Polymarket: How the world's largest prediction market works

Source: PortaldoBitcoin Original Title: Polymarket: how the world’s largest prediction market works Original Link: Polymarket has established itself as the largest prediction market in the world, allowing bets on a wide variety of topics: from sports and elections to economic decisions, and even unusual subjects, such as the possibility of singer Taylor Swift getting pregnant this year.

At first glance, the platform resembles the popular “bets” that have rapidly expanded in Brazil in recent years. However, some aspects of Polymarket’s operation are more peculiar than those of traditional online betting houses.

Use of cryptocurrencies

The first is the use of cryptocurrencies. On Polymarket, all bets are made and paid in USDC, Circle’s stablecoin. This means that, before starting, the user needs to acquire USDC and know how to send and receive the asset. The step-by-step guide recommends services like MetaMask, some trading platforms, and WalletConnect.

Stablecoins are a type of cryptocurrency backed by fiat currencies, maintaining a one-to-one parity. Thus, a stablecoin pegged to the dollar is always worth one dollar. To ensure this equivalence, issuing companies maintain proportional reserves. In the case of Circle, for example, each USDC in circulation corresponds to one dollar held in deposits, Treasury securities, or other safe assets.

How bets work

After acquiring the stablecoins and sending them to Polymarket, it’s time for the user to understand the market logic. Each bet is structured as a question with a “yes” or “no” answer. Participants buy shares corresponding to one of these answers. When the market is resolved, each share on the winning side is worth one dollar.

Profit arises from the difference between the purchase price and the final value. If a user buys a “Yes” share for 30 cents, they will receive 1 dollar if they are correct — thus earning 70 cents profit per share.

Unlike traditional betting houses, on Polymarket the user does not bet “against the house.” There is no central entity calculating probabilities, adjusting odds, and profiting from bettors’ losses. Instead, the platform functions as a kind of betting exchange, where users buy and sell shares based on what they believe will be the outcome of an event.

Logic of “Yes” and “No” values

These shares represent “yes” or “no” positions for each question available on the site. Prices fluctuate constantly according to supply and demand, just like in the financial market. If many people believe an event will happen, the “Yes” price rises and the “No” price falls; if sentiment reverses, prices follow suit.

Thus, when someone buys a “Yes” share for 30 cents, another person on the other side is effectively selling that share at that price. Polymarket does not assume risk: it merely intermediates these trades. The user is always trading with other participants, not with the platform.

The market outcome determines which of the two shares (Yes or No) will be worth 1 dollar at the end. Those on the correct side receive 1 dollar per share; those on the wrong side lose the amount they paid. This is exactly how any financial asset behaves, appreciating or depreciating according to market behavior.

Closing a position

The user can buy shares on the side they believe in. They can also sell their positions before the market is resolved if the price moves in their favor, allowing them to realize profits early, similar to selling a valued stock. Likewise, if the market moves against their expectation, they can sell beforehand to reduce losses.

This ability to enter and exit at any time is one of the elements that most differentiate Polymarket from traditional betting.