Polymarket

What is Polymarket?¶

Polymarket is a decentralized prediction market platform based on Polygon, where users can place bets on the outcomes of future events.

Polymarket's Core Mechanism¶

Polymarket operates roughly in the following steps:

1. Event Creation (Market Creation) The general format is: "Will Trump be elected in the 2024 US Presidential Election?" [Yes] / [No] Key elements of each event: Event description (natural language + structured judgment criteria) Expiration time (event deadline) Resolution source (e.g., Associated Press, official websites) Market type: binary market (Yes/No) or multiple-choice market

After event creation, a new smart contract market is deployed

1. Betting/Trading

Each option's price starts at 1/n. For binary markets, the starting price is $0.50. Betting is based on an LMSR (Logarithmic Market Scoring Rule) automated market maker curve. The price also represents the current market-perceived probability of that outcome occurring. When a user buys an option, it is equivalent to "betting that option will occur," and the price fluctuates with supply and demand (the price the user pays is the average between the initial price and the post-purchase price). For example: If the YES price for "Trump elected" is 0.62 (meaning the market believes there is a 62% probability), a user buying YES with USDC is willing to pay $0.62 for a potential $1.00 return (if the outcome is true).

1. Event Resolution After the event result can be verified, Polymarket triggers the settlement process. Primary resolution sources include: third-party oracles (Reality.eth), official APIs (such as Associated Press), and human-submitted disputes/arbitration (rare). Once the result is determined, the winning token can be redeemed for 1 USDC, while the losing token becomes worthless. The difference between the purchase price is the profit or loss.