APY-to-Prediction Conversion
Introduction:
The APY-to-Prediction Conversion is an innovative feature on Polyquest that integrates DeFi yield opportunities with prediction markets. This mechanism allows users to convert their future yield from various DeFi protocols into a form of collateral that can be used to participate in prediction quests on the Polyquest platform, providing a new way to engage in prediction markets without direct financial risk to their principal investments.
How It Works: Detailed Steps
Connect Your DeFi Protocol:
Users start by linking their accounts from supported DeFi protocols (such as Aave, Compound, or Solana-based protocols) to the Polyquest platform. This connection enables Polyquest to access relevant data about the user’s assets, APY, and collateral value.
Calculate Future Yield:
Once connected, Polyquest analyzes the user’s DeFi investments, focusing on the APY (Annual Percentage Yield) and the amount of collateral locked in.
For instance, if a user has a $100 collateral in a DeFi protocol earning a 7% APY, the system calculates the potential future earnings over a specified period (e.g., a year), resulting in an estimated future yield of $7.
Convert APY to Prediction Tokens:
With the user’s explicit consent, Polyquest facilitates the conversion of rights to the user's future yield into USDC or other SPL tokens. This conversion is executed by securing the predicted yield on-chain, ensuring transparency and security.
A small transaction fee is deducted during this process to cover the operational costs and service fees for the conversion. This fee structure will be transparent, and users will be informed about the deduction beforehand.
Participate Without Losing Collateral:
The converted tokens can then be used to participate in various prediction quests on the Polyquest platform. Importantly, the underlying collateral (e.g., the $100 in the DeFi protocol) remains untouched and continues to generate yield.
This model allows users to utilize their future earnings for speculative activities or strategic positioning in prediction markets, without risking their principal DeFi investments. Only the yield is at stake, preserving the user's core assets and maintaining their DeFi positions.
Key Benefits for Users:
Maximized Asset Utility: Users can leverage their future yield to participate in prediction markets, effectively allowing them to "double dip" by earning yield while simultaneously engaging in prediction markets.
Preservation of Collateral: The underlying collateral in the DeFi protocols remains secure and untouched, maintaining the user's liquidity and investment strategy without compromising their core assets.
Flexibility and Optionality: This feature offers users a unique financial tool to utilize their future earnings proactively, providing additional liquidity and investment opportunities without disrupting their DeFi strategies.
Risk Mitigation: Since only future yields are used for prediction market participation, users can experiment with predictions without risking their principal or having to liquidate any assets.
Potential Use Cases and Scenarios:
Yield Farmers and Liquidity Providers:
Yield farmers or liquidity providers with locked assets in DeFi protocols can use the future yield generated from their assets to participate in prediction markets. This approach allows them to capitalize on both their DeFi strategies and prediction market opportunities concurrently.
Strategic Hedging:
Users can hedge their DeFi positions by participating in prediction markets that reflect broader market movements. For example, if a user anticipates a market downturn, they could engage in prediction quests that benefit from such scenarios, using their future yield as a stake.
Enhanced Engagement for NFT and Meme Communities:
NFT holders and meme communities who are active in DeFi can use this feature to engage in prediction markets that align with their community interests or meme culture, providing a new layer of engagement without additional financial outlay.
Collaborations with DeFi Protocols:
DeFi protocols themselves could encourage their users to leverage this feature, adding value to their ecosystem by providing additional utility and engagement options for their community.
Security and Transparency:
On-Chain Transactions: All conversions of future yield to prediction tokens will be handled via on-chain transactions, ensuring full transparency and security.
User Control and Consent: Users maintain full control over their assets and must explicitly approve any conversion of their future yield. This approval process includes clear terms, conditions, and fee disclosures.
Smart Contract Audits: The conversion process will be governed by audited smart contracts to ensure robustness, security, and compliance with decentralized finance standards.
Revenue Model for Polyquest:
Polyquest will earn a small transaction fee for each conversion of future yield into prediction tokens. This fee is essential for maintaining the infrastructure, providing support, and ensuring the seamless operation of the APY-to-Prediction Conversion feature.
The APY-to-Prediction Conversion feature is set to offer a unique, innovative way for users to engage with prediction markets on Polyquest. By leveraging their future DeFi yields, users can unlock new opportunities for participation, strategy, and engagement without compromising their existing investments. This feature will further enhance the utility and attractiveness of the Polyquest platform, appealing to a broad range of users, from DeFi enthusiasts to NFT and meme communities.
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