OIP-259: Default Round Underwriting for Futures, High-Odds Parlays and System Bets

id	Title	Status	Author	Description	Discussions to	Created
OIP-259	Default Round Underwriting for Futures, High-Odds Parlays and System Bets	Vote Pending	Danijel, padzank	Shift underwriting of only long-tail futures and specific-threshold high-odds parlays and system bets from current upfront escrow collateralization to default round payout-on-claim, thus improving capital efficiency, liquidity, and user experience.	https://discord.com/invite/overtime-io	2026-02-27

Simple Summary

Shift underwriting of only long-tail futures and specific-threshold high-odds parlays and system bets from current upfront escrow collateralization to default round payout-on-claim, thus improving capital efficiency, liquidity, and user experience.

Abstract

Overtime V2 currently fully collateralizes every bet at placement, including all futures, high-odds parlays and high-odds system bets. While this guarantees constant onchain solvency for all types of bets, it also leads to significant unnecessary inefficiencies such as locking large amounts of liquidity for extended periods or for outcomes that are mutually exclusive.

This proposal introduces a model where: -Futures markets are underwritten at settlement (claim time) by the default round only. -Very High odds parlays above configurable thresholds are also settled via default round, without full upfront collateralization. -Very High odds system bets above configurable thresholds are also settled via default round, without full upfront collateralization.

This enables significantly better capital utilization and far superior UX while maintaining payout guarantees through protocol-level controls and monitoring.

Motivation

1. Futures Capital Inefficiency

Futures bets often:

-Have very high odds (e.g. 50x–100x+)
-Lock potential win liquidity for months, rendering it inaccessible for more active trades.
-Require full collateralization upfront

Example: -A $10 bet at 100x odds requires $1,000 to be locked immediately until market resolution
-Across many users, this scales to hundreds of thousands or millions in idle locked capital

This capital cannot be used for:
-Active Market making
-Live trading
-Short-duration bets

2. Parlay Scaling Limitation

Overtime Parlays and their compounded odds:
-Are highly profitable for LPs due to accumulated vig
-Are currently capped (200x max odds)
-Could have more competitive cap if potential payout wasn’t locked on trade execution

Example:
-$10 bet at 10,000x odds → requires $100,000 collateral
-At scale → millions locked unnecessarily

Additionally:
-Many parlay outcomes are mutually exclusive
-Full collateralization overestimates actual risk by a significant margin

This results in:
-Artificial odds caps
-Poor UX vs Web2 sportsbooks
-Reduced competitiveness

3. System Bet Scaling Limitation

System bets combine multiple parlay permutations into a single ticket, which can push the aggregate maximum potential payout very high even when individual combinations are modest. Under the current model:
-Full collateralization of the theoretical maximum payout overstates realistic risk, since only a subset of permutations can actually win in any given outcome scenario.
-Liquidity is locked across many mutually exclusive outcome paths simultaneously.
-Odds and stake caps must be set conservatively to account for worst-case payouts that are statistically improbable.

The effect mirrors the parlay case: capital is locked against payouts that will almost never materialize in aggregate, constraining both user offering and LP efficiency.

Specification

1. Futures Handling
   Futures bets potential payout will no longer be fully locked in escrow at trade execution. Instead, the payout will be sourced from default round funds at claim time.

2. High-Odds Parlay Handling
   Parlays meeting configurable thresholds (set by pDAO, e.g. ≥ 10 legs, ≥ 50x odds)
   -Will not have potential payouts locked in escrow on trade execution
   -Will be settled via default round on claim if won.

3. High-Odds System Bet Handling
   System bets meeting configurable thresholds (set by pDAO, e.g. based on combination count, maximum potential payout, or effective odds):
   -Will not have the maximum potential payout locked in escrow on trade execution
   -Will be settled via default round on claim if won.

4. Default Round Role
   The default round will act as a backstop liquidity pool for Futures, Very High odds parlay and Very High odds system bet trades.

5. Risk Controls

Controls that, when combined, will maintain solvency guarantees with new implementation:
-Max exposure limits per market
-Adjustable odds caps
-Per-user / per-market limits
-Real-time monitoring of any potential liabilities
-Ability to pause markets if thresholds are exceeded

Rationale

This approach aligns with how traditional sportsbooks operate and allows Overtime to increase competitiveness with said platforms:
-Not all outcomes are collateralized simultaneously because full escrow lockups overcompensate for solvency guarantees.
-Risk is managed at portfolio level, not per-ticket.

Key advantages:
-Massive capital efficiency gains
-Improved liquidity availability enabling more trading activity
-Higher odds offering enabling better UX versatility
-Significantly better UX for parlay and system bet users
-Increased LPs and Protocol Fee performance

For LPs
-Higher capital utilization
-Increased turnover
-More profitable bet types (parlays, system bets, futures)

For Users
-Higher max odds
-Better pricing
-More competitive offering vs Web2

For Protocol
-Reduced idle capital
-Improved scalability
-Stronger market-making capabilities

Implementation

1. Introduce new flag for:
   -Futures markets
   -High-odds parlay classification
   -High-odds system bet classification
2. Update underwriting logic:
   -Skip full collateral lock
   -Track exposure separately
3. Route payouts:
   -Default round at claim
4. Add monitoring dashboards + alerts
5. Governance-configurable thresholds

Conclusion

This proposal significantly improves Overtime’s capital efficiency and competitiveness by eliminating unnecessary collateral lockups for futures, high-odds parlays and high-odds system bets.

By shifting to a payout-on-claim model backed by the default round, the protocol can:
-Unlock liquidity
-Scale its offering
-Deliver a UX comparable to leading Web2 sportsbooks

All while maintaining strong safety guarantees through controlled risk management.

Copyright

Copyright and related rights waived via CC0.

Are you in favor of this proposal?