> For the complete documentation index, see [llms.txt](https://heroarenagame.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://heroarenagame.gitbook.io/docs/3.-wager-system-and-on-chain-settlement.md).

# 3. Wager System & On-Chain Settlement

> **The single best answer to "why does this game need a blockchain?"**

Hero Arena Play's defining mechanic — and the feature that most clearly justifies its on-chain architecture — is its **skill-based wager system**. Players can stake real value on the outcome of their own matches, with full self-custody, transparent escrow, and instant settlement enforced by smart contracts. No house. No platform middleman. No counterparty risk.

This is not a feature that could exist in a Web2 game. Centralized escrow services charge significant fees, hold player funds (introducing exit-scam risk), face severe licensing requirements, and historically default on payouts in disputed matches. Hero Arena Play's smart-contract escrow eliminates all of these problems.

### 3.1 What is a Wager Battle?

A **Wager Battle** is a peer-to-peer Hero Arena Play match in which both players agree to stake an equal amount of value on the outcome. The winner takes the pooled stake (less a small protocol fee). Losers receive nothing.

**The flow:**

1. **Player A** creates a match invitation and selects a wager:
   * **Native Token** (e.g. BNB) — denominated in the chain's native asset
   * **$HAP** — Hero Arena Play's protocol token
   * **None** — friendly match for fun and ranking only
2. **Player B** receives the invitation and must accept the **same wager amount in the same asset** (or decline). If Player A bets 0.1 BNB, Player B bets 0.1 BNB. No partial wagers, no asymmetric stakes.
3. Both players' stakes are **escrowed in a smart contract** the moment the match begins. Neither player can withdraw mid-match.
4. The match plays out using Hero Arena Play's standard 5-AP turn-based rules.
5. The smart contract automatically reads the on-chain match outcome and **transfers the entire pot to the winner**, minus the protocol rake.

**Settlement is instant, automatic, and final.** The losing player has no recourse to claw back their stake. The winning player has no need to trust a platform to pay out.

### 3.2 Why This Mechanic Justifies Blockchain

This is the answer Hero Arena Play will give to every Launchpad investor, every CEX listing committee, and every player who asks "why do I need a wallet for this game?":

* **No trusted intermediary.** Web2 wager platforms must hold both players' money during a match. This creates regulatory burden, KYC overhead, withdrawal limits, exit-scam risk, and platform-fee compounding. Hero Arena Play's smart contract holds the pot trustlessly — no human ever has discretion to move the funds.
* **Instant cross-border settlement.** Two players in different countries can settle a wager match in seconds with no banking infrastructure. A traditional skill-game platform requires fiat rails, multiple licenses, and days for cross-border payouts.
* **Provably fair outcomes.** Match results are committed on chain. There is no "the server says you lost" — anyone can audit the win/loss decision logic and the reward routing.
* **Genuine asset ownership.** Wager stakes never leave self-custody until the match begins, and return to self-custody the moment it ends.

A turn-based strategy game without wagers can technically run on a Web2 server. **A turn-based strategy game with peer-to-peer trustless wagers cannot.**

### 3.3 Skill-Based, Not Chance-Based

This distinction is critical and is reflected throughout Hero Arena Play's design and legal framing.

Match outcomes in Hero Arena Play are determined entirely by player skill: deck construction, action-point allocation, positioning, prediction of the opponent's moves, and adaptive play. There is no random "draw a card from a shuffled deck" mechanic that introduces chance into the win condition. A more skilled player will defeat a less skilled player at a rate approaching 100% over a sufficient sample of matches, exactly as in chess.

This positions Hero Arena Play's wager mechanic as a **skill-based competition** rather than a game of chance. Skill-based competitions occupy a different legal category than gambling in most jurisdictions, similar to chess tournaments, eSports leagues, and competitive poker (where it is treated as skill-based).

Hero Arena Play nevertheless takes a conservative approach to legal risk and [**restricts wager features in jurisdictions**](/docs/13.-risks-and-disclaimer.md) where the legal landscape for skill-based wagering is unfavorable. See Restricted Jurisdictions below and the full Risks & Disclaimer section.

### 3.4 Wager Modes

#### 3.4.1 Casual Wager (LIVE in Phase 2)

A player creates an open invitation. Any player may accept by matching the wager. Best for casual matchmaking and low-stakes play.

