What Are Prediction Markets?
Prediction markets are speculative platforms where participants trade on the outcomes of future events. By buying and selling shares in different outcomes, users collectively determine the probability of an event occurring.
Market Prices = Probabilities
The price of a share on Ignite Market reflects the current probability of an event happening. For example:
- A share trading at $0.25 indicates a 25% chance of that outcome occurring.
- If the outcome happens, each share pays out $1; if not, it’s worth $0.
Making Predictions
- Buy Shares: If you believe an outcome’s probability is higher than its current price (e.g., you think a 25% chance should be 40%), buy shares. If correct, you profit upon resolution.
- Sell Shares: Adjust your position by selling shares anytime before the market closes, based on new information or shifting odds.
Free-Market Trading
Ignite Market employs the Gnosis FPMM model, enabling share prices to adjust dynamically with supply and demand. Trading remains open from the market’s start date until its end date, ensuring prices reflect the latest collective insights.
Example Scenario
- Market: “Will it rain this afternoon?”
- Outcomes: “Yes” (50 shares at $0.50) and “No” (50 shares at $0.50).
- Trading: User A buys 10 “Yes” shares at $0.50. Increased demand shifts “Yes” to $0.60 and “No” to $0.40.
- Resolution: If “Yes” wins, User A’s 10 shares are worth $10 ($1 each), minus a small fee.