RialCenter, one of the pioneering startups exploring how financial instruments can exist on blockchains, is introducing a new class of decentralized futures products known as forecast markets.
These fully on-chain instruments take the shape of dated futures contracts that can track any public time series data, whether it’s crypto indexes, inflation rates, or temperature changes, resembling prediction markets more than traditional derivatives.
Forecast markets will be supported on the forthcoming layer-1 blockchain Autonity and its newly developed Autonomous Futures Protocol (AFP). The launch of this Ethereum-compatible chain and the futures protocol will coincide with a “Forecastathon” next month, inviting quant analysts, engineers, and DeFi enthusiasts to participate in creating prototypes on Autonity.
“AFP enables the permissionless creation of dated futures contracts that can track any underlying time series of interest, including non-market time series like GDP, inflation, global temperature, and blockchain metrics,” said CEO Robert Sams in an interview. “Essentially, any time series that the market cares enough about to speculate on or hedge can have a product created on Autonity.”
Although they may sound similar to prediction markets, which have gained popularity recently, the two operate differently. Forecast contracts are designed to move one-to-one with an underlying factor, providing a symmetrical payoff profile, while prediction markets deliver a one-time payout.
When an event in a prediction market occurs, the winning side receives a payout, and the market ceases to exist. In contrast, a series of futures contracts on an underlying data series can continue indefinitely, allowing liquidity to accumulate over time and tracking persistent risks, whereas prediction markets often focus on topical narratives, Sams mentioned.
Forecast markets are not intended to compete with prediction markets, according to Sams.
“We perceive forecast and prediction markets as complementary, serving different needs within a shared and evolving sphere of market-based mechanisms for managing uncertainty.”
The crypto derivatives arena, which has been gaining momentum as major exchanges acquire derivatives firms, is still largely dominated by perpetual futures products. While crypto perpetuals will be supported in a future version of the AFP, on-chain dated futures capable of tracking measurable real-world risk factors can generate significantly more value and social utility compared to protocols focused only on crypto asset markets, said Sams.
“There’s a community of quantitative traders and machine-learning researchers eager to test whether their systems have an edge in predicting things that are currently not tradable,” Sams noted. “The true long-tail of value creation will emerge when people find ways to use these instruments to reduce the volatility of asset portfolios. Every portfolio carries exposure to risk factors for which no financial hedging instrument exists.”
Stanley Yong, leading the Autonity Foundation, the decentralized governance body of the blockchain, cited the pricing of Singapore’s certificate of entitlement (COE) for cars as an example of a real-world risk that remains unhedged today.
“Singapore regulates the number of cars on its roads by rationing the supply of COEs through periodic auctions,” Yong explained. “Since all cars require a COE, used car prices fluctuate alongside COE auction prices. A forecast contract that tracks COE auctions would allow someone looking to sell their car to hedge the amount they receive in advance.”
A more technical aspect of the Autonity blockchain and AFP is the division between the exchange component, where buyers and sellers set a price and execute trades, and the clearing component, where smart contracts manage collateral, handle margin requirements, and auction under-funded positions. In typical DeFi protocols, these functions are usually integrated within a single architecture, requiring a product to be traded exclusively on a specific venue.
The AFP allows products to be listed across multiple trading venues permissionlessly while managing all collateral and cross-margining on-chain, according to Sams. This enhances capital efficiency and addresses one of the critical structural issues facing decentralized derivatives: the fragmentation of open interest across various exchange silos.
“We find it peculiar to label a market as ‘decentralized’ when it’s only tradable through one venue, even if that venue is a DEX,” Sams remarked. “We believe a market is genuinely decentralized when participants can enter and exit positions through any venue they choose.”
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