# Contract-for-Difference

<mark style="color:$info;">Multiply provides leveraged directional exposure to prediction markets through a</mark> **Contract-for-Difference ("CFD") layer**<mark style="color:$info;">. Users trade via integrated front-ends, while Dimes constructs and manages the corresponding positions on the underlying venue.</mark>

<mark style="color:$info;">CFDs are the natural instrument for this use case. Alternative approaches: perpetual futures, collateral looping, and options-like event contracts,</mark> **each carry fundamental limitations in the context of prediction markets**<mark style="color:$info;">.</mark>

<mark style="color:$info;">Perpetual futures rely on funding rates to keep contracts' price tethered to spot. The mechanism assumes a balanced fight between longs and shorts. Prediction markets violate this structurally: as an outcome becomes probable, the price converges toward $0 or $1 and</mark> **one side of the book collapses**<mark style="color:$info;">. The losing side has no incentive to hold; the winning side has no counterparty to pay them. Funding breaks down exactly as the contract approaches its most important moment.</mark>

<mark style="color:$info;">Pool-based collateral looping: borrowing against tokenized outcome positions to buy more can technically produce leverage on fully collateralized prediction market contracts. But lending protocols following this approach are</mark> **structurally blind to the asymmetric risk surface of prediction markets**<mark style="color:$info;">. They have no awareness of interim jump risk, no mechanism to intelligently decay leverage, and no ability to manage the liquidity microstructure that makes losing-side depth vanish as outcomes become clearer. When a market jumps to settlement, looped collateral goes to zero and the lender absorbs the loss. The result is capital loss for liquidity providers and higher borrowing costs for traders.</mark>

<mark style="color:$info;">Options and similar event-derivative contracts can deliver leveraged exposure to binary outcomes, but they require</mark> **bootstrapping independent liquidity for every market, at every strike**<mark style="color:$info;">. None of this benefits from the depth that already exists on the underlying prediction market venue such as Polymarket. The result is fragmented, thin books that widen spreads and limit scale.</mark>

<mark style="color:$info;">CFDs avoid these issues. The user benefits from levered exposure; Dimes holds and manages the corresponding hedge. Because opposing user exposures can be netted internally, the total hedge the desk carries on-venue is smaller than the sum of individual positions, reducing execution costs that are ultimately passed through to traders.</mark>&#x20;

**CFDs are a well-established structure in TradFi, supporting hundreds of billions in annual notional** <mark style="color:$info;">by delivering economic exposure without transferring custody of the underlying instrument. Multiply applies the same principle onchain. Synthetic positions mirror the payoff of prediction market contracts, while collateral management, PnL accounting, margining, and settlement are handled natively by Multiply's infrastructure.</mark>