What Is Polymarket, and How Does It Work?

Polymarket is a decentralized prediction market platform that uses blockchain technology to enable users to bet on the outcomes of various real-world events. These events span across a wide range of spheres, including politics, sports, entertainment, and more. Polymarket offers enhanced transparency, security, and decentralization by operating on both the Ethereum and Polygon networks. If you’re wondering what Polymarket is, how it works, or how to start using it, you’ve come to the right place!

What Is Polymarket?

Polymarket provides a platform where users can bet on the outcome of events by buying and selling shares that represent different possible outcomes. The platform covers diverse topics, such as political events, financial markets, and cultural phenomena. Polymarket’s decentralized nature means that it operates without a central authority, ensuring that all transactions are trustless and transparent. Thanks to this decentralized structure, it avoids many pitfalls associated with traditional prediction markets, such as centralization and lack of transparency.

Other crypto prediction markets similar to Polymarket include Augur, Gnosis, PredictIt, Omen, and Catnip. Each of these platforms operates on various blockchain networks, such as Ethereum and Gnosis, and offers unique features like scalar markets and binary markets. These platforms, like Polymarket, aim to harness the collective wisdom of their users to predict the likelihood of future events, providing a valuable alternative to traditional financial markets.

How Does Polymarket Work?

At the heart of Polymarket, there is a fairly straightforward mechanism that integrates blockchain technology with user-generated market predictions. Here’s how it works:

Event Selection: Users choose from a broad range of events to bet on, such as political elections, sports matches, or the price movement of assets like Bitcoin.

Market Prices: Polymarket employs a share-based system where users buy shares in the outcome they believe will occur. The price of these shares fluctuates based on market demand and supply, which effectively reflects the current probability of the event’s outcome.

Trading: Users can trade shares at any time before the event concludes, allowing them to capitalize on changing market conditions. This means if a user believes an outcome is undervalued, they might buy shares, and conversely, they might sell shares if they think an outcome is overvalued.

Settlement: After the event concludes, shares corresponding to the correct outcome are settled at $1 per share, while all other shares become worthless. This binary market structure ensures that only accurate predictions are rewarded.

Blockchain Integration: The platform operates on the Polygon network, a Layer 2 solution that enhances the scalability of Ethereum by enabling fast and cost-effective transactions. This blockchain integration ensures that trades are executed quickly, with minimal fees, making it superior to traditional prediction markets that often suffer from slow transactions and high costs.

Decentralized Market Creation: Polymarket allows users to create their own markets, making the platform highly adaptive to current trends and interests. This community-driven model ensures a wide variety of topics are covered, keeping the platform vibrant and relevant. Unlike centralized platforms, Polymarket remains responsive to its user base because of its decentralized nature, fostering a diverse and engaging marketplace.

Polymarket’s use of smart contracts ensures that all transactions and market resolutions are transparent and trustless. This innovation is further supported by strong liquidity pools and market makers, who play a crucial role in maintaining active and fluid markets on the platform.

What Can Polymarket Users Bet On?

Polymarket users have the opportunity to bet on a vast array of real-world events across multiple categories:

Political Events: This is one of the most popular categories on the platform. Here, users can speculate on outcomes such as the results of the 2024 US presidential election.

Sports: The platform offers markets on various sports events so that users can bet on outcomes such as game results, player performances, and other sports-related predictions.

Financial Markets: Users can place bets on the performance of financial indicators, such as cryptocurrency prices, stock market movements, and other economic metrics.

Cultural and Entertainment Events: Polymarket includes markets for entertainment events, such as the outcomes of award shows, movie box office predictions, and other pop culture phenomena.

Global Issues and Miscellaneous Events: The platform also allows betting on a wide range of global issues, including climate change impacts, scientific discoveries, and even viral trends or significant technological advancements.

Polymarket Fees

Polymarket’s fee structure is designed to be simple and transparent, making it easy for users to understand the costs associated with their trades:

Trading Fees: Polymarket charges a 2% fee on net earnings from winning trades. This fee is deducted from the profit of users who have made successful predictions. Unlike many other platforms, Polymarket does not charge fees on losing trades, deposits, or withdrawals, making it a cost-effective option for frequent traders.

Transaction Costs: Since Polymarket operates on the Polygon network, transaction fees are generally low, which significantly enhances the platform’s accessibility and appeal compared to traditional predictions markets that often involve higher costs.

No Deposit/Withdrawal Fees: Users can deposit and withdraw funds without incurring additional charges, which adds to the platform’s user-friendly approach. This feature is particularly appealing to users who trade frequently and want to avoid the hidden costs often associated with other platforms.

