X402 Prediction Market

A decentralized prediction market platform on Solana with AI-generated markets, MCP protocol integration, and x402 payment support.

What Makes This Unique

🤖 AI-Generated Markets: All prediction markets are automatically generated by AI, creating diverse and timely betting opportunities across multiple categories.

🔌 MCP Protocol Support: Industry-first Model Context Protocol (MCP) integration allows AI agents to interact directly with the prediction market:

• Add/remove liquidity positions
• Buy and sell YES/NO tokens
• Query market data and positions
• Execute trades programmatically

💳 x402 Payment Protocol: Seamless USDC payments across Solana and Base chains with unified interface and gasless transactions.

How It Works

What is a Prediction Market?

Trade YES/NO tokens on future events. Token prices = probability:

• YES token at $0.70 = 70% chance event happens
• NO token at $0.30 = 30% chance it doesn't
• Prices always sum to $1.00

Winners redeem tokens for $1.00 each after event resolves.

Core Features

For Traders:

• Buy YES/NO tokens on AI-generated markets
• Trade via x402 payment gateway (Solana USDC)
• LMSR pricing ensures fair probability-based prices
• Arbitrage with Complete Sets (1 USDC ↔ 1 YES + 1 NO)

For Liquidity Providers:

• Add liquidity to earn trading fees
• Fair fee distribution with cumulative tracking
• Withdraw anytime with proportional share

For AI Agents (MCP Protocol):

• Programmatic market access via MCP servers
• Execute trades without manual intervention
• Manage liquidity positions automatically
• Query real-time market data

MCP Protocol Integration

This is the first prediction market with native MCP support, enabling AI agents to participate autonomously:

Available MCP Operations

Trading Operations:

• buy_yes_tokens(market_id, usdc_amount) - Purchase YES tokens
• buy_no_tokens(market_id, usdc_amount) - Purchase NO tokens
• sell_yes_tokens(market_id, token_amount) - Sell YES tokens
• sell_no_tokens(market_id, token_amount) - Sell NO tokens

Liquidity Operations:

• add_liquidity(market_id, yes_amount, no_amount, usdc_amount) - Provide liquidity
• remove_liquidity(market_id, lp_shares) - Withdraw liquidity
• claim_lp_fees(market_id) - Claim accumulated fees

Query Operations:

• get_market_info(market_id) - Fetch market details and prices
• get_user_positions(wallet_address) - View token balances and LP positions
• get_market_list(category) - Browse available markets

Why MCP Matters

For AI Agents:

• Direct blockchain interaction without custom integrations
• Standardized protocol for DeFi operations
• Enables autonomous trading strategies
• Real-time market analysis and execution

For Developers:

• Build AI trading bots easily
• Integrate prediction markets into AI applications
• Automate liquidity provision strategies
• Connect LLMs directly to Solana DeFi

Example Use Case: An AI agent analyzes crypto news, identifies high-probability events, automatically buys YES tokens via MCP, and manages positions based on sentiment analysis - all without human intervention.

AI-Generated Markets

Automated Hot Topic Tracking

Our AI system continuously monitors real-time news and trends to automatically create prediction markets:

How It Works:

1. Data Collection: AI scans news feeds, social media, and crypto/finance APIs
2. Event Detection: Machine learning identifies trending events with clear YES/NO outcomes
3. Market Creation: AI automatically deploys new markets on-chain via smart contract
4. Pool Initialization: Auto-seeds initial liquidity for immediate trading
5. Monitoring: Tracks event resolution and updates market status

AI-Generated Market Features:

• Real-Time: Markets created within minutes of trending topics emerging
• Diverse Categories: Finance, sports, politics, technology, entertainment
• Quality Control: AI filters for verifiable events with clear resolution criteria
• Smart Pricing: Initial pricing parameters set based on event type and liquidity needs
• Auto-Expiry: Markets automatically set end times based on event schedules

Example Markets Created:

• "Will Bitcoin reach $100k by end of 2024?" (created after BTC rally news)
• "Will the next Ethereum upgrade deploy on schedule?" (created from dev updates)
• "Will [Team A] win the championship?" (created during playoffs)
• "Will [Company] announce new product this quarter?" (created from earnings call)

Benefits:

• Zero Manual Work: No human intervention needed for market creation
• Always Fresh: Constantly updated pool of relevant markets
• High Quality: AI ensures events are well-defined and resolvable
• Optimal Liquidity: Smart initial seeding based on expected trading volume

x402 Payment Integration

Dual-Chain Support:

• Solana Devnet: Prediction market trading (low fees, fast)
• Base Sepolia: Lucky Draw game (EVM compatibility)

Payment Features:

• SPL Token transfers (USDC, 6 decimals)
• EIP-712 signing for gasless payments
• Server-side verification for security
• Unified payment interface across chains

Use Cases:

• Market token purchases
• Liquidity provision
• Lucky Draw participation (Base)
• GAME$ token sales

Technical Architecture

Smart Contract (Solana)

• Framework: Anchor (Rust)
• Pricing: LMSR (Logarithmic Market Scoring Rule)
• Collateral: USDC (100% backed)
• Security: Dual ledger system, reentrancy guards, PDA-based access control

Frontend (Next.js)

• Wallet: Solana Wallet Adapter + Coinbase OnchainKit
• Styling: Tailwind CSS v4
• Payment: x402 protocol integration
• AI Integration: Market generation API

MCP Server

• Protocol: Model Context Protocol (MCP)
• Operations: Trading, liquidity, queries
• Authentication: Wallet-based signing
• Transport: JSON-RPC over HTTP/WebSocket

Key Innovations

1. AI Market Generation: First prediction market with fully AI-generated content
2. MCP Protocol: First DeFi app with native AI agent support
3. Dual Ledger: Separates collateral safety from trading efficiency
4. Cross-Chain Payment: x402-powered USDC across Solana and Base
5. LMSR Pricing: Probability-based pricing with fixed-point math

Security Features

• Collateral Safety: Every YES+NO pair backed by 1 USDC (no fractional reserve)
• Access Control: Multi-tier permissions with two-step authority transfer
• Trading Protection: Slippage limits, time windows, reentrancy guards
• Smart Contract: Deterministic math, PDA design, authority checks

Getting Started

For Users:

1. Connect Solana wallet
2. Fund with USDC
3. Browse AI-generated markets
4. Trade YES/NO tokens via x402 payment
5. Claim winnings after resolution

For AI Agents:

1. Install MCP client library
2. Connect to MCP server endpoint
3. Authenticate with wallet
4. Execute trading operations programmatically

For Developers:

1. Integrate x402 for payments
2. Use MCP protocol for market access
3. Build AI trading strategies
4. Deploy on Solana devnet

Roadmap

• Mainnet deployment
• More AI market categories
• Advanced MCP operations (limit orders, stop-loss)
• Decentralized oracle integration
• Cross-chain liquidity aggregation
• Mobile app with MCP support

Technical Stack

• Blockchain: Solana (Devnet) + Base Sepolia
• Smart Contract: Anchor Framework (Rust)
• Frontend: Next.js 15 + TypeScript
• Payment: x402 Protocol
• AI Integration: MCP Protocol
• Collateral: USDC (SPL Token)

License

MIT License

Acknowledgments

• Built with Anchor Framework
• Inspired by Polymarket
• LMSR pricing based on research by Robin Hanson
• x402 Payment Protocol by Crossmint
• MCP Protocol by Anthropic

---

Built for Hackathon - First prediction market with AI-generated content and MCP protocol for autonomous AI agent trading