Levr.bet Explained: Onchain Betting with Options and CLOB Mechanics
A review of an interesting betting platform that offers leveraged betting and incorporates options and CLOB mechanics.
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1. Introduction
2. Levr.bet Overview
2.1 How the process works
2.2 How the Pricing Mechanism Works in Setting Odds
2.4 The MVP Vault
3. Tokenomics
4. Backers
5. Conclusion
1. Introduction
Today, we have a rather atypical project for our reviews: Levr.bet from the betting world, which stands out in this industry. Before we dive into examining it directly, it's worth paying attention to the dynamics and development of the crypto betting industry, as we haven't covered this area before, and it actually appears quite interesting and unique. According to data from Statista and Business Wire, the overall capacity of the online betting industry in 2022 was estimated to be in the range of $60-$80 billion. A similar estimate of around $70 billion is provided in a 2023 report by Grand View Research.
In the crypto space, the figures are significantly lower, but there are no precise numbers. The most frequently mentioned figure is $250 million from a 2021 article by Crypto Wisser. Another interesting metric is from thecryptostrip.com, which states that from 2014 to 2017, approximately $4.5 billion worth of bets were placed in BTC, based on the exchange rates at that time. This shows that the industry has always had demand, and it all depends on the capacity of the crypto market itself, as crypto betting significantly simplifies the process and makes it verifiable and transparent. However, there is another side to this: almost all such projects are difficult to track on-chain because they do not operate as dApps, so the available information is quite scarce.
Specifically, in Arbitrum and Ethereum, despite the spikes and drops in transactional activity in this sector, the cumulative unique users continue to grow, indicating a steady influx of new users. However, in other chains, these figures are even more modest:
DappRadar also shows rather modest numbers for dApps that are related to crypto-betting based on onchain metrics:
Thus, on one hand, traditional web3 sportsbooks focus on minimal improvements such as slightly lower fees and increased transparency. They often lack significant innovations and suffer from low liquidity in numerous markets.
On the other hand, the crypto betting market itself actually has a vast number of different sites and companies, effectively engaging in a competition for specific regions and marketing activities to attract as many users as possible. For example, bitcoin.com lists 14 major platforms in this area, which is just a small fraction. These projects typically support a wide variety of assets from various chains (most commonly BTC, BCH, ETH, USDT, USDC, SOL, BNB, ADA, TRX, LTC, DOGE). The centralized infrastructure allows them to outperform their web3 competitors by avoiding unnecessary expenses. Additionally, they offer attractive welcome bonuses to engage users. The main categories of applications include:
Casinos
Sites with a variety of gambling games
Sports betting sites (bookmakers)
Aggregators with extensive functionality
Most of these projects operate as custodial services, making it extremely difficult to track their activity through on-chain metrics. This is why the exact market capacity of crypto betting remains unknown. It is possible that after the meme-coin boom, the 2020-21 bull run, and the current market revival, the volume of crypto betting could be many times higher than the $250 million reported in 2021. Indirect evidence for this includes the large number of new projects in this field that emerged from 2022 to 2024.
Enter Levr.bet with very interesting and atypical mechanics for this industry, as it is difficult to categorize under the aforementioned types. How about options, multiplied options, all under the guise of an implementation of CLOB functionality?
2. Levr.bet Overview
Unlike traditional platforms where users deposit their funds and either lose them or gain the ability to withdraw depending on the outcome, Levr.bet operates as a dApp and introduces a technology called SBEX, which combines elements of DeFi, options, and betting.
SBEX, as presented by Levr.bet, stands for Leveraged Sports Book Exchange. Even more interestingly, this leveraged sports book exchange merges the excitement of sports betting with the sophisticated strategy of a decentralized options exchange. In SBEX, each "bet type" represents a "market" that LEVR can tokenize. The prices of the tokens correspond to the odds of winning in the in-game market, resulting in a tokenized bet on an event.