How to Get Started on Polymarket, the Decentralized Prediction Market

Getting started on Polymarket is a straightforward process, even for those new to decentralized platforms. Here’s a step-by-step guide to help you begin:

Step 1. Set Up a Crypto Wallet

Before participating in Polymarket, you need a cryptocurrency wallet that supports the Polygon network, such as MetaMask or Coinbase Wallet. These wallets will store your USDC (USD Coin), the stablecoin used for trading on the platform. Setting up a wallet is a straightforward process, and most wallets offer user-friendly interfaces to help you manage your digital assets securely.

Step 2. Add the Polygon Network

If you use MetaMask, you need to manually add the Polygon network. To do this, access the network dropdown in MetaMask and input the necessary network details, which can be found in Polygon’s official documentation. Adding the Polygon network ensures that your transactions on Polymarket are fast and cost-effective. Without this step, you may face delays and higher transaction fees associated with using the Ethereum mainnet.

Step 3. Acquire USDC on the Polygon Network

To trade on Polymarket, you need USDC on the Polygon network. You can purchase USDC from popular exchanges like Changelly and then transfer it to your wallet. Make sure that you are acquiring USDC on the Polygon network; otherwise, you’ll need to use a bridging service to convert it from Ethereum to Polygon. This step is crucial for participating in Polymarket’s markets, as all trades are conducted using USDC on the Polygon network.

Step 4. Connect Your Wallet to Polymarket

Visit the Polymarket website and click the ‘Connect Wallet’ button. You’ll be prompted to link your crypto wallet to the platform. Once connected, you’ll have access to the platform’s full range of features and will be able to explore the available markets. Connecting your wallet is a simple process that usually takes just a few clicks.

Step 5. Deposit Funds

If you haven’t already, deposit USDC into your Polymarket account. This can be done by copying the USDC deposit address from Polymarket and transferring funds from your wallet. Polymarket does not charge deposit fees, making it simple and cost-effective to get started. You can also use the platform’s integration with crypto exchanges to acquire USDC directly into your Polymarket wallet.

Step 6. Explore and Choose a Market

Browse the various markets available on Polymarket, which range from political events to financial market predictions. Each market displays current trading prices, reflecting the probability of different outcomes as predicted by the market participants.

Step 7. Place Your Bet

After selecting a market, decide whether you want to buy or sell shares in a particular outcome. Enter the amount of USDC you wish to wager and confirm the transaction. You can buy shares if you believe the event outcome is likely or sell if you think the probability is overstated.

Step 8. Monitor Your Positions

Keep an eye on the markets where you’ve placed bets. You can trade your shares at any time before the market closes and thus lock in profits or minimize losses as the probabilities change.

Step 9. Withdraw Your Earnings

After the market resolves, if your prediction is correct, your shares will be settled at $1 per share. You can then withdraw your earnings directly to your wallet without any additional fees. Polymarket’s no-fee withdrawal policy is particularly advantageous for users who trade frequently and want to maximize their returns.

Polymarket Platform FAQ

Is Polymarket legit?

Yes, Polymarket is a legitimate decentralized prediction market platform where users can speculate on the outcomes of various real-world events. It operates on the Polygon blockchain, utilizing smart contracts to ensure transparency and trust. 

Backed by notable investors like the Founders Fund and supported by figures such as Vitalik Buterin, Polymarket offers a secure, innovative approach to online prediction markets. The platform’s legitimacy is further evidenced by its strong liquidity pools, the role of liquidity providers, and the robust advisory board that oversees its activities.

How does Polymarket make money?

Polymarket generates revenue through a 2% fee on net profits from winning trades. This fee structure applies to all the various markets on the platform. In addition to these fees, Polymarket benefits from the liquidity provided by market makers who facilitate trades, ensuring a fluid and active market environment.

What chain is Polymarket on?

Polymarket operates on the Polygon blockchain, a Layer 2 solution for Ethereum that empowers faster and more cost-effective transactions. This choice of blockchain is crucial for handling the high volume of trades related to big political events like the 2024 US presidential election. By leveraging Polygon, Polymarket can efficiently utilize smart contracts to manage market resolution and maintain the integrity of its decentralized prediction markets.

Is Polymarket legal?

Polymarket operates globally but has faced regulatory challenges in the U.S., particularly with the Commodity Futures Trading Commission (CFTC). Despite this, Polymarket remains operational and offers predictions markets on key events like the 2024 US presidential election, featuring candidates Donald Trump and Kamala Harris. The platform is actively exploring ways to comply with U.S. regulations while maintaining its innovative approach to decentralized prediction markets.

How to use Polymarket in the US?

Due to regulatory restrictions, U.S. users cannot directly trade on Polymarket but can still view current market odds and forecasts. This allows them to stay informed about political outcomes and other major events through Polymarket’s platform.

Who owns Polymarket?

Polymarket was founded by Shayne Coplan, with backing from investors like the Founders Fund and support from Vitalik Buterin. The platform operates in a decentralized manner, governed by smart contracts and overseen by an advisory board. This decentralized ownership model aligns with its mission to innovate within the realm of decentralized prediction markets.

Disclaimer: Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.

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