Toncast — Decentralized Prediction Market on TON Network

Abstract

Toncast is a fully on-chain prediction market platform on the TON network. Users place bets on event outcomes, while smart contracts automatically match opposing positions, hold fees, and distribute winnings after oracle publishes the result. Protocol revenues are directed to the DAO treasury and distributed among TCAST stakeholders as epoch rewards, creating a sustainable economic model for long-term development.

1. Introduction and Motivation

Traditional prediction markets are centralized and subject to risks of censorship, custodial storage, and opaque rules. The decentralized approach on TON eliminates these limitations: settlements are executed by smart contracts, liquidity and rules are transparent, and results are reproducible. This philosophy follows the principles [11][12].

Key principles of Toncast:

• Accessibility: minimizing entry barriers through interface simplicity and transparency of mechanics
• Sustainability: economic model motivating long-term participation through DAO tokenomics
• Decentralization: absence of single point of failure, community-driven governance
• Efficiency: aggregation of collective knowledge to form accurate predictions

The theoretical foundation of prediction markets has been thoroughly researched in academic literature [1][3], demonstrating their superiority over expert assessments and surveys in aggregating distributed information [5]. Markets effectively extract and aggregate distributed knowledge of multiple participants, creating more accurate predictions than traditional methods [4][7].

2. System Overview

At a high level, Toncast, based on principles of decentralized systems [11], consists of several key components:

• Coordination Layer: management of prediction event lifecycle and global protocol parameters
• Market Layer: isolated markets for individual events with autonomous trading mechanisms
• Matching Layer: automatic matching of opposing positions and liquidity formation
• Settlement Layer: result finalization and payout distribution to participants
• Oracles: external sources of truth for event resolution
• DAO: decentralized governance and protocol revenue distribution [15][16]

All operations occur on-chain, ensuring complete transparency and verifiability. The protocol utilizes modern TON blockchain technologies [13] to achieve high performance and scalability.

3. Protocol Architecture

3.1 Multi-Layer Architecture

The protocol is built on principles of modularity and separation of concerns:

Coordination Layer:

• Management of prediction market lifecycle
• Configuration of global parameters and policies
• Integration with external oracles and DAO
• Protective mechanisms and usage limits

Market Layer:

• Isolated trading spaces for individual events
• Support for multiple market types (binary, categorical, continuous)
• Autonomous operation of each market
• Flexible event parameter configuration

Matching Layer:

• Automatic matching of opposing positions
• Liquidity formation through bet pools
• Efficient order queue management
• Scalable data storage

Finalization Layer:

• Reception and validation of oracle results
• Calculation and distribution of winner payouts
• Operation batching for cost optimization
• Refund mechanisms for cancelled events

3.2 Design Principles

• Risk Isolation: component independence, fault tolerance
• Determinism: predictable behavior for integrations
• Scalability: efficient operation under high loads
• Evolution: evolution through decentralized governance

3.3 Economic Integration The protocol is integrated with the TON ecosystem:

• Native support for token standards [16]
• NFTs for representing stake and governance rights [15]
• Compatibility with existing DeFi protocols
• Base market infrastructure [17]

4. Prediction Market Mechanics

4.1 Pricing Principles The market forms outcome probabilities through supply and demand mechanism. As described in [2], informed participants are motivated to correct prices through their bets, leading to efficient aggregation of distributed knowledge.

The market price of an asset representing an event outcome is interpreted as consensus probability $p_{\text{market}}$. For a binary market with bet volumes $V_{\text{yes}}$ and $V_{\text{no}}$:

$$ p_{\text{market}} = \frac{V_{\text{yes}}}{V_{\text{yes}} + V_{\text{no}}} $$

An efficient market tends toward an equilibrium state where:

$$ p_{\text{market}} \approx \mathbb{E}[p_{\text{true}}] $$

where $\mathbb{E}[p_{\text{true}}]$ is the expected value of the true probability based on aggregated information from all participants.

