Thales

Introduction to Thales Protocol Thales Protocol is a set of smart contracts on the Ethereum Network that offers an easy-to-integrate liquidity and automated market making layer for probability-based markets such as digital options and sports markets, which are settled using various on-chain oracle data sources.

Purpose of the Thales Protocol By providing a secure, transparent, and decentralized infrastructure for traders and liquidity providers, Thales Protocol has transformed probability-based exclusive-outcome markets globally. It acts as a publicly accessible on-chain automated market making system that enables traders to take positions on sports, digital options, and other markets against collateral supplied by AMM liquidity providers.

How Thales solved the Market Making challenge in exclusive-outcome markets Market making in token units has historically caused issues for prediction markets on Ethereum. Constant Function Market Making often results in significant losses because the losing side’s value drops to zero at maturity. An alternative market making approach was needed.

Thales Protocol addressed this by developing an Automated Market Making system that supplies on-demand liquidity based on a fixed oracle-based probability reference. This allows the Thales AMMs to offer liquidity across multiple markets from a single specialized contract that pools collateral from a single counterparty. Managing risk with caps and skew impact enables the AMM to market make based on risk units rather than token prices, providing theoretically unlimited capital efficiency as long as the overall risk stays within the set cap.

Innovative on-chain solutions enable new decentralized products. Thales Protocol's straightforward yet robust smart contracts empower anyone to participate as a trader or liquidity provider in various exotic decentralized products, leveraging the same core collateralization architecture.

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