Glossary · P
Prediction Market
A platform where users buy and sell shares representing the probability of future events. Shares pay $1 if the event occurs and $0 if it doesn't — so the price reflects the crowd's probability estimate. Decentralised prediction markets (Polymarket, Augur) settle automatically via oracle networks.
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How Prediction Market works in practice
Prediction markets aggregate dispersed information into a price by letting people bet on outcomes. Because being wrong costs money, prices tend to be better calibrated than surveys — a mechanism that works best on liquid, clearly defined questions.
Worked example
A market on an interest-rate decision trades at 0.72 for a cut. That is the crowd's 72% probability, updated continuously as new information arrives — faster than most published forecasts.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
Thin markets are not wisdom of crowds; they are the opinion of whoever traded last. Check volume and open interest before treating a price as a forecast, and read the resolution criteria before treating it as a bet.
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Prediction Market: common questions
- What is Prediction Market?
- A platform where users buy and sell shares representing the probability of future events. Shares pay $1 if the event occurs and $0 if it doesn't — so the price reflects the crowd's probability estimate. Decentralised prediction markets (Polymarket, Augur) settle automatically via oracle networks.
- How does Prediction Market work in practice?
- Prediction markets aggregate dispersed information into a price by letting people bet on outcomes. Because being wrong costs money, prices tend to be better calibrated than surveys — a mechanism that works best on liquid, clearly defined questions.
- Can you give an example of Prediction Market?
- A market on an interest-rate decision trades at 0.72 for a cut. That is the crowd's 72% probability, updated continuously as new information arrives — faster than most published forecasts.
- What do people get wrong about Prediction Market?
- Thin markets are not wisdom of crowds; they are the opinion of whoever traded last. Check volume and open interest before treating a price as a forecast, and read the resolution criteria before treating it as a bet.
- Where can I learn more about Prediction Market?
- Our full guide, Prediction Markets Explained, covers Prediction Market in depth with worked scenarios and the risks involved. This glossary entry is the short definition.