What is Polymarket?

An online market that allows people to buy or sell “yes”, “no” ballots on events. The events that allow investing are categorized into a range of things, such as politics, worlds, crypto, tech, weather etc. For instance  some of the topics could be: “Highest temperature in London on April 8th”, or “ What price will Bitcoin hit in 2026”. 

The current largest prediction market online is Polymarket, which has over 30 million potential users, and 270,000 users per month (Binance).

Comparison to stocks:

For a stock, the minimum shares you can purchase is 1 share, which is however much the company’s current share price is. Apple, for instance, has a stock price of a  margin of 10 USD fluctuating above and below $250 USD. This would thus indicate that you must pay $250 or a multiple of that in order to purchase shares. On the contrary, prediction markets allow you to place an investment of whatever monetary value you prefer. It ranges from $0.01 to 1 billion USDC coins. 

Perhaps you may have realized that there are certain similarities between prediction market and the stock market, since both of them involve forming an educated guess and the action of investing money with risks of losing it; there are still differences innately between the two of them. 

However, stocks rely not on the basis of practical outcomes, for instance, a tech stock may grow within price after a new major release regarding functionality, even though how many real customers would pay to use the new functionality isn’t certain yet. 

In the end, how you make profit in a stock, is based on people’s hopes within a stock, instead of how the company is actually doing. Most of the time, if a company’s net profit grows then people would likely believe in its future potential, they therefore buy a share, and consequently the stock’s price grows. In general, stock prices are still tied to people’s expectations instead of the actual outcomes of the company (although most of the time the two are closely related). 

Prediction markets have functions highly similar to stocks, but instead of the winning/losing of your money being reliant on other’s expectations; it’s dependent on the actual outcome of the event. If I place a yes bid on saying that the US would have a ceasefire with Iran in June, and it happens, I get 1 dollar for every share I paid for, and every share is sold to me with the price margins varying between 0 to 100 cents. This means that, the lower I bought my share, the more money I would receive compared to my cost (which is lower than 1 dollar). 

Similarities:

However, you can also sell your shares before the market is locked (which means before the outcome happens). The price you sell your shares depends on the current market price, and this part is more similar to stocks since it operates on the same basis.

Insights:

Some say that prediction markets can function as a reflection of the probabilities of events happening. The more faith you have in something happening, the more money you will be likely to put in; or, the more people who believe in an event to occur, the larger the population would invest in one option. These two factors collectively contribute to the partition between the yes/no ballot, therefore, a 60 cents yes ballot vs 40 cents no ballot would mean that the public have 60% of faith in this happening (though not guaranteed that all who voted for 60% are different individual actors). 

I think this is one of the closest and fastest ways to make a public poll. This is due to 2 factors, one, money is inherently important, and we can count on the faith of people in one outcome if they are willing to invest money in it. Secondary layer to this, we are to account for the reliability of results since people are likely to base their outcomes on reliable sources in order to guarantee money well spent. By this, we eliminate a very common, widely disputed concern for elections; which is that people follow mainstream and vote for one blindly without enough incentive to truly care about the results. We see that, although it isn’t promised that the outcome necessarily depends on the purchase split, the general consensus is inferable from percentage. 

In today’s world where biases and purposeless opinions may flood mainstream media, it felt reassuring that at least you can receive a mainstream opinion from platforms like polymarket.