Pharo is an evolution of the Automated Market Maker concept (AMM), which we call an Automated Coverage Maker (ACM). In an AMM there are Buyers, Sellers, and Liquidity Providers; Buyers and Sellers are facilitated by Liquidity Providers who assume the risk of completing a transaction. In an ACM there are Buyers, Events, and Liquidity Providers; Buyers save for an inevitable Event, and Liquidity Providers assume the risk of that Event occurring. The ACM protocol incentivizes Buyers to buy-in early, and Providers to optimize Event odds to maximize their returns. In time, Events will be managed by a DAO.
What it does
There are three (3) or four (4) actors on a Pharo, depending on how you want to think about it. A Pharo begins as a Mummy when it is assigned an event. A Mummy becomes Imhotep when either a Buyer or Provider stakes their money. Imhotep becomes a Pharo when Buyers and Providers have staked their money. A Pharo becomes a Pyramid, immortalized on the blockchain, when the Event is exercised and all payouts are completed. A Pharo Event can be any on-chain event as simple as wind > 50 mph or rain > 4 in, and as complicated as deliverables in a statement of work. Events can also be combined into functions that determine when some event relationships have been met. A Pharo Provider can stake any amount on whatever odds they place against an event happening. As Providers choose which odds to stake in, which create or add to odds tranches, they maximize their returns by staking odds closest to the real world likelihood that the event will take place. If their odds are too high, they will guarantee a payout but they will also have to cover those high odds, and over the course of these events they will probably lose money. If their odds are too low, they may be bought out by providers with higher odds. A Pharo Buyer can stake as much or little as they like, each buy-in is processed on a First-In-First-Out (FIFO) basis. The more money a buyer stakes asafp, they higher their payout when the event happens.
How we built it
Built on top of Scaffold-Eth, we used solidity contracts and react front-end.
Challenges we ran into
Of course the obvious challenge of time, but with that comes the challenge of learning at an increased pace while communicating the 'new tech' to your teammates.
What's next for Pharo
There are a nearly infinite number of events that can be brought on-chain, and even more combinations of these events that can become indexes. Which combination of events, which indexes will people engage with most? Which will people stake the most in? Every industry measures events that help them coordinate and manage, Pharo enables funding vehicles that deburr the volatility of those events. Question is, how do you measure to manage? Events can be in time, physical space, peoples' relationships, infrastructure, or any combination thereof. If people understand the events, the risk will converge to consistent payouts for liquidity providers and buyers alike.