How to trade
Butter Conditional Funding Markets (CFMs) feature two distinct markets for each proposal, to precisely estimate its impact. This page explains this structure. We will use Total Value Locked (TVL) as an example metric; actual CFMs may use different metrics.
Why two markets per proposal?
For each proposal (e.g., "Proposal X"), you will find:
Funded market: Predicts the protocol's TVL if Proposal X receives funding. "Funded" means the proposal is selected and gets its requested capital.
Not_Funded market: Predicts the protocol's TVL if Proposal X does not receive funding.
Screenshot of a proposal's metric estimate in the Funded and Not_Funded scenarios:
These markets allow the CFM to isolate the proposal's specific contribution. If the Funded market for Proposal X predicts $15M TVL and the Not_Funded market predicts $10M TVL, the market estimates Proposal X will add $5M TVL if funded.
How do I trade these markets?
Your goal is to assess if the current market-predicted TVL in either scenario (Funded or Not_Funded) is an over or underestimate. Each market has its own UP and DOWN tokens, where UP tokens gain value with higher final TVL, and DOWN tokens with lower final TVL.
For Proposal X's Funded market: If its price implies $15M TVL if funded:
Believe TVL will be >$15M? Buy Funded-UP tokens for Proposal X.
Believe TVL will be <$15M? Buy Funded-DOWN tokens for Proposal X.
Screenshot of the trading widget for an example proposal's Not_Funded scenario:
(the green and red buttons facilitate purchases of Not_Funded-UP tokens and Not_Funded-DOWN tokens respectively)
For Proposal X's Not_Funded market: If its price implies $10M TVL if not funded:
Believe TVL will be >$10M even without funding? Buy Not_Funded-UP tokens for Proposal X.
Believe TVL will be <$10M without funding? Buy Not_Funded-DOWN tokens for Proposal X.
Important: Compare your TVL belief against the market's current predicted TVL for that specific scenario before buying. Do not buy UP tokens irrespective of the market price.
How do UP and DOWN payouts work?
Every market fixes a minimum and maximum TVL—say $0 and $100 M.
At the minimum: UP pays $0, DOWN pays $1.
At the maximum: UP pays $1, DOWN pays $0.
In between: UP pays whatever fraction of the $0–$1 range the final TVL represents; DOWN pays the rest so the two always add to $1.
The live UP price is simply the market’s guess of that fraction. If a Funded-UP token trades at $0.70 in a $0–$100 M range, traders expect funding to lift TVL to about $70 M. Buy UP if you think the TVL will finish higher than that, or DOWN if you think it will finish lower.
Are Funded-DOWN tokens and Not_Funded-UP tokens the same?
No, these are different.
Funded-DOWN token (for Proposal X): You predict low TVL if Proposal X is funded.
Not_Funded-UP token (for Proposal X): You predict high TVL if Proposal X is not funded.
How do the markets resolve?
The Funded market and Not_Funded market for a proposal predict the same metric (e.g., TVL) under mutually exclusive conditions.
Their predicted TVL values can change based on shared information (e.g., general ecosystem news) or information specific to one scenario. They are not expected to move in exact lockstep, and their predicted TVLs do not sum to a fixed value.
After funding decisions:
If Proposal X is funded: Its Funded market tokens resolve based on actual TVL at the resolution date. Its Not_Funded market tokens become worthless.
If Proposal X is not funded: Its Not_Funded market tokens resolve based on actual TVL at the resolution date. Its Funded market tokens become worthless.
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