The methodology for interpreting such predictions is detailed in [6].

4.2 Liquidity Mechanisms The protocol supports various liquidity provision models, inspired by successful decentralized platforms [8][9][10]:

• Automatic matching of opposing positions (peer-to-peer matching)
• Discrete or continuous coefficient spaces
• Liquidity pools with various pricing mechanisms
• Hybrid models for market depth optimization

For a binary market, participants take positions on opposite outcomes, forming a pool:

$$ P = s_{\text{YES}} + s_{\text{NO}} $$

where $s_{\text{YES}}$ and $s_{\text{NO}}$ are bet volumes on respective outcomes.

The winner receives the pool minus protocol fees. The specific implementation of the matching mechanism is determined through protocol parameters and can evolve.

4.3 Result Resolution The oracle system ensures reliable determination of event results:

• Publication of verifiable result data
• Dispute and arbitration mechanisms for contentious situations
• Economic incentives for honest and timely reporting
• Ability to change data sources through governance

This approach is based on experience of decentralized platforms [8][9][10], where the effectiveness of cryptoeconomic mechanisms for ensuring reliability of external data in smart contracts has been proven.

4.4 Economic Efficiency Participant payouts are calculated considering protocol fees that ensure ecosystem sustainability.

For a matched pair of bets with fixed pool $P$, the winner receives:

$$ W = P \times (1 - f_p) $$

where $f_p$ is the protocol's percentage fee from winnings.

Additionally, a fixed fee $f_b$ is charged when placing each bet (non-refundable). Thus, the total cost for a participant placing a bet of size $s$:

$$ C = s + f_b $$

Expected return for a participant with subjective success probability $p$:

$$ EV = p \times W - C = p \times P \times (1 - f_p) - (s + f_b) $$

This model ensures balance between attractiveness for participants and protocol sustainability.

5. Economics and Incentives

5.1 Protocol Revenue Sources The protocol charges a two-component fee structure to ensure sustainability:

1. Fixed fee $f_b$ for placing each bet (non-refundable even if event is cancelled)
2. Percentage fee $f_p$ from paid winnings

Total fee collection per period:

$$ F_{\text{total}} = M \times f_b + K \times (f_p \times P) $$

where:

• $M$ — total number of placed bets
• $K$ — number of matched pairs (winning positions)
• $P$ — fixed pool size of matched pair

Specific fee parameters are determined through DAO governance, allowing adaptation to market conditions. This approach ensures balance between user accessibility and ecosystem sustainability, following principles outlined in [1][2] regarding the need for adaptive mechanisms in prediction markets.

5.2 Value Distribution Collected fees are distributed among ecosystem participants according to protocol parameters.

Let $F_{\text{total}}$ be the total volume of collected fees per period. Distribution occurs according to the formula:

$$ F_{\text{total}} = F_{\text{DAO}} + F_{\text{oracle}} + F_{\text{reserve}} $$

where:

• $F_{\text{DAO}} = \alpha \times F_{\text{total}}$ — DAO treasury share for rewarding stakeholders [15][16]
• $F_{\text{oracle}} = \beta \times F_{\text{total}}$ — compensation for infrastructure operators
• $F_{\text{reserve}} = (1 - \alpha - \beta) \times F_{\text{total}}$ — protocol reserves

Parameters $\alpha$ and $\beta$ are determined through DAO governance and can adapt to ecosystem conditions, with $\alpha + \beta \leq 1$.

This model is based on research of optimal incentive mechanisms in prediction markets [4][7].

5.3 Staking and Governance Mechanism TCAST tokens represent the right to participate in governance and receive protocol rewards [15][16].

