Capsaicin

A decentralized prediction-market protocol on Chiliz Chain where users stake team fan tokens to buy outcome positions, earn rewards and fees, and have every prediction recorded into a dynamic Season-Pass NFT that grows into verifiable Proof-of-Fandom.

Core value propositions

1. Liquidity & velocity for Fan Tokens. Markets are denominated in the teams’ native fan tokens (e.g., $BAR), creating direct on-chain demand and organic trading volume for those tokens.
2. On-chain fan reputation. Every trade / win updates a user’s dynamic NFT that visualizes and stores win rate, streaks, badges and historical performance.
3. Community & virality. Guilds/Tribes aggregate fans, compete weekly, earn guild rewards, and drive social traction.
4. Native SportsFi primitives. Market creation, LP rewards, validators, protocol fees, and NFTs combine DeFi + social mechanics to align incentives.

How it works — user & protocol flows

Market lifecycle

• Market creation: Anyone (market creator) can create a match market (e.g., Barcelona vs Real). The market is denominated in one or both teams’ fan tokens depending on the pair (configurable). Creator posts initial liquidity and a small listing fee.
• Buying shares: To buy “YES” on Barcelona, the user stakes $BAR tokens into the market’s contract and receives outcome shares. Share price is determined by an on-chain bonding curve (AMM / LMSR style) to ensure continuous pricing and liquidity.
• LPs & fees: Liquidity providers deposit tokens into the market pool and earn a share of trading fees. Market creators receive 50% of total trading fees (per your spec), validators get 20%, 10% flows to CASP NFT holders, protocol gets 10%, and 10% reserved for promotions (or adjustably distributed).
• Resolution & payout: At match end, an oracle (decentralized or trusted) posts the final outcome. Winners redeem shares for the underlying fan token collateral. Fees and rewards are paid automatically by contracts.

Dynamic Season-Pass NFT

• On first use the user mints a “Season Pass” NFT (free or minimal mint).
• The Season Pass listens to SharesRedeemed and Trade events (via subgraph/indexer). Each outcome (win/loss/hold) updates the on-chain metadata: total predictions, win rate, streaks, badges, level, rarities, and even on-chain artwork/versioning.
• Badges & prestige traits (e.g., Diamond Hand for holding until result) are minted as traits or attached NFT sub-assets. The NFT is upgradable or composable but the canonical history is immutable.

Guilds / Tribes

• Users join guilds representing teams or communities. Guilds have aggregated metrics (collective win rate, liquidity provided, risk-adjusted score).
• Guild rewards: weekly payouts, guild NFTs, special skins or fee shares (a cut of protocol fees allocated to top guilds).

Technical architecture (high level)

• Chain: Chiliz Chain (or other EVM-compatible chain integrated).
• Smart contracts: Solidity contracts for market creation, bonding curve AMM / LMSR market maker, LP staking & reward distribution, NFT minting & metadata-updates, fee splitter, and governance.
• Oracles: Decentralized / fallback oracle architecture (Chainlink sports feeds where available, plus neutral trusted relayers and multi-sig validators for edge cases).
• Indexing & event processing: The protocol emits rich events; a subgraph (The Graph) or off-chain indexer ingests them to update NFT metadata (on-chain URI or via IPFS/CID).
• Storage: Metadata and evolving artwork stored on IPFS/Arweave; small proofs & state stored on-chain.
• Frontend: React + web3 + wallet connectors (MetaMask, WalletConnect, Chiliz wallet).
• Backend services: Optional for UX (notifications, caching, gas estimation, leaderboard aggregation). Use minimal centralized components; core logic and funds remain on-chain.

Economic model & incentives

• Fee split: Market creator 50% / validators 20% / CASP NFT holders 10% / protocol 10% / promotions 10%. (Configurable via governance.)
• LP yield: LPs collect trading fees and can earn additional emission incentives early on to bootstrap liquidity.
• NFT utility: CASP holders receive fee shares, early access to new market types, exclusive drops, stadium ticket priority, and gamified utilities (exclusive guild skins, real-world merch unlocks).
• Token launches for athletes: Athletes can issue fan tokens; the protocol supports seed markets to kickstart liquidity—market creators (or the athlete’s team) may subsidize initial liquidity or reward early LPs.

