Autonity Historical Series · E-01 · Event Markets

Prediction Market Mechanics:
Binary vs Scalar Payoffs

How event contracts pay out, why the payoff shape changes everything, and how Autonity ran forecast futures in Season 1 of the Forecastathon.

Autonity stood down in February 2026. This explainer preserves its core ideas and shows where each mechanic lives today. Not financial advice.

Historical · Feb 2026 Educational Interactive demo Zero PII

01 · The core idea

Two ways to bet on an outcome

Every prediction market lets you express a view on whether something will happen. But the payoff structure divides markets into two fundamentally different animals. Understanding that difference is the entry point for everything else in derivatives pricing.

Binary (event) contract

Pays a fixed amount if the event occurs, zero if it does not. Your profit is the same whether you were right by a little or right by a lot. Price trades as an implied probability (0 to 1).

Win $1 if CPI > 3%.
Price: $0.62 → implies 62% chance.

Scalar (linear) contract

Pays proportional to how far the settlement value lands from the strike. A bigger surprise means a bigger payoff. This is the forecast-future model Autonity used.

Long CPI at 3.50. Settles at 4.10.
Delta: +0.60 × $200/pt = +$120.

The Autonity AFP ran scalar contracts on economic data points using USDZ as collateral. Each Forecastathon Season 1 product was a forecast future: you bought or sold at a strike, and at expiry the contract settled to the actual data release. A good forecast that was directionally right but not by much still earned less than one that was right by a lot.

02 · The math

Payoff formulas side by side

SCALAR / LINEAR (AFP forecast future): pnl = side_sign × (settlement − strike) × unit_value × n_contracts side_sign: LONG = +1, SHORT = −1 settlement is clamped to [min_price, max_price] before the delta unit_value: notional per unit (e.g. $200/point for AFP CPI contracts) BINARY (event contract): pnl = n_contracts × (payout × won − entry_price) − fees payout: fixed ($1 on Kalshi, $100 on CME events) entry_price: what you paid per contract (= implied probability × payout)

Key insight

A forecast future keeps scaling with the size of the surprise; a binary market pays the same for any winning margin. This makes scalars better for calibrated forecasters who care about how far they were right, and binaries better for pure yes/no views. Season 1 of the Forecastathon used scalars precisely to reward magnitude accuracy.

03 · Interactive demo

Try the PnL calculator

🔒 All inputs are processed locally in your browser. No data is transmitted. Do not enter real personal data — use synthetic or anonymised inputs only.

Preset

Inputs

Underlying

Direction

Strike

The price you entered the contract at

Settlement Value

Final price the contract settled to at expiry

Unit Value ($/point)

Notional per unit — $200/point for AFP CPI contracts

Number of Contracts

Min Price (floor)

Max Price (cap)

Result

◆

Net PnL (scalar)

Equiv binary PnL

--

if contract were binary

04 · Autonity context

How Season 1 used this

The AFP (Autonity Financial Protocol) ran scalar contracts on macroeconomic indices. In Season 1 of the Forecastathon (a trading competition on the Autonity testnet), participants took positions on US CPI year-over-year, NFP, and other releases using USDZ as collateral.

Each position was opened with an intent-signing key and margined via the DCC (Decentralized Clearing Contract). At expiry, an oracle settled the contract to the actual release value, and the AFP computed the PnL using exactly the formula above.

The competition also included a referral component and a self-reported accuracy percentage — these were aggregated into the composite Forecastathon score (see E-04).

05 · Where this lives now

The Autonity mechanics live on

Autonity stood down in February 2026. The payoff math did not.

Autonity mechanic	2026 heir
Scalar forecast futures (AFP)	Kalshi scalar markets (proportional settlement, live Feb 2026); CME weather futures ($20 × HDD/CDD index point, continuous trading)
USDZ collateral / on-chain clearing	USDH on Hyperliquid HIP-4 binary contracts (live May 2026); USDC on Polymarket via QCX DCM
Forecastathon scoring (self-reported accuracy)	Metaculus community scoring; Cultivate Labs enterprise forecasting; Manifold Markets
Competition format (PnL + volume leaderboard)	Polymarket/Kalshi season-style competitions; Prediction Global ranking

Next → E-02

Margin & Liquidation

Then → E-03

AFP/DCC Clearing (centerpiece)