Incentives and Considerations

Balancing Providence.

The system Providence will utilise provides a strong incentive for early deposit into comparatively likely (true-likelihood (true likelihood is the real-world likelihood, as opposed to the implied likelihood that is derived from user speculation)) outcomes as depositors, but a disincentive to deposit into comparatively unlikely outcomes until T is large (when the market is larger). This is because the system supposes that all outcomes are equally likely early on.

It can be assumed that as an outcome becomes more and more likely as the market nears expiry, users will exchange more and more of the unlikely outcomes into the likely - this is ameliorated by the dynamic exchange rate outlined in the Sigma section. With the Mint/Burn exchange, as an outcome becomes more likely the upside of exchanging into that outcome decreases, until it becomes a guaranteed loss to exchange as the exchange rate between any two tokens tends toward 0 as market reaches expiry.