> ## Documentation Index
> Fetch the complete documentation index at: https://hypernode-docs.polynode.dev/llms.txt
> Use this file to discover all available pages before exploring further.

# HIP-4 Prediction Markets

> Native L1 prediction markets on HyperLiquid. Binary outcome instruments with pair minting, CLOB trading, oracle settlement, and fee-on-close economics.

HIP-4 introduces native prediction markets as first-class L1 instruments on HyperLiquid. These are binary outcome contracts that settle between 0 and 1, built on top of the HIP-3 deployment pipeline with distinct trading mechanics.

## Core properties

Unlike perpetual futures, prediction markets operate under a restricted set of rules:

* **1x isolated margin only** -- no leverage, no liquidation
* **No continuous oracle feed** and no funding rates
* **Price = CLOB mid** during active trading
* **Price bounds:** 0.001 to 0.999
* **Loss is capped** at the amount paid to enter

These constraints make prediction markets fundamentally different from perps. There is no liquidation risk because positions are fully collateralized by design.

## Pair minting model

Every prediction market has two tokens: **YES** and **NO**. They always sum to 1.00 in value.

<Note>
  Buying YES at 0.40 is economically identical to selling NO at 0.60. The protocol enforces this invariant at the L1 level through the pair minting mechanism.
</Note>

When you deposit 1 unit of collateral, the protocol mints 1 YES token and 1 NO token. You can then sell the side you don't want on the orderbook.

```
1 collateral -> 1 YES + 1 NO (always)
YES price + NO price = 1.00 (always)
```

## Four L1 actions

HIP-4 defines four native actions for interacting with outcome markets:

<AccordionGroup>
  <Accordion title="SplitOutcome">
    Deposit collateral to mint a matched pair of YES and NO tokens.

    **Fields:** `collateral` (amount), `question` (market identifier)

    This is the primary entry point. Depositing 1 USDC mints 1 YES + 1 NO. You then sell whichever side you don't want on the CLOB.
  </Accordion>

  <Accordion title="MergeOutcome">
    Merge a matched pair of YES + NO tokens back into collateral.

    **Fields:** `tokens` (amount to merge)

    The inverse of SplitOutcome. If you hold both sides, you can recombine them to recover collateral without paying spread on the orderbook.
  </Accordion>

  <Accordion title="MergeQuestion">
    Merge across a multi-outcome question.

    **Fields:** `question` (market identifier)

    Used for questions with more than two outcomes, allowing cross-outcome merges.
  </Accordion>

  <Accordion title="NegateOutcome">
    Flip position direction.

    **Fields:** `asset`, `amount`, and additional parameters

    Converts a YES position into the equivalent NO position (or vice versa) without going through the orderbook.
  </Accordion>
</AccordionGroup>

## Settlement

Settlement is handled by a designated oracle address (`oracleUpdater`) that posts the final value:

1. Oracle posts the resolution value
2. Trading halts instantly
3. All positions auto-settle in a single block
4. Winners receive 1.00 per token, losers receive 0

There is no gradual wind-down or expiry period. Settlement is atomic and immediate once the oracle posts.

## Fee model

<Warning>
  Opening a position is **free**. Fees are only charged on closing or settlement.
</Warning>

HIP-4 outcome markets use **spot fee rails**, meaning they inherit the spot trading fee schedule:

| Action             | Taker (cross) | Maker (add) |
| ------------------ | :-----------: | :---------: |
| Open position      |     0 bps     |    0 bps    |
| Close on orderbook |    7.0 bps    |   4.0 bps   |
| Settlement         |    7.0 bps    |      --     |

Fees are charged in the **outcome token**, not in USDC.

A governance hook (`SetOutcomeFeeScale`) exists that allows validator vote to adjust outcome fee rates independently from base spot fees in the future.

<Note>
  VIP tier discounts, staking discounts, and referral discounts all apply to outcome market fees the same way they apply to spot fees. See the [fee structure](/research/fees) page for full details.
</Note>

## Asset ID encoding

Prediction market tokens use a distinct ID range within the HyperLiquid asset system:

```
Asset type          ID range
──────────          ────────────────
Perpetuals          0, 1, 2, ...        (BTC=0, ETH=1, ...)
Spot tokens         10000+
Spot variants       110000 - 170000+
Prediction outcomes 1900000+
```

For EVM bridge operations, outcome tokens use a separate index scheme:

```
EVM bridge index = 100_000_000 + int(str(outcomeId) + str(sideId))

Example:
  "BTC > 68k" YES token = 100019520
  "BTC > 68k" NO token  = 100019521
```

## Minimum order size

The minimum order size is dynamic, based on the current mark price:

```
size x min(markPx, 1 - markPx) >= $10 USDC
```

This means cheaper outcomes (closer to 0 or 1) require larger token quantities to meet the \$10 notional minimum. At a mark price of 0.10, you need at least 100 tokens. At 0.50, you need at least 20.

## Deployment

Any **HIP-3 deployer** can deploy HIP-4 prediction markets. Becoming a deployer requires staking **500,000 HYPE**.

Deployment uses dedicated L1 actions:

* `RegisterOutcome` -- register a new outcome market
* `RegisterTokensAndStandaloneOutcome` -- register tokens and outcome in a single action

Market structure is defined through:

* `OutcomeSpec` -- defines the outcome parameters
* `QuestionSpec` -- defines the question being resolved
* `OutcomeTracker` -- tracks outcome state through its lifecycle

### Deployer fee share

The `deployer_trading_fee_share` parameter and `fee_recipient` address exist in the deployment configuration, allowing deployers to earn a share of trading fees. However, on testnet this value is currently observed as `0.0` for all prediction market deployments, meaning deployers do not yet receive trading fees. This may change when prediction markets launch on mainnet.

See the [fee structure](/research/fees#deployer-fee-share) page for more details on deployer revenue mechanics.