LEVR converts all odds into token values ranging from $0 to $1, representing the user's bet. At the end of the game, each token corresponding to the winning side of the bet can be redeemed for 1 $USDC, while tokens for the losing side are worthless. SBEX also includes trading mechanisms typical of DEXs, but its tokenized bets function similarly to short-term binary options:
Binary Options Structure: In this model, winning outcomes yield the full predetermined value ($1 per token), and losing outcomes render tokens worthless ($0). Each bet has its win and loss values.
Short-term Nature: Unlike perpetual options, these options have limited upside, limited downside, and a fixed expiration. The value of LEVR betting tokens fluctuates only during pre-game or in-game trading. The end of the game marks the expiration of the option, with all betting tokens assigned a value of either $0 or $1. Prices cannot be perpetual.
Initially, bettors can only buy tokens as leveraged positions (traded as tokenized options), where each LEVR token represents a bet and inherently carries a leverage ratio ranging from 2x to 5x. Tokens representing leveraged bets created in the pre-game market become fully tradable during live gameplay.
2.1 How the process works
High level:
Once a game goes live and "orderbook" is created for that market. The market being that specific game. Users at that point can trade in and out of their positions only if there are buys on the other side. So the vault isn't purchasing positions at any "market value" that we set. It's users trading with other users.
How this process works in more detail:
The pre-game market is formed by issuing all relevant game tokens. However, pre-game token issuance occurs in multiple phases during the pre-game market period, known as "epochs." Each epoch represents a distinct pricing period for odds in the pre-game market. Pre-game markets establish the initial token price, which after minting is based on the aggregated set of pre-game odds. Levr.bet summarises odds from over a dozen IRL sportsbooks. To determine the initial token price for each market, LEVR uses a specialized formula that converts these odds into a token price.
Once a user purchases a token, that specific purchase price is fixed. Users can also buy the same token at a different price later during other phases of the pre-game market.
Pre-match markets open up to 24 hours before the start of the game, giving bettors ample time to participate in the pre-match betting market. However, the pre-game market may open closer to the start of the live game market (less than 24 hours).
The second phase begins with the inclusion of a full-fledged CLOB, introducing a PvP element to betting:
If more people bet on one team, the token representing that team usually increases in price. This happens because increased demand for the token indicates greater confidence in that team's victory, leading to a higher token valuation in the market.
In LEVR's pre-game markets, each market operates within a default limit, ensuring balanced trading activity. When the initial liquidity injected on both sides is fully depleted on one side, the CLOB market temporarily halts, creating a pause for subsequent actions. At this point, liquidity is limited to the side still possessing available liquidity until the next epoch. During this epoch, the price oracle intervenes, injecting additional liquidity into both sides of the market at prevailing odds. After this, the market reaches equilibrium as users take opposing positions, allowing the CLOB to facilitate potentially unlimited volume within balanced parameters. This innovative mechanism enables the CLOB to manage significant volumes while regulating market dynamics and maintaining fair play principles.
It's also important to note that since creating leveraged positions and borrowing funds from the MVP pool is not included in the initial beta testing, all live game market transactions require full cash payment.
2.2 How the Pricing Mechanism Works in Setting Odds
The token prices mentioned above also approximately reflect each team's chances of winning, based on odds collected by the sports data oracle and processed using LEVR's pricing formula.
Lower Price > Lower Winning Probability: The GSW token, initially priced at $0.42, indicates underdog status, corresponding to lower predicted winning odds. A lower token price signifies a decreased probability of winning.
High Risk > High Reward: Owning GSW tokens carries more risk because if the Warriors lose, their value will be $0. However, if they win, the tokens could yield higher returns—about 150% (a $0.58 profit per token).
Limit Risk > Limit Reward: The BOS token, initially priced at $0.61, offers a more modest profit of $0.39 per token or about 66% per token. Ultimately, the Celtics have a much higher predicted chance of winning. This limits the risk but also caps the growth potential.
These valuations are subject to market fluctuations based on real-time supply and demand but consistently reflect their inherent risk-reward calculation: higher risks associated with lower probability of success potentially lead to greater rewards, which are multiplied through leverage.