UX / product features

• Simple flows: Connect wallet → mint Season Pass → search match → stake fan tokens → view dynamic NFT progress.
• Advanced trader tools: Market maker dashboard, LP analytics, limit orders (optional), and marginal risk indicators.
• Social & discovery: Leaderboards, guild pages, embeddable match widgets, shareable NFT pages.
• Mobile-first: Lightweight mobile web app and potential native apps for notifications and guild chat.

MVP (minimum viable product) scope

1. Market creation & simple binary markets denominated in a single fan token.
2. AMM-based pricing (simple LMSR or constant product approximated for predictions).
3. Outcome resolution via an oracle and automated payouts.
4. Season Pass NFT with basic on-chain stats (wins/losses/streak).
5. Fee split logic and dashboard for market creators and LPs.
6. Guild creation & basic leaderboards.

Metrics to measure: TVL, number of active markets, active users (daily/weekly), NFT mints, trading volume, average trade size, churn.

Roadmap (high level)

• Phase 0 — Research & prototype: bonding curve selection, oracle integrations, legal review.
• Phase 1 — MVP launch: single-token markets, Season Pass v1, simple fees.
• Phase 2 — Growth: guilds, athlete token issuance, multi-token markets (two-sided denominated pools), mobile optimizations.
• Phase 3 — Ecosystem: cross-chain support, secondary market for Season Pass trades, on-ramp fiat integrations, partnerships with clubs/athletes.
• Phase 4 — Governance: DAO for protocol parameters, fee splits, and feature proposals.

Security, compliance & legal considerations

• Smart contract audits (multiple reputable auditors).
• Oracle decentralization to prevent result manipulation. Multi-source consensus + dispute window.
• Gambling compliance: Prediction markets can be regulated in many jurisdictions. Implement geoblocking, KYC for regulated regions, and legal counsel to determine allowed markets & user flows.
• Funds custody: All funds remain in smart contracts; minimize privileged roles and implement timelocks for upgrades.

Example end-to-end narrative

Priya holds $BAR. She creates a market for Barcelona vs Real, staking $BAR to bootstrap liquidity. Tomas buys YES shares using $BAR. After the match, the oracle reports Barcelona won; Tomas redeems shares for $BAR; Priya (market creator) gets 50% of fees; validators get their share; Priya’s Season Pass upgrades to “Pro” for successful market creation and predictive accuracy and gains a “Creator” badge. Their guild’s leaderboard rises and the guild wins the week’s fee-share reward.

Key risks and mitigations

• Oracle manipulation: Use multiple oracle feeds, a validator network, and dispute windows.
• Low liquidity / low usage: Bootstrapped incentives, partnerships with clubs/athletes, and initial subsidy markets.
• Regulatory / gambling laws: Restrict markets in sensitive jurisdictions and offer tournament-style non-monetary markets as alternatives.
• Token price volatility: Markets denominated in fan tokens move with token price; consider LP protections and collateralization ratios to protect against front-running and slippage.

KPIs to track

• Total trading volume (USD & token terms)
• TVL in markets & LP pools
• Active Season Pass holders & average win rate
• Guild churn & retention
• Market creator retention & revenue share distributed

Final notes — why this matters

Capsaicin aligns fandom, finance, and provenance: instead of fan tokens sitting idle, they become the native currency of a socially rich Speculative layer where fans can demonstrate knowledge, earn yield, and claim persistent on-chain social status. The combination of immediate utility (trading, yield) and long-term social capital (dynamic NFTs, guilds) creates deeper engagement and sustainable network effects.

Built Capsaicin as a Next.js 14 app with the App Router, TypeScript, and Tailwind for styling. On-chain data flows through ethers.js layered on ChiliZ’s L1 testnet plus the fan-token contracts we deployed and registered via src/lib/contractRef.ts. We orchestrate market + tribe state through server actions that hit our API routes, which talk to the same contracts and cache responses in Vercel KV for snappy reads. Partner-wise, ChiliZ gives us instant fan-token minting, gating, and event hooks—so engagement scores can be updated live and reflected in the TribeBoard component. The hackiest bit: we wrote a contract ref helper that autogenerates typed bindings from ABI metadata at build time, letting us hot-swap new fan markets during the hackathon without redeploying the frontend.