PARITY Index

A fully backed DOT:KSM Ratio Asset

A tokenised rivalry between Kusama & Polkadot.

🚀 Introduction

PARITY INDEX is a proof of concept built on top of PARITY PROTOCOL a novel decentralised finance (DeFi) system enabling the tokenisation of on chain rivalries through ratio markets, using financial engineering to empower David vs Goliath competitions.

The first ratio market to launch on the protocol is Kusama vs Polkadot and the PARITY token (this will likely be $KVP ticker when launched on mainnet). The rivalry is captured in real-time through their relative market caps, which is the current ‘price’ to mint or burn the token.

Users can mint tokens using KSM, DOT, or dUSD, creating a synthetic asset that tracks relative performance — isolated from broader market movements. The protocol features a dynamic fee mechanism that funds a NAV Vault for holder bonuses to reward early adopters and hodlers and a multi-oracle consensus system for ingesting data feeds.

The project evolves prediction markets, using economic incentives to align collective interest, with the potential to create any ratio market based on independent and publicly verifiable data feeds:

• Crypto centric: Bitcoin vs Gold, Ethereum vs Bitcoin, Solana vs Ethereum
• Traditional markets: Microsoft vs Apple market cap, Intel vs Nvidia market cap
• Sports: Team A’s performance vs Team B’s performance
• Film: Movie A ticket sales vs Movie B’s ticket sales
• Music: Artist A streams vs Artist B’s streams
• Platform: Streaming platform A subscribers vs Streaming platform B subscribers
• Politics: Political party A members vs Political party B members

🚀 RATIO MARKETS vs PREDICTION MARKETS

Feature	Traditional Prediction Markets (Polymarket, Kalshi, Azuro, Omen, etc.)	Perpetual Synthetics (GMX, Gains Network, Synthetix)	Ratio / Index Tokens (Index Coop, BasketDAO, old Set Protocol)	PARITY Ratio Markets (Kusama vs Polkadot, etc.)
What you are long/short	Probability of a discrete event (Yes/No or scalar outcome)	Absolute price direction of an asset	Basket of assets (absolute performance)	Relative performance of two rivals only
Market-direction neutrality	No (crypto-wide moves affect outcome prices)	No	No	Yes – 100% isolated from broader market
Expiry / settlement	Fixed event end date → one-time payout	None (perpetual)	None	None – perpetual, real-time price
Resolution mechanism	Oracle or jury at event close	Price feed	Rebalancing + price feeds	Continuous oracle consensus on ratio
Holding incentive	None (pure speculation)	Funding rate arbitrage	Sometimes small streaming fees	Strong – NAV Vault bonuses that can exceed entry cost
Early-adopter / loyalty advantage	None	None	Rare	Yes – dynamic burn rate, lower NAV take the longer you hold
Composability	Low (PM tokens rarely used elsewhere)	High	High	Very high – ERC-20 ratio token usable anywhere
Scope of what can be tokenized	Any event with clear resolution	Any price feed	Any basket of tokens	Any two publicly verifiable metrics (crypto, stocks, sports, music, politics…)
Economic flywheel	Volume → fees → nothing for holders	Volume → fees → liquidity providers	Volume → tiny streaming fees	Mint/burn volume → NAV Vault → rewards loyal holders
Primary user emotion	“Will this event happen?”	“Will price go up or down?”	“I want diversified exposure”	“I believe the underdog will close the gap”
Closest mental model	Bet on election, Super Bowl, etc.	Perpetual futures	Crypto index fund	Tokenized rivalry / “David vs Goliath” certificate

🚀 How PARITY INDEX works

Unlike passive tokens, PARITY is actively backed by wrapped KSM and DOT (v1), redeemable at any time for its share of the protocol’s reserves plus any bonuses.

Premiums from PARITY purchases are used to buy more KSM and DOT, building deeper reserves.

Transparent, non-custodial, and designed to be unruggable.

• PARITY v1 and v2 Roadmap:

  • PARITY v1: Uses wrapped ERC-20 tokens for KSM, DOT, dUSD, and PARITY due to missing precompiles on Kusama Asset Hub.
  • PARITY v2: Will transition to native KSM, DOT, and dUSD after a future runtime upgrade enables precompiles, improving efficiency.

• Benefits for KSM and DOT Holders:

  • Increased Demand: Premiums buy wrapped KSM/DOT, boosting demand.
  • Enhanced Ecosystem Growth: A DeFi primitive attracts developers and users, increasing network activity.
  • Improved Liquidity: DODO-style PMM pools deepen KSM:dUSD and DOT:dUSD liquidity and address 'AssetConversionPallet' limitations.
  • Greater Composability: Wrapped KSM (v1) and native KSM (v2) enable DeFi integration.

DODO-style Proactive Market Maker (PMM) contracts manage liquidity for PARITY/dUSD, KSM:dUSD, and DOT:dUSD pools, while wrapped tokens enable smart contract composability in v1. Oracle-driven rebalancing ensures the DOT:KSM ratio is maintained.

In v2, native precompiles will replace wrapped tokens for improved efficiency.

• 📈 Price rises as Kusama gains ground on Polkadot.
• 💵 Fully backed by wrapped KSM and DOT (v1), with minimal wDUSD.
• 🔁 Redeemable 1:1 against backing assets based on the market cap ratio.
• 🧮 Oracle-driven rebalancing maintains the DOT:KSM ratio.
• 🧰 Liquidity seeded by creators; LP tokens for PARITY:dUSD sent to Treasury for fee capture.

