
  "noPrice": 0.33,
  "volume": 2400000,
  "liquidity": 890000,
  "deadline": "2026-12-31T23:59:59Z",
  "resolutionSource": "pyth:BTC/USD",
  "creator": "8xzT...k9mP",
  "createdAt": "2026-01-15T10:00:00Z"
}

Roadmap