#### 3.4.2 Direct Challenge (LIVE in Phase 2)

A player sends an invitation to a specific friend or rival. Useful for grudge matches, scheduled play, and private wagers.

#### 3.4.3 Ranked Wager (LIVE in Phase 2)

Wager matches that simultaneously affect ranked MMR. Wager-ranked matches earn ranking faster than non-wager matches, creating a path for serious competitive players to advance.

#### 3.4.4 Tournament Wagers (LIVE in Phase 3)

Bracket-format tournaments where every match is a wager match. Entry fee functions as a buy-in; bracket progression accumulates stakes from defeated opponents.

### 3.5 Protocol Fee (Rake)

Hero Arena Play charges a **3% rake** on every settled wager match. This is below the rake of major regulated poker platforms (PokerStars, GGPoker typically charge 4–5%) and well below the implied edge of casino games (5–15% on table games).

**Where the rake goes:**

| Allocation                        | Share of rake |
| --------------------------------- | ------------- |
| **$HAP buyback & burn**           | 50%           |
| **Staking rewards pool**          | 20%           |
| **Tournament prize pool subsidy** | 15%           |
| **Development treasury**          | 15%           |

The 50% buyback share means **every wager match directly creates buy pressure on $HAP**, regardless of which asset was used to stake. If two players wager BNB, the contract converts the rake's BNB into $HAP via PancakeSwap and burns it. This routes wager activity into deflationary pressure on the protocol token.

A worked example: two players each wager 1 BNB. Total pot = 2 BNB. Rake = 3% × 2 BNB = 0.06 BNB. Of that 0.06 BNB:

* 0.03 BNB is used to buy $HAP from the open market and burn it
* 0.012 BNB goes to the staking rewards pool
* 0.009 BNB goes to the tournament prize pool subsidy
* 0.009 BNB goes to the development treasury

Winner receives **1.94 BNB** (their original stake + opponent's stake − rake).

### 3.6 Match Integrity

The wager system is only as trustworthy as the match outcomes that determine payouts. Hero Arena Play protects match integrity through:

**Server-side game state validation.** Match outcomes are validated by a deterministic game server before being committed on chain. Client-side actions cannot fabricate wins. Every action's legality is verified against the canonical game state.

**On-chain commitment.** The final match outcome (winner, MMR delta, wager payout) is committed in a single on-chain transaction by the game server, signed by a key whose authority is revocable by governance.

**Replay system.** Every wager match generates a complete replay file. Either player can produce the replay; community members and tournament organizers can review for cheating evidence.

**Anti-collusion measures.** Wash-trading wager matches (two accounts owned by the same player intentionally losing to each other to manipulate ranks or earn referral bonuses) are detected via:

* Wallet relationship graphs (frequent paired matchups, shared funding sources)
* MMR pattern analysis (impossible win/loss patterns)
* Action-pattern fingerprinting

Confirmed collusion results in escrow forfeiture (stakes routed to the buyback pool) and account ban.

**Disconnect handling.** If a player disconnects mid-match, a configurable grace timer applies (default 90 seconds). On timeout, the disconnected player loses by default and the wager pot transfers to the opponent, identically to a surrender.

### 3.7 Spectator Prediction Markets (PHASE 3-4)

> **Status: Planned for Phase 3–4 (post-TGE 6–12 months). Not part of the initial mainnet launch.**

The natural extension of Hero Arena Play's player-vs-player wager system is a **spectator prediction market** for major matches and tournaments. This is one of Hero Arena Play's most ambitious long-term mechanics and is sized to follow only after the core wager system has proven stable in production and the regulatory landscape is better understood.

#### 3.7.1 What It Is

When a featured match takes place — a championship semifinal, a top-rank ladder rematch, an officially-broadcast tournament round — third-party spectators can take positions on the predicted outcome. The mechanism is modeled on **Polymarket's information markets**: each predicted outcome is a tradeable share whose price reflects the market's collective probability estimate.

* The **Player A wins** market and the **Player B wins** market trade simultaneously
* Share prices range from $0 to $1 (or equivalent) and sum to $1 across both outcomes
* Spectators buy shares of the outcome they predict will occur
* When the match concludes, winning shares pay out at $1 each; losing shares pay out at $0

Spectator participation is **entirely optional and entirely separate from the players' own wager**. The players' match takes place exactly as it would without spectator markets.