Participants stake TCAST tokens in the DAO, receiving:

• Economic benefits: proportional share of protocol revenues
• Governance rights: participation in voting on key decisions [2]
• Reputation capital: influence on development direction

Stakeholder participation can be represented through various mechanisms (tokens, NFTs, contract records), providing:

• Cryptographic protection against forgery
• Transparent accounting of contribution and participation time
• Transferability of rights
• Automatic reward accrual

The epoch distribution system ensures:

• Reward predictability [7]
• Protection against short-term manipulation [6]
• Incentives for long-term participation [1][2]

Mathematical Model of Epoch Rewards:

Epochs are created periodically (parameter configured through DAO). In each epoch $e$, all accumulated TON from protocol fees is directed. For participant $i$ who staked $s_i$ TCAST tokens at epoch $e$ moment, the reward is calculated:

$$ R_i^{(e)} = \begin{cases} \displaystyle \frac{s_i}{S_e} \times T_e & \text{if } \displaystyle \frac{s_i}{S_e} \times T_e \geq \theta \\\ 0 & \text{otherwise} \end{cases} $$

where:

• $s_i$ — amount of TCAST staked by participant $i$
• $S_e$ — total volume of staked TCAST in epoch $e$
• $T_e$ — total TON reward pool for epoch $e$
• $\theta$ — minimum payout threshold (protection against micro-transactions)

When unstaking, the participant automatically receives rewards for all completed epochs:

$$ R_i^{\text{total}} = \sum_{e \in E_{\text{completed}}} R_i^{(e)} $$

where $E_{\text{completed}}$ is the set of completed epochs since staking.

This model [15] ensures fair proportional distribution with spam protection through minimum thresholds.

5.4 Participant Ecosystem

The protocol creates a mutually beneficial ecosystem for various roles:

Market Participants

• Form predictions through position placement
• Monetize informational advantages
• Contribute to pricing efficiency [3][6]

Infrastructure Providers

• Ensure reliability of oracles and services
• Motivated by economic incentives and reputation
• Receive compensation for provided services

Token Holders

• Participate in decentralized governance [2]
• Receive proportional share from protocol growth
• Influence strategic ecosystem development

6. Security and Reliability

6.1 Security Principles

• Trust Minimization: cryptographic guarantees instead of reputation [11]
• Risk Isolation: independence of system components
• Transparency: open code and operation verifiability [12]
• Resilience: recovery and backup mechanisms

6.2 Protective Mechanisms Multi-level protection system ensures participant security:

• Validation of all critical operations at protocol level
• Economic barriers against attacks and manipulation [11]
• Parametric limits to prevent abuse
• Emergency response mechanisms through decentralized governance

6.3 Scalability and Performance The protocol is designed for efficient operation with activity growth:

• Distributed data architecture
• Optimization of computational and transaction costs [13][14]
• Adaptive resource management
• Horizontal scaling capability

7. Decentralized Governance

7.1 DAO Principles Protocol governance is carried out by the community through DAO mechanisms [15]:

• Transparent voting on key decisions [2]
• Graduated powers depending on stake and reputation
• Governance capture protection mechanisms

7.2 Governance Areas Decentralized governance covers key protocol parameters:

• Economic parameters: fee structure and size
• Technical parameters: limits, thresholds, security parameters
• Integration: new oracles, markets, and external services
• Resource allocation: treasury for development and rewards
• Evolution: logic evolution and feature additions

7.3 Evolution Mechanism DAO ensures protocol adaptability and development:

• Open proposal system from community
• Voting considering economic interests
• Gradual implementation of changes with rollback mechanisms
• Experimental features with controlled risk

8. Development Directions

The protocol is designed with long-term development and adaptation to community needs in mind. Key evolution directions are determined through DAO mechanisms.

