Polymarket is the largest prediction market, allowing users to bet on event outcomes using cryptocurrency. Here's a breakdown of how Polymarket works, ways to earn with it, and potential pitfalls to watch out for.
What is Polymarket
Polymarket is a decentralized platform for making bets on the future. It operates on the Polygon blockchain, which reduces transaction costs and enhances security.
Polymarket platform
Unlike traditional betting, Polymarket offers a marketplace where people buy and sell shares that reflect the probability of a specific outcome. These shares, akin to "stocks" of potential event results, are also known as tokens.
Launched in 2020, Polymarket has gained popularity among both casual users and professional traders.
How prediction markets work on Polymarket
Every prediction market on Polymarket splits into two outcomes: "Yes" and "No". If a user believes in a particular outcome, they can purchase the corresponding shares (e.g., "Yes").
The price of each share ranges from 0 to 1 USDC, depending on how many people are willing to buy or sell them. The share price reflects the collective opinion of participants about the likelihood of the event.
A page for betting on who will join Donald Trump's administration. Source: Polymarket
For example:
- A token priced at $0.40 suggests a 40% probability of the event occurring.
- A token priced at $0.60 suggests a 60% probability of the event not occurring.
When the event's outcome is determined, holders of the winning shares receive 1 USDC per share. Those with losing shares lose their investment.
Additionally, users can sell their shares at any time before the event concludes, locking in profits if the price rises.
Example of Polymarket in action. Imagine a user is interested in the prediction: "Will Bitcoin reach $150,000 by December 31, 2024?"
At the time of the bet:
- A "Yes" token costs $0.40, indicating a 40% market-assessed probability.
- A "No" token costs $0.60, indicating a 60% market-assessed probability.
The user believes Bitcoin will hit the mark and buys 100 "Yes" tokens at $0.40 each, investing a total of $40. Possible outcomes:
1. If Bitcoin reaches $150,000:
- Each "Yes" token will be worth $1, earning the user $100 (100 tokens × $1).
- Net profit: $60 ($100 - $40 investment).
2. If Bitcoin does not reach $150,000:
- "Yes" tokens become worthless, and the user loses the $40 investment.
Earnings depend on the event outcome and the token purchase price. An accurate prediction can double the initial investment.
Types of events on Polymarket
Polymarket covers a wide variety of events, including:
- Political elections (e.g., U.S. presidential elections).
- Cryptocurrency prices (e.g., forecasting Bitcoin's value).
- Economic developments (e.g., Federal Reserve rate changes, inflation).
- Sports events (e.g., outcomes of major tournaments).
- Social events (e.g., banning TikTok in specific countries).
Each event is presented as a poll with "Yes" or "No" options for users to choose from.
How to register on Polymarket
Getting started on Polymarket involves a few simple steps:
- Visit the Polymarket website and connect an Ethereum-compatible wallet like MetaMask.
- Deposit USDC stablecoins into your Polymarket wallet. USDC is the platform’s primary token for bets.
- Choose a market and purchase shares representing the likelihood of your chosen event outcome.
Example of top rates on Polymarket
Polymarket does not require KYC verification, simplifying the registration process and enhancing user privacy.
Pros and cons of Polymarket
Pros:
- Decentralization and security: Blockchain technology ensures transparent and tamper-proof betting.
- Low fees: The Polygon network keeps transaction costs minimal.
- Wide variety of events: Diverse betting categories make it easy to find interesting markets.
- Earnings from knowledge: Users can profit from accurate predictions.
Cons:
- Regional restrictions: Polymarket is unavailable to U.S. users due to legal constraints.
- Market volatility: Share prices can fluctuate significantly, especially during critical events.
- Regulatory risks: The platform may face new regulations due to its blockchain-based nature.
- Allegations of artificial manipulation in some polls.
How to earn on Polymarket
If you're confident about an event outcome, you can purchase shares reflecting your prediction. The lower the share price at the time of purchase, the higher your potential earnings if the prediction comes true.
Polymarket also allows users to lock in profits before an event concludes. For instance, if you buy "Yes" shares at $0.30 USDC and their price rises to $0.70 USDC, you can sell them to secure a profit without waiting for the event to end.
Tips for beginners
1. Study the market: Before buying shares, research news, poll data, and expert opinions to make informed decisions.
2. Bet responsibly: Only use money you can afford to lose, as bets involve risk.
3. Monitor large players: Watch for "whales" who can influence prices by making significant bets.
Note: This is not financial advice.
Should you bet on Polymarket
Polymarket is an innovative prediction platform that may appeal to those looking to earn from their knowledge and forecasts. However, betting on the platform comes with risks, including price volatility, regulatory challenges, and potential losses.
If you're prepared for these risks and interested in exploring decentralized prediction markets, Polymarket could be a worthwhile option.
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This article is not investment advice or a recommendation to purchase any specific product or service. The financial transactions mentioned in the article are not a guide to action. It’s not intended to constitute a comprehensive statement of all possible risks. You should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.