#### 3.7.2 Why Spectators Can Trade Mid-Match

This is where Hero Arena Play's prediction markets become genuinely novel: because share prices are quoted by an automated market maker (AMM) and update continuously based on liquidity and demand, spectators can **buy and sell their positions during the match**, just like trading any token on a DEX.

**Worked example:**

* Pre-match: Both Player A and Player B markets trade at $0.50 (50/50 implied probability)
* Mid-match: Player A captures a major board advantage. Demand for A-shares surges; A trades up to $0.80, B drops to $0.20
* A spectator who bought A-shares pre-match at $0.50 can sell at $0.80, locking in a 60% profit before the match even ends
* Late-match: Player B mounts a comeback. A-shares fall to $0.55, B-shares rise to $0.45
* A spectator who bought B-shares at $0.20 can sell at $0.45, more than doubling

This dynamic transforms passive viewing into an **information game** — spectators who better predict mid-match swings outperform those who don't, regardless of whether they correctly call the final winner.

#### 3.7.3 Why This Matters

Three reasons spectator prediction markets are strategically important to Hero Arena Play:

1. **It dramatically increases the value of competitive viewership.** Esports broadcasts struggle to monetize spectators directly. Prediction markets give spectators a financial stake in every match they watch, increasing engagement, viewership duration, and platform stickiness.
2. **It creates demand for $HAP and game tokens beyond the players themselves.** Every spectator using $HAP to take positions adds buy-side demand for the token from a population dramatically larger than active players.
3. **It positions Hero Arena Play at the intersection of GameFi and the prediction market sector**, one of crypto's fastest-growing 2024–2026 narratives, anchored by Polymarket's growth.

#### 3.7.4 Why It's a Phase 3-4 Feature

Spectator prediction markets are deferred to a later phase for three reasons:

1. **Regulatory uncertainty.** Prediction markets face evolving regulatory treatment in many jurisdictions. Hero Arena Play will benefit from observing how regulation develops post-TGE before launching.
2. **Liquidity scaling requirements.** AMM-based prediction markets require sufficient depth to function smoothly. Launching them too early — when the player base and spectator population are small — produces poor user experience and gameable prices.
3. **Smart contract complexity.** The prediction market contracts are substantially more complex than wager battle contracts, and warrant their own dedicated audit cycle separate from the launch contracts.

When launched, spectator prediction markets will be subject to the same restricted-jurisdiction policy as the wager system, with potentially additional restrictions added based on regulatory developments.

### 3.8 Restricted Jurisdictions for Wager Features

Hero Arena Play restricts wager features (Wager Battles, Tournament Wagers, and the future Spectator Prediction Markets) in jurisdictions where regulatory risk is highest. **Restricted jurisdictions for wager features:**

* **United States** (and all US territories)
* **People's Republic of China** (Mainland)
* **Hong Kong SAR**
* **Sanctioned jurisdictions** under OFAC, UK HM Treasury, EU, and UN sanctions, including but not limited to: North Korea, Iran, Syria, Cuba, Crimea region, Donetsk region, Luhansk region, Russia (subject to ongoing review), Belarus

Players from restricted jurisdictions can still play Hero Arena Play's free, non-wagered matches and the wallet-free Tutorial. They cannot access:

* Wager Battle creation or acceptance
* Tournament Wager entry
* Spectator Prediction Market participation

**Enforcement mechanisms:**

* **IP-based geofencing** at the application layer — restricted-jurisdiction IPs cannot access the wager UI
* **Wallet address screening** against OFAC and other sanctions lists
* **Self-attestation** — players accessing wager features must affirm they are not located in a restricted jurisdiction
* **Terms of Service prohibition** — circumventing geofencing (e.g. by VPN) is a Terms violation, and confirmed circumvention results in account ban and stake forfeiture

Players in restricted jurisdictions who attempt to circumvent these controls do so in violation of Hero Arena Play's Terms of Service and at their own legal risk under their local law. Hero Arena Play disclaims liability for any participant's failure to comply with their local regulations. See Risks & Disclaimer for full legal terms.

> **Other jurisdictions, including the United Kingdom and European Union member states**: skill-based wagering exists in a developing legal landscape. Players in these jurisdictions are responsible for confirming their participation is permitted under local law before engaging with wager features. Hero Arena Play will continue to monitor regulatory developments and may expand the restricted list in response to changing legal requirements.