And thus, the following maths is derived:
As the underdog, GSW's betting odds would be +138.
As the favorite, BOS's betting odds would be -164.
Token Prices as Decimal / European Odds
GSW's odds as the underdog would be 2.38.
BOS's odds as the favorite would be 1.61.
2.4 The MVP Vault
Counterparty CLOB Model and Redemptions
LEVR incorporates a Counterparty Vault for its Pre-Game and Post-Game (redemption)
Markets. Functioning similarly to GMX's GLP Pool and the gDAl Vault of Gains Network, the LEVR's MVP Vault acts as the proxy counterparty in all pre-game betting scenarios and postgame redemptions:
WIN: If a bettor wins, they redeem their winning tokens from LEVR for $1 (1 USDC) each.
LOOSE: If a bettor loses, their losing tokens expire at $0, and LEVR keeps the bettor's collateral as profit.
LIQUIDATION: If a bettor gets their leverage position liquidated, LEVR similarly retains the bettor's collateral as profit.
Similar to the binary options framework, winning bettors will always have their tokens valued at $1, while losing bettors will always have their tokens priced at $0 at the end of each game.
The collateral that remains in the MVP Vault after each game ensures sufficient liquidity for redemptions as well as protocol health.
3. Tokenomics
To help reduce price volatility of the $LEVR token and reward those who have the long term interest of the protocol in mind, LEVR.bet utilizes a veLock system that requires a novel form of token lock to access a variety of protocol features and $LEVR token holder benefits. Locked $LEVR ($veLEVR) is the alternate version of $LEVR that is created on a 1:1 basis by locking $LEVR in the veLock contract.
$LEVR may be locked into $veLEVR on a 1:1 basis via the LEVR Lock contract at anytime. $veLEVR may be unlocked into $LEVR via the LEVR unLock contract at any time by depositing $veLVER into the unlocking contract. $veLVER converted via the contract will unlock linearly, minute by minute, over a 365-day period into $LEVR at a 1:1 basis. $veLEVR deposited in the unlocking contract is still eligible for fee revenue distribution.
Users can pay a penalty fee to “Force Unlock” their $veLEVR and sacrifice a variable portion of their allocation for the immediate conversion of the remainder to $LEVR. On day 1, penalty cost is 80% of the total $veLEVR tokens locked by the user and will decrease non-linearly over the 365-day unlocking period to a minimum of 10% penalty. All $veLEVR captured from force unlock penalties will be burnt.
This also allows Flywheels to form Flywheels for the $LEVR tokenomics system, which has several other flywheels built in, designed to reduce the strain on the system that can arise from the unintended consequences of rapid token issuance. These include the following mechanisms:
Protocol Owned Liquidity: LEVR Foundation will own a significant stake in the Vault and LP Farm. This will ensure that the Vault and LP always have a minimum level of protocol owned liquidity for consistent operations in time of user supplied TVL drawdown. This stake will also come with associated $veLEVR rewards allocated to $MVP stakers and LP Farmers as liquidity incentives - the $veLEVR rewards received by the Foundation for its POL holdings will be burned.
Force Unlock $veLEVR: Users that force unlock their $veLEVR will have a variable portion of it sent to be burnt forever. The corresponding $LEVR is sent to be burned as well.
4. Backers
The list of backers includes VCs such as Dewhales, Third Earth Capital, Big Brain Holdings, Ava Labs, Kobol Fund, Hyperithm, Acacia, Varys Capital, and others.
5. Conclusion
The betting industry in web3 definitely has a right to exist as it integrates directly with blockchain technologies, in contrast to platforms that merely accept crypto for bets. Levr.bet is a prime example of combining DeFi mechanics with a field where it seemed nothing new could be invented. Despite potential scalability and legal issues, the gradual, albeit slow, integration of betting into web3 at a native level could lead to a new phase of crypto betting development. This is achievable through increased transparency and the emergence of complex mechanics that were previously impossible but now seem obvious in web3.
Levr.bet links:
Website | Twitter | Medium | Discord
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