<p>Polymarket is a decentralized prediction market platform built on  Polygon, allowing users to bet on the outcomes of real-world events. The  platform has become increasingly significant in the crypto space due to  its innovative approach to market predictions and the use of <a href="https://listing.help/what-are-stablecoins-stablecoins-types/" rel="noopener noreferrer nofollow">stablecoins</a> like  USDC for betting, which provides liquidity and stability in  transactions. In June 2024, Polymarket reached nearly 30,000 monthly  active users.</p><p>Utilizing blockchain technology and smart contracts, Polymarket  offers a transparent and secure way to speculate on events ranging from  political elections to sports outcomes and economic indicators. All  transactions are fully transparent, secure, and executed via smart  contracts on the Ethereum blockchain, enhanced by the <a href="https://listing.help/what-is-layer-2-in-blockchain/" rel="noopener noreferrer nofollow">Layer-2</a> solution Polygon, which improves s<a href="https://listing.help/what-is-blockchain-scalability-and-why-is-it-important/" rel="noopener noreferrer nofollow">calability</a> and reduces fees.</p><p>On Polymarket, users buy shares that represent the likelihood of  an event happening. For instance, if you believe a certain candidate  will win an election, you can purchase &#34;Yes&#34; shares at a price  reflecting the current market odds. If your prediction is correct, your  shares will be valued at $1 each; if not, they lose all value. This  system allows users to capitalize on their insights and predictions  about various events.</p><h2 id="header-0">History of Polymarket</h2><p>Polymarket, founded by Shayne Coplan in 2020, operates on the  Ethereum blockchain. The platform launched its beta version the same  year, allowing users to trade on various topics. During its initial  phase, Polymarket secured $4 million in a Series A funding round,  attracting investments from Polychain Capital, CoinFund, and other  prominent figures in the blockchain industry.</p><p>The platform gained notable attention during the 2020 U.S.  Presidential Election, drawing in users eager to bet on the election’s  outcome, which led to a sharp increase in its user base and trading  volume. However, in 2021, Polymarket came under the scrutiny of the  Commodity Futures Trading Commission (CFTC) for allegedly offering  unlicensed binary options. This issue was resolved in early 2022 when  Polymarket agreed to a settlement with the CFTC, involving a $1.4  million fine, the closure of non-compliant markets, and a commitment to  &#34;cease and desist from violating the CEA and CFTC regulations, as  charged.&#34;</p><p>Following the settlement, Polymarket restricted U.S. users from  trading on the platform, though they could still access market  information.</p><p>Despite these regulatory hurdles, Polymarket continued to expand.  In 2024, the platform secured $45 million in a Series B funding round,  led by Peter Thiel’s Founders Fund, with participation from high-profile  investors, including Ethereum co-founder Vitalik Buterin. The platform  also brought on seasoned futures industry executive Richard Jaycobs to  explore opportunities for U.S.-regulated activities and enlisted  statistician and election analyst Nate Silver as an advisor.</p><p>In 2024, Polymarket saw over $400 million in trades, with much of the activity centered around the U.S. elections.</p><h2 id="header-1">How Does Polymarket Decentralized Prediction Market Work?</h2><p>Polymarket is a decentralized Web3 application that allows users  to place bets on various topics by connecting their non-custodial Web3  wallets. The platform operates without the need for KYC procedures,  prioritizing user privacy and accessibility in line with DeFi and Web3  principles. Looking ahead, Polymarket plans to integrate <a href="https://listing.help/what-is-a-decentralized-autonomous-organization-dao/" rel="noopener noreferrer nofollow">DAO</a> elements, enabling users to participate in the governance of the platform.</p><p>By eliminating traditional financial intermediaries and bypassing  KYC processes, Polymarket offers a more private and accessible betting  experience. The platform leverages blockchain technology to create a  transparent and secure environment for users to speculate on events,  from politics to entertainment and economic trends. To manage  scalability and reduce transaction costs, Polymarket operates primarily  on Polygon, a Layer-2 solution. This choice allows the platform to  efficiently handle large transaction volumes without putting undue  strain on the Ethereum network.</p><h3 id="smart-contracts">Smart Contracts:</h3><p>Polymarket relies on smart contracts to automate and manage  transactions. These contracts ensure that every trade and market  resolution is transparent and immutable. When users place a bet or  purchase shares, the transaction is recorded on the blockchain via a  smart contract, guaranteeing a secure and tamper-resistant process.</p><h3 id="security-measures">Security Measures:</h3><p>Security is a top priority for Polymarket. Users maintain control  of their funds through self-custodial wallets, meaning they hold their  private keys. This non-custodial approach ensures that Polymarket never  has direct access to user funds. Additionally, the platform employs  strong encryption and authentication methods to safeguard user data and  transactions, making Polymarket a secure option for those participating  in prediction markets.</p><h3 id="polymarket-fees">Polymarket Fees</h3><p>Polymarket charges minimal fees primarily to cover transaction  costs and provide incentives to liquidity providers. When you trade on  Polymarket, a small fee in USDC is typically paid to these liquidity  providers. This fee ensures that the market maintains sufficient  liquidity, which helps minimize price slippage during the buying or  selling of shares.</p><h3 id="liquidity-providers">Liquidity Providers</h3><p>Liquidity providers play a vital role in Polymarket’s operation.  They supply the funds needed to keep markets liquid, enabling users to  trade shares without difficulty. Without sufficient liquidity, executing  trades would be challenging, and prices could become unstable, leading  to significant slippage.</p><p>To become a liquidity provider on Polymarket, you need to deposit  funds into a liquidity pool. These funds are used to support trades  across various markets. In return, you earn a share of the transaction  fees collected from users trading in the markets you support. This can  be a profitable way to contribute to the platform while earning passive  income.</p><p>While Polymarket itself does not charge additional trading fees,  liquidity providers are rewarded from the transaction fees paid by  traders. This structure encourages more participants to add liquidity,  helping to keep the markets efficient and active.</p><h2 id="header-2">Competitors of Polymarket</h2><p>Polymarket faces competition from several other platforms in the  prediction market space. Augur is one of the earliest decentralized  prediction markets and is also built on Ethereum. It allows users to  create and trade on event outcomes using a similar decentralized  approach. Another significant competitor is Gnosis, an Ethereum-based  platform that provides the infrastructure for creating prediction  markets, offering a range of tools and applications to support its  ecosystem. Additionally, PredictIt represents a more traditional,  centralized prediction market platform focused on political events.  Unlike Polymarket, PredictIt operates under a no-action letter from the  CFTC, giving it a regulated framework.</p><p>Despite the competition, Polymarket has experienced steady growth,  particularly in recent months, with a consistent increase in the number  of active monthly traders.</p><p><img src="https://media.licdn.com/dms/image/v2/D4E12AQFoIeUxXf5jHA/article-inline_image-shrink_1500_2232/article-inline_image-shrink_1500_2232/0/1725213045283?e&#61;1730937600&amp;v&#61;beta&amp;t&#61;_P6HryE0Av2mjL0dEa5v8LdLToWo4QgfvBe6QFu3KpE" /></p><p>For more insights and updates on the crypto world, don&#39;t forget to check out our blog at <a href="https://listing.help/blog" rel="noopener noreferrer nofollow">Listing.Help</a></p>

What is Polymarket? Decentralized Prediction Markets Explained

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Sergei Khitrov

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