What Are Prediction Markets?
A prediction market is an exchange where people trade contracts based on the outcomes of future events. Each contract pays out a fixed amount (typically $1.00) if the event occurs, and $0.00 if it doesn't.
The price of these contracts — determined by supply and demand — represents the market's collective estimate of the probability of the event. A contract trading at $0.65 means the market believes there's a 65% chance the event will happen.
The Wisdom of Crowds
Prediction markets work because of a phenomenon called the wisdom of crowds — when a large group of people independently estimate a probability, their aggregated estimate is remarkably accurate.
- Skin in the game — Traders risk real money, which incentivises honest, well-researched estimates.
- Information aggregation — Thousands of participants each bring different information and perspectives.
- Self-correcting — If the price is wrong, informed traders profit by correcting it — pushing the price toward the true probability.
- Continuous updating — Prices adjust in real-time as new information emerges, unlike polls which are snapshots.
How They Work
- 1A question is posed
"Will BTC close above $100,000 at 3:00 PM UTC?" — with a clear YES or NO outcome.
- 2Shares are created
YES and NO shares are created in pairs, backed by $1.00 in collateral.
- 3Traders buy and sell
Prices fluctuate between $0.01 and $0.99 based on supply and demand.
- 4The event occurs
At resolution, the actual outcome is determined.
- 5Winners are paid
Winning shares pay $1.00. Losing shares pay $0.00.
Types of Prediction Markets
Binary Markets
Simple YES/NO outcomes. 'Will X happen?' — the most common type. Used for elections, price predictions, and event outcomes.
Scalar Markets
Predict a value within a range. 'What will BTC's price be at midnight?' — pays proportionally based on the outcome.
Categorical Markets
Multiple possible outcomes. 'Who will win the election?' with shares for each candidate.
Crypto Price Markets
Short-term binary predictions on crypto prices. 'Will BTC be above $X in 15 minutes?' — what Polyblock specialises in.
Prediction Markets vs Sports Betting
While prediction markets look similar to betting, there are fundamental differences:
- Order book vs bookmaker — Prediction markets use peer-to-peer order books. Bookmakers set odds and take the other side of your bet.
- No vig/juice — Prediction market prices are set by supply and demand. Bookmakers build in a margin (vig) that works against you.
- Tradeable positions — You can sell your shares before resolution to lock in profit or cut losses. Bets are typically locked in.
- Price discovery — Prediction market prices converge on true probabilities. Bookmaker odds are designed to maximise their profit.
Major Prediction Market Platforms
Polymarket
The largest crypto-native prediction market. Runs on Polygon, uses USDC. Hundreds of millions in monthly volume.
Kalshi
US-regulated prediction market (CFTC-regulated). More limited market selection but fully legal for US residents.
Metaculus
Community forecasting platform focused on accuracy. No real money — reputation-based scoring system.
Polyblock
Professional trading terminal for Polymarket crypto markets. Adds real-time orderbook, automation, and custodial wallets.
How to Start Trading Prediction Markets
The fastest way to start trading prediction markets is through Polyblock, which provides a professional interface for Polymarket's crypto prediction markets:
- 1Create a free account
Sign up at polyblock.trade with your email.
- 2Fund your wallet
Deposit USDC to your custodial wallet.
- 3Start trading
Open the terminal, pick a market, and place your first trade.