TopFlight.fun
the football stock market
1. Introducing TopFlight
The football stock market
TopFlight is the football stock market.
In a traditional stock market you buy a share in a company you think will do well. Its price moves as the company's prospects change, and while you hold it, it pays you according to the company's financial performance.
On TopFlight you buy a token in a club you think will do well. Its price moves as the club's prospects and league position change, and while you hold it, it pays you every day according to the club's performance in the Premier League: where it sits in the table. The higher the club, the more it pays.
Every Premier League club has a token on TopFlight. And like a share, a token has no end date. Nothing settles after a match or at the end of a season. It is yours until you sell it.
A Prediction Perp
A club token is a Prediction Perp Token (PPT), the first of a new kind of asset: a token with no expiry whose return depends on something happening in the world.
Our article on Prediction Perps sets out the broad concept; this article details the first implementation, TopFlight.
2. How TopFlight works
The underlying asset
Club tokens are created in full sets: one token of every club. It costs $1 to create a full set, and a full set can be redeemed for $1 at any time. The mechanism is similar to the Gnosis Conditional Token Framework used in prediction markets such as Polymarket.
So there is always an equal number of tokens of each club, and behind every full set of tokens in existence there is exactly $1. We call that $1 the underlying asset.
The underlying asset is deposited to earn yield, in a lending market such as Aave, earning something like 4% a year.
The yield is split between the club tokens by the distribution rate: each club's rate depends on its position in the league.
The automated market maker
Club tokens are ERC20s, and you buy and sell them through an automated market maker (AMM). The AMM is always collateralised, so it can buy or sell any club at any time, and its prices move as people trade.
The AMM is a venue, like Uniswap. The tokens themselves are yours: anyone can hold them, send them or trade them elsewhere.
The distribution rate
Each day's yield is the distribution, and each place in the table has its own distribution rate: its share of it.
| Place | Distribution rate |
|---|---|
| 1st | 33% |
| 2nd | 22% |
| 3rd | 15% |
| 4th | 10% |
| ... | ... |
| 20th | 0.02% |
Each place gets about half as much again as the place below it.
When a club moves up or down the league, its distribution rate moves with it.
Fair price
The fair price of a club token is the value today of all the distributions it is expected to receive.
A club's distribution rate depends on its league position, so the fair price is a prediction of where the club will sit in the league from here on. A club expected to stay near the top has a high fair price. A club expected to drop has a low one.
Assets are valued by what they pay. A token that receives a share of what the underlying asset earns is worth the same share of the underlying asset.
Take a club expected to sit fourth for eternity. Fourth place has a distribution rate of 10%, so the fair price of its token is 10% of the underlying $1 asset: 10 cents.
The market is the disagreement. People disagree about where clubs will sit in the future, and so about what their distribution rates will be. That is what makes them disagree about the fair price, and what makes the price move.
3. The story of a position
What the table and the price tell us
Take one club: Everton.
Say Everton are sitting second in the Premier League table and are currently trading at 11 cents.
| Club | Place today | Distribution rate | Price of one token |
|---|---|---|---|
| Everton | 2nd | 22% | 11 cents |
The table sets what Everton are paid today: 22% of the distribution, the second place rate.
The price says what the market expects from here on. A club expected to stay second forever would have a fair price of 22 cents. Everton currently costs half that, which is about the fair price of a club expected to sit fourth forever.
So the market disagrees with the table. Everton are second today, but it expects them to sit around fourth over the long run.
Should I buy Everton?
The price says fourth. So the question for me is whether Everton will do better than fourth, on average, from here on.
I don't have to think they will stay second. If I think they will average third, 11 cents is already cheap: a club expected to sit third forever has a fair price of 15 cents.
I think they will do better than fourth.
So I buy Everton.
An Everton token costs 11 cents. $100 buys about 900 of them.
My position is now:
| Club | Tokens | Price of one token | Value |
|---|---|---|---|
| Everton | 900 | 11 cents | $100 |
That is the whole position. No date on it, no odds to take. I can sell this afternoon or hold for years.
Three months later
Three months later Everton are first, and the market has changed its mind about them.
| Club | Place today | Distribution rate | Price of one token |
|---|---|---|---|
| Everton | 1st | 33% | 21 cents |
21 cents is about the fair price of a club expected to sit second forever. The market previously had Everton around fourth over the long run. Now it has them around second.
My position is now worth:
| Club | Tokens | Price of one token | Value |
|---|---|---|---|
| Everton | 900 | 21 cents | $190 |
Selling Everton
I still rate Everton. I think they will average second or third from here on, which makes a token worth between 15 and 22 cents to me. The current price is 21 cents.
At 21 cents the token is worth about what I think it is worth. There is nothing more to be made from holding it, so I sell.
| The trade | |
|---|---|
| Bought 900 Everton at 11 cents | $100 |
| Sold 900 Everton at 21 cents | $190 |
| Gain on the price | $90 |
| Distributions paid while I held them | about $2.50 |
| Total gain | about $92.50 |
4. Why a football stock market
A club token turns an opinion about a club into one position. It pays while the club does well, it moves with every result, and it can be bought or sold at any moment.
One opinion, one trade
Most opinions about a football club are broad. Everton are getting better. Tottenham are in trouble. A bet asks for something narrower: this match, this season, top six or not.
On TopFlight the broad opinion is the trade. If I think Everton will do better than the price says, I buy Everton.
Every match matters
Every place in the table has its own distribution rate, each about 50% higher than the place below it. So wherever a club sits, moving up one place means its holders are paid about 50% more than the day before. A mid-table club going up a place in April matters to its holders as much as the title decider does to theirs.
Winning the league
When the season ends, the final table keeps paying for around three months, until the first table of the new season replaces it. That is designed to give the finishing position weight. A club might only be first after the last match of the season; it is paid as champion all summer.
A relegated club keeps its token. It is paid nothing while the club is out of the Premier League, and its price becomes the market's view of whether the club comes back. The full set includes clubs outside the Premier League too; their tokens are paid nothing until they come up.
One market, every time horizon
Someone trading Saturday's match, someone with a view on the season and someone holding for ten years all trade the same Everton token. Bets split those people up, into one market per match and one per season. On TopFlight they all meet in one place, which gives each club a single price with the trading of all of them behind it.
Try it
TopFlight is in beta on testnet. Invite codes are in the Telegram group.
The prices and the table are open to look at without signing in, at TopFlight.fun.