Contro - Gradual Limit Order Book (GLOB): What You Need to Know
Aggregated P2P Trading, Anti-insider info Prediction Markets, & More
Prediction markets have gotten a lot of fanfare lately and for good reason. With recent events in the markets and geopolitical realm unfolding, more permissionless or at least faster creation of markets around relative news could prove to be an interesting implementation for prediction markets. In today’s edition, we’ll be discussing a new DEX infrastructure that can enable various interesting onchain use cases, perhaps most interestingly, in the prediction markets space. The Polymarket elections market has now done over half a billion dollars and counting in volume, but laying on laurels and banking on the upcoming elections to carry interest in this space may not cut it for some faction of users, and builders.
By now we’re likely all familiar with AMMs and CLOBs; Contro is now building out the GLOB (Gradual Limit Order Book). Contro’s core offering is a market that basically allows downtime of markets, making prediction markets less prone to instant inside information snipes. Instead, with Contro, markets slowly shift over time, averaging out liquidity in pools. So one player can’t claim an outsized share of rewards, instead other traders betting on the same outcome also experience this upside. As an early-stage project, there are some interesting considerations around protocol design and potential applications that can be explored.
Stay informed, stay alert ⬇️
Background on Contro
Contro describes itself as ‘the GLOB Chain for Fairer Markets’. The protocol is building out its ‘Controverse’, a dedicated rollup chain built in partnership with Initia, which provides a framework for interwoven rollups. Contro represents a new and innovative use case built on this modular network interoperability infrastructure, though Contro is an infrastructure protocol itself to some extent.
What is the GLOB? The GLOB takes inspiration from Time Weighted Average Price (TWAP), noting how liquidity in a trade is deployed over time. This is commonly used by institutions or whales to lower slippage/price impact, splitting a desired trade into multiple smaller trades typically of equal value, each executed subsequently over time. TWAP can be thought of as a more systemic and automated DCA (Dollar Cost Average) usually with more defined targets. This is not only efficient for the party initiating the TWAP but also the market in general, as it is subject to less swings the more the large trade is spread out. The main exception would be arbitragers who can quickly take advantage of these sorts of scenarios. The GLOB basically employs TWAP as a mandate.
Necessitating the splitting of trades is perhaps not feasible for the majority of DeFi applications. However, for some use cases, which may or may not exist yet, this design could bring something novel to the table. The Contro team has an academic background and has tested some of these concepts in this realm, though publicly available research is not yet available at this time. Users can take from that what they will, some in crypto discount academic protocols, as seen with the moniker “professor coins” used to describe a subset of coins (Cardano) that sound best on paper.
The main takeaway from the GLOB is that it basically entirely mitigates the role of time in markets. Time, or more specifically, speed (no advantage to being slow), is a huge factor in traditional markets as well as crypto, with firms going to great lengths to shave milliseconds of latency off. Crypto market participants are of course familiar with MEV and the vast amount of resources that have gone into combatting it. With the GLOB, “time matters only proportionally to how much of it has passed.”
The GLOB explicitly aims to cut down on high-frequency trading (HFT) strategies, labeling them as extractive. Instead, the goal is to help empower each trader to be a sort of market maker of their own in some respects removing middlemen in the process as much as possible. The DEX’s role instead becomes aggregating P2P trades. This is something that is both new in traditional finance as well as crypto, ideally the best kind of innovation to aim for, things that don’t yet exist which blockchain can help facilitate.
OK so the jist of the GLOB is clear; how can actually be employed in practice? While it’s still early days, the team has floated some ideas on how this new architecture can best be used for new use cases instead of incremental improvements upon existing applications. One major consideration is that in prediction markets, the impact of insider information is substantially negated. One party can’t simply bet on an outcome of the blue by operating with some information unknown to the other participants; much more of his trade will coincide with additional inflows from other users, most likely. Some might view this as reducing the edge and just creating more equitable outcomes, and this is true to some extent. But the role this could have is clear, not everyone wants each market to be highly volatile and high-risk.
The team has also made their stance clear that prediction markets should employ low fees and not partake in exercising edge of their own, so leaving the market as permissionless as possible with little intervention from the venue. This includes banning certain parties from participating, using in-house algorithms to assist with making the market, and more.
Important Links
Become a Premium member to unlock all our research & reports including access to our members-only discord server
Join thousands of sharp crypto investors & traders by becoming a Premium Member & gain an edge in the markets. For just $116.58/month you’ll get:
Premium access to the entire Revelo Intel platform
Members Only Discord server
Market Intel - actionable trade ideas
Industry Intel - important trend & narrative overviews
Project Breakdowns & Timelines - Deep dive 50+ page protocol-specific reports
Notes - Summaries of your favorite podcasts & AMAs