⚙️ Mechanics Overview

Property	Details
Token	PARITY (ERC-20, wrapped in v1)
Price Reference	Market cap ratio: DOT / KSM
Backing Assets	Wrapped KSM + DOT + minimal wDUSD (v1); native KSM + DOT (v2)
Trading Pairs	PARITY/dUSD, KSM:dUSD, DOT:dUSD
Chain	Kusama Asset Hub (PVM)
Login	Virto Connect universal login
Market Mechanism	DODO-style Proactive Market Maker (PMM) with premium allocation to reserves
Oracle Feed	CoinGecko API (off-chain) + on-chain Oracle, 24-hour TWAP
Redemption	PARITY → Wrapped KSM & DOT & wDUSD (v1); Native KSM & DOT (v2)
Frontend	WIP

🧱 Smart Contract Architecture

Contract	Role
PARITYToken.sol	ERC-20 token tracking DOT:KSM ratio
WrappedAsset.sol	Wraps KSM, DOT, dUSD as ERC-20 tokens (v1 only)
OracleFeed.sol	Pushes off-chain ratio data on-chain
ParityPMMPool.sol	Manages PARITY/dUSD, KSM:dUSD, DOT:dUSD pools with PMM
BackingVault.sol	Stores wrapped KSM, DOT, and minimal wDUSD (v1); native assets (v2)
MintRedeem.sol	Handles minting/redemption of PARITY

🧪 Net Asset Value (NAV)

v1:

• NAV = (Total Wrapped KSM & DOT Held + Vaulted wDUSD) ÷ PARITY Supply

v2:

• NAV = (Total Native KSM & DOT Held) ÷ PARITY Supply

• In v1: wDUSD (including premiums) is used to purchase wrapped KSM/DOT via PMM pools at oracle ratio.

• In v2: native assets are used directly.

• Premiums boost NAV by buying more backing without increasing supply.

• Redeeming returns pro-rata share of KSM/DOT (plus wDUSD in v1).

Example:

• Oracle ratio = 10 (DOT = $10B, KSM = $1B)
• Oracle prices: KSM = $20, DOT = $80
• User mints 1 PARITY with $11 wDUSD
  → $10 used to buy 0.0833 wDOT + 0.1665 wKSM
  → $1 premium buys extra backing in same ratio
  → NAV = $11
  → Redeeming returns ~0.0875 wDOT + ~0.1748 wKSM

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🔁 Dynamic Rebalancing

• Maintains backing ratio by:
  • Buying backing with all wDUSD (v1) or native assets (v2)
  • Redeeming PARITY for backing assets
  • Periodic rebalancing if ratio shifts >1%

Example:
If ratio drops to 8, protocol sells wDOT for wKSM (or DOT for KSM in v2).

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📈 Market Mechanics: PMM

DODO-style PMM contracts manage:

• PARITY/dUSD, KSM/dUSD, and DOT/dUSD with single-sided liquidity

Price(x) = P₀ × (1 + Κ × (x / R))
Where:

• P₀ = Oracle price
• Κ = 0.8 (curvature constant)
• x = Trade size
• R = Pool reserve (wDUSD)

Premium Allocation:

• PARITY always minted at oracle price
• Full payment (including premium) buys backing via PMM
• NAV increases — no extra PARITY minted

Benefits:

• Single-sided liquidity
• Oracle-anchored pricing
• Low slippage
• Capital efficient
• Reserve-growing protocol design

Liquidity Provision:

• Seeded by creators
• LP tokens go to Treasury to earn fees

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📊 NAV Dynamics

Action	Effect on Supply	Effect on Pool Value	Effect on NAV
Buy at premium	↑ Increases	↑ Increases	↑ Increases
Sell back to pool	↓ Decreases	↓ Decreases	Neutral / ↓
Hold (no action)	-	-	↑ (if others buy)

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🔐 Virto Connect Integration

• Single-sign-on for Kusama’s EVM ecosystem.
• Supports MetaMask, Nova, Talisman, and WebAuthn (passkeys).
• Ensures seamless UX for web2 and web3 users.

🔮 What’s Next?

• PARITY v2: Migration to native KSM, DOT, and dUSD precompiles after Kusama Asset Hub runtime upgrade.
• Decentralized oracle integration (e.g., DIA).
• New synthetic matchups (e.g., ETH:BTC).

🧑‍💻 Development Directory

├── contracts/
│   ├── PARITYToken.sol        # ERC-20 PARITY token logic
│   ├── WrappedAsset.sol       # Wrapper contracts for native KSM/DOT
│   ├── OracleFeed.sol         # Oracle price feed integration
│   ├── ParityPMMPool.sol      # DODO-style PMM for backing/assets
│   ├── BackingVault.sol       # Vault to hold wrapped/native assets
│   └── MintRedeem.sol         # Minting and redeeming logic for PARITY
├── frontend/
│   ├── public/                # Static assets
│   ├── pages/                 # Next.js or similar frontend routing
│   └── components/            # Reusable UI components
├── scripts/
│   └── updateOracle.ts        # Script to update oracle prices on-chain
└── README.md                  # Project documentation

📜 License

MIT — Memeable. Forkable. Fundable.