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Polymarket is a decentralized prediction market platform that is open-source and uses blockchain technology to enable trading on the outcome of real-world events in the physical world. Developed first in 2020 by Shayne Coplan, the platform has been noticed due to its novel approach to prediction, offering an open-source alternative to the traditional betting system. Based on the Polygon blockchain network as a layer-2 scaling solution for Ethereum , Polymarket provides low-cost, efficient transactions.
A step-by-step explanation of its mechanics, structure, and operation on the 1st of April, 2025 is given in the article. Prediction markets allow individuals to sell and buy stakes in the outcome of events, such as the result of an election or the condition of some economic indicator. Polymarket does this, with each stake being a probability between US$0 and US$1 of something happening.
A share price of US$0.70, for instance, is a 70% chance of that event occurring. Prices fluctuate based on supply and demand, which depend on how the traders are behaving and on new information.
At the end of an event, shares settle at $1 for the right result and $0 for all else, settling payments . This mechanism uses collective knowledge to produce probabilistic predictions. Polymarket's business is founded on blockchain infrastructure , in this case, Polygon, which improves Ethereum's scalability.
Settlement occurs in USD Coin (USDC), a US dollar-backed stablecoin, which provides exchange stability for payments. Users fund USDC to a non-custodial wallet, such as MetaMask, attached to the platform. Smart contracts, automated contracts that are written to the blockchain, are used to create markets, trade, and settle, without middlemen.
Decentralized design reduces fees and provides more trust since all transactions can be on-chain verified. Polymarket also introduced a native token, POLY, towards the end of 2024 for staking and governance, but trading remains to utilize USDC. Anyone can suggest a market on Polymarket, subject to approval from its team or, more typically, community governance through POLY holders.
Markets cover any subject: politics, sport, weather, or cryptocurrency hype, presented as yes/no questions or multiple choices. Any market uses an end time and resolution source, like media news sites or APIs, to fairly find answers. Startup capital is procured through liquidity providers, establishing opening prices and allowing trades.
Popular ones in early 2025 include ‘Will Bitcoin hit $100,000 in December?’ and ‘Will a Democrat win in the 2026 midterms?’ - serving to reflect the platform's wide reach. Polymarket trading begins by connecting a wallet and funding it with USDC. Customers trade markets through a simple interface, selecting outcomes to bet on.
Purchasing shares involves placing orders, market or limit, filled immediately or at a negotiated price. For example, purchasing 100 shares of ‘Yes’ at $0.40 will cost $40; if the event occurs, redemption will yield $100, resulting in a $60 gain.
Unwind before settlement allows locking gains or capping losses. Ease is the focus of the platform, with real-time price charts and volume numbers informing decisions. An update in 2025 added mobile support, expanding beyond desktop users.
After an event ends, Polymarket settles markets according to pre-established sources. A pre-approved oracle, a reliable data source, verifies the result, activating smart contracts to settle share values. Winners cash out shares for $1 apiece in USDC, and losers get nothing.
Disputes, although infrequent, go to community arbitration through POLY token voting, maintaining decentralization. Being a decentralized entity, Polymarket has to deal with stringent regulations. U.
S. consumers were capped after a 2022 penalty by the Commodity Futures Trading Commission, terminating access to non-U.S.
citizens or VPN users by 2025. The platform was compliant with know-your-customer regulations on large transactions, taking a middle road between anonymity and compliance. Polymarket's 2025 vision includes the inclusion of market categories, the inclusion of AI-driven analytics, and enhanced user features like portfolio tracking.
Scaling to integrate more blockchains, including Solana, is designed to make it even cheaper. Its predictive accuracy, voting ahead in 2024, is driving it to become the market leader in decentralized prediction. Institutional demand and a $70 million raise in May 2024 are indications of strong potential.
With the growth of applications of blockchain, Polymarket's business can reverse the paradigm around how probabilities are used to inform decisions in sectors..