Market Type Expansion The protocol can support various prediction formats [1][3][4]:

• Categorical markets (multiple choice)
• Scalar markets (numerical ranges)
• Combinatorial markets (complex conditions)
• Long-term and short-term predictions

Increased Decentralization Gradual reduction of dependence on centralized components [8][9][10]:

• Distributed oracles with economic guarantees
• Consensus mechanisms for dispute resolution [5][6]
• Complete autonomy and censorship resistance [11]

Economic Innovations
Development of tokenomics and incentive mechanisms [1][3]:

• Dynamic pricing models
• Extended liquidity mechanisms [9][10]
• Integration with TON DeFi ecosystem [12][16][17]
• Cross-chain functionality

9. Conclusion

Toncast represents a decentralized platform for prediction markets, combining cryptographic guarantees of blockchain [11][12] with economic efficiency of information aggregation mechanisms [1][2][5]. The protocol eliminates key limitations of centralized systems — censorship, opacity, and custodial risks — ensuring complete verifiability of all operations.

Modular architecture and decentralized governance mechanisms allow the protocol to continuously evolve, adapting to community needs and technological progress. Tokenomics [15][16] creates sustainable long-term incentives for all ecosystem participants.

Integration with TON blockchain [13][14] provides performance and scalability necessary for mass adoption. Experience of existing platforms [8][9][10] and academic research [3][4][7] confirm the superiority of market mechanisms in aggregating distributed knowledge.

Toncast aims to become an open infrastructure for collective forecasting, where participants form and monetize predictions of the future, contributing to more efficient information distribution in society.

10. References

[1] R. Hanson, "Combinatorial Information Market Design," In Information Systems Frontiers, vol 5, no 1, pages 107-119, 2003.

[2] R. Hanson, "Shall We Vote on Values, But Bet on Beliefs?" In Journal of Political Philosophy, vol 21, no 2, pages 151-178, 2013.

[3] J. Wolfers, E. Zitzewitz, "Prediction Markets," In Journal of Economic Perspectives, vol 18, no 2, pages 107-126, 2004.

[4] K. J. Arrow, et al., "The Promise of Prediction Markets," In Science, vol 320, no 5878, pages 877-878, 2008.

[5] F. A. Hayek, "The Use of Knowledge in Society," In American Economic Review, vol 35, no 4, pages 519-530, 1945.

[6] C. F. Manski, "Interpreting the Predictions of Prediction Markets," In Economics Letters, vol 91, no 3, pages 425-429, 2006.

[7] J. Berg, et al., "Results from a Dozen Years of Election Futures Markets Research," In Handbook of Experimental Economics Results, 2008.

[8] Augur Protocol, "Augur: A Decentralized Oracle and Prediction Market Platform," https://github.com/AugurProject/whitepaper/releases/download/v2.0.6/augur-whitepaper-v2.pdf, 2018.

[9] Gnosis, "Gnosis Whitepaper," https://github.com/gnosis/research/blob/master/gnosis-whitepaper.pdf, 2017.

[10] Omen/Reality.eth, "Conditional Tokens Framework," https://dxdocs.eth.limo/docs/Products/omen/technical-documentation/, 2020.

[11] S. Nakamoto, "Bitcoin: A Peer-to-Peer Electronic Cash System," https://bitcoin.org/bitcoin.pdf, 2008.

[12] V. Buterin, "Ethereum: A Next-Generation Smart Contract and Decentralized Application Platform," https://ethereum.org/content/whitepaper/whitepaper-pdf/Ethereum_Whitepaper_-_Buterin_2014.pdf, 2014.

[13] TON Foundation, "The Open Network Documentation," https://docs.ton.org, 2024.

[14] Tact Language, "Smart Contract Programming Language for TON," https://tact-lang.org, 2024.

[15] Toncast DAO, "NFT Staking & Epoch Rewards System," https://github.com/Toncast/toncast-dao-nft, 2024.

[16] TCAST Token, "TCAST Token Minter Contract," https://github.com/Toncast/toncast-minter-contract, 2024.

[17] Toncast Markets, "Root-Pari-Bets Smart Contracts," https://github.com/Toncast/toncast-contracts, 2024.

---

Version: 1.0
Date: October 2025

© 2025 Toncast Foundation. This document describes the target architecture and economics of the Toncast protocol and may evolve through DAO governance.

Contacts:
Website: toncast.me
GitHub: github.com/Toncast
Email: team@toncast.me