A visual guide
How a prediction market works.
You sign a bet off-chain, for free. The exchange pairs it with someone taking the other side, then settles it automatically. That is the whole idea — the rest is detail, and we'll take it slowly.
Ten short chapters. Each one has a single idea and something you can touch. Read straight through, or jump around.
A bet is two tokens.
Ask a question — will it rain tomorrow? — and it becomes two tokens: a YES and a NO. One of them will be worth a dollar; the other, nothing.
You don't know which yet. But you know something certain: together they're always worth exactly one dollar. So their prices are just the market's guess at the odds. Move the guess and watch.
The dollar behind the pair is the collateral — real money locked up while the bet is live.
Three things you can do.
Because a YES and a NO always add up to a dollar, only three moves are ever possible. The whole exchange is built out of them.
Split. Put in one dollar and receive one YES and one NO. You’ve turned cash into a matched pair. The exchange does this when two people both want to buy — it’s the mint path.
The exchange runs split and merge constantly while trading. Redeem happens once, after the question is finally answered.
An order's journey.
Six steps carry an order from your keyboard to tokens changing hands. Take them one at a time.
You sign the order
You describe a bet — the token, the amounts, buy or sell — and your wallet signs it. No blockchain, no cost. Just a signature that says you approve.
The first two steps are free and off-chain — post and cancel all you like. Gas is spent only when the exchange matches two orders.
The match.
Two orders meet. If their prices agree, money moves — in one of three ways, depending on the two sides. Set the orders and watch what happens.
- –The maker hands 100 YES to the taker.
- –The taker pays the maker 55 USD.
One rule governs it all: the maker always gets their limit price; the taker keeps whatever surplus the match produces.
Proving you signed.
An order only counts if the person whose money moves actually approved it. There are four ways to prove that — from a plain wallet to a smart-contract vault.
The money behind the tokens.
To trade, you deposit real dollars. The exchange keeps them in reserve and gives you a matching balance to trade with — one-for-one. Withdraw whenever you like, and the dollars come back.
Every unit of trading balance is backed by exactly one real dollar sitting in reserve — that is why the two sides of the panel always match. The tokens you trade are, in turn, backed by that same reserve.
Many candidates, one winner.
Some markets have many candidates but only one winner — who wins the election? Because exactly one can win, betting NO on some of them is the same as betting YES on the rest.
Because the two forms are worth exactly the same, the exchange lets you convert freely between them — hand in your NO tokens on some candidates, receive YES tokens on all the rest.
Fees.
The contract holds no fee formula. The exchange names the fee for each trade; the contract only checks it stays under a ceiling. The default ceiling is five percent.
The fee is always measured against the dollar side of the trade. Anything above the ceiling simply reverts.
The brakes.
Two roles run the exchange, and there are two ways to stop it. The quietest and most interesting is the one you control.
Pause your own account
If you fear your key is compromised, you can freeze all trading against your own account — no admin needed. It doesn't happen instantly: it takes effect after a short, known delay, so trades already in flight resolve cleanly.
Glossary.
Every term from this guide, gathered in one place.