Prediction markets 101

What is a prediction market?

A prediction market lets people trade contracts that pay out based on a real-world event. Because traders lose money when they are wrong, prices tend to concentrate the information available.

Prices as probabilities

A contract paying $1.00 if an event happens will trade near what participants collectively think the chance is. At $0.20 the market implies about 20%. YES and NO prices sum to roughly $1.00.

Binary questions only

Every market here has two outcomes. Multi-outcome questions are expressed as several separate binary markets.

Why on chain?

• Collateral sits in public contracts, not with a company.
• Anyone can create a market without asking permission.
• Every trade, fee and resolution is publicly verifiable.
• Payouts are executed by code, not by a support ticket.

What prediction markets are not

• Not advice, and not a signal to follow blindly.
• Not a savings product: positions can go to zero.
• Not reliable when liquidity is thin or the question is poorly written.