Somnia: Why a New L1 Pivoted to AI Agents and Prediction Markets

Paul Thomas, founder of Somnia, sat down with Julian Stafford to explain how a chain built for virtual events became an L1 for AI agents. Paul previously worked at Improbable, which built technology that put tens of thousands of avatars in the same digital space. The company ran large events with Major League Baseball, Yuga Labs and Universal Music. Those events needed a trusted shared data store that could keep up in real time, and no existing chain was fast enough. In 2020 the team started building a high-performance blockchain, and Paul spun Somnia out as its own company.

Somnia became the fastest EVM compatible chain, but Paul said the team built too far ahead of demand: the applications that need that performance do not exist yet. In January the team repositioned Somnia as the agentic L1. They saw engineers delegating work to AI and bet that agents will transact on behalf of people. They also added LLM inference to the chain itself. Validators with GPUs run the model in a deterministic way and reach consensus on the output, so a smart contract can call an AI. The idea came from prediction markets, where resolution is centralized and often settled by humans. The team also moved away from gaming and entertainment toward DeFi, where Paul sees real product market fit.

Two products show the approach. Prophecy is a protocol that lets anyone create a prediction market on anything. An LLM reads named data sources and resolves the market, and the interface shows a flowchart of how it will resolve. Prophecy Social is the first party app, a social version with no real money. Liquidity can be seeded by the creator, then a protocol market maker adds more, and busy markets move from an AMM pool to an order book. Each market also receives a rating, like a bond rating, based on how reputable its data sources are. Event contracts, such as five minute up or down markets, already run inside Dream DEX on top of Prophecy.

Dream DEX calls itself the endgame DEX: spot, perps and event contracts with the matching engine and liquidation rules fully onchain. Paul argued that many venues are faux DeFi because they run key parts offchain. Dream DEX charges zero maker and taker fees, with only a very small gas cost, aims for no MEV, and prices pairs in Somnia's native stablecoin. The team is working on sub 10 millisecond block times to tighten spreads. For growth, the first competition, Algo Arena, offers about $10,000 in prizes with a weekly leaderboard for algorithmic traders. Perps are in private alpha and will start invite only, followed by prize pools of $50K to $100K, a points program and a founding traders group drawn from the top 20,000 onchain traders. Paul prefers stablecoin rewards to heavy token emissions in a weak market.

Paul's larger view is that agents will first act as the interaction layer for onchain users, then make decisions for them, from finding yield to avoiding emotional trades. He expects onchain volume to reach $100B within two years and trillions in five to ten, and he sees insurance and new financial products as use cases for smart contracts that can reason.