Binary Markets

A smart contract system for creating binary prediction markets with integrated AMM trading via Uniswap V3. Split ERC20 collateral into binary outcome tokens and trade them efficiently through a custom router implementation.

Overview

This project implements a prediction markets infrastructure where users can:

• Split collateral tokens into two binary outcome tokens (Token A & Token B) at a 1:1 ratio
• Merge equal amounts of both tokens back to recover collateral
• Trade position tokens directly for collateral through Uniswap V3 pools
• Deploy new markets deterministically using a factory pattern

Architecture

Core Contracts

• Market.sol: Handles split/merge operations, maintaining the invariant that total positions always equal locked collateral
• PositionToken.sol: Minimal ERC20 implementation for binary outcome tokens, mintable only by their parent market
• MarketFactory.sol: Deploys markets with deterministic addresses using CREATE2, automatically initializing Uniswap V3 pools
• Router.sol: Enables complex swaps between collateral and position tokens through Uniswap V3 integration

Installation

# Clone the repository
git clone https://github.com/JetJadeja/binary-markets.git
cd binary-markets

# Install dependencies with Bun
bun install

# Install Foundry dependencies
forge install

Setup

# Build contracts
bun run build
# or
forge build

# Run tests
forge test

# Run tests with gas reporting
forge test --gas-report

# Format code
forge fmt

Testing

The test suite covers core functionality:

• Market creation through the factory
• Split/merge operations maintaining 1:1 ratios
• AMM swaps via Uniswap V3
• Edge cases like slippage and deadline protection

Run specific tests:

forge test --match-test testSplitAndMerge
forge test --match-test testSwapCollateralForPosition

Usage Example

// Deploy a new prediction market
address market = factory.deployMarket(
    "BTC-100K-2024",      // Market name (used as CREATE2 salt)
    "BTC reaches $100K",  // Token A name
    "BTC below $100K",    // Token B name
    1000e18               // Initial collateral for liquidity
);

// Split collateral into position tokens
Market(market).split(msg.sender, 100e18);

// Swap collateral directly for a position token
router.swapCollateralForPosition(
    market,
    tokenA,        // Desired position token
    100e18,        // Collateral amount
    95e18,         // Minimum output (slippage protection)
    block.timestamp + 3600
);

Technical Stack

• Solidity 0.8.29: Fixed version for consistency
• Foundry: Development framework and testing
• Solady: Gas-optimized library implementations
• Uniswap V3: AMM infrastructure for trading
• Bun: Fast package manager and task runner

License

MIT