Polymarket is a decentralized platform that allows users to bet on various events, ranging from sports and entertainment to cryptocurrency prices and election outcomes.
In this article, we’ll explain how Polymarket operates, how it generates revenue, and provide a step-by-step guide for placing bets on the platform. We’ll also examine whether Polymarket is legitimate and trustworthy.
Key Highlights:
- Polymarket is a decentralized platform utilizing blockchain technology for betting on a wide array of events.
- Users can trade shares of their predictions, with prices fluctuating based on supply and demand, allowing bettors to profit even before the event concludes.
- Currently, Polymarket does not charge platform fees, though this is likely to change in the near future.
- The platform is legitimate, but it’s best to avoid events with poorly defined outcomes.
How Does Polymarket Work?
Polymarket users can explore various prediction markets and purchase shares representing their forecasts. If you believe a specific outcome will occur, you buy shares for that outcome (labeled “Yes”). Conversely, if you think the event will not happen, you purchase shares for the opposite outcome (labeled “No”).
Markets can be straightforward with binary outcomes (Yes/No, such as “Will BTC reach its all-time high in September?”) or involve more than two possible results (for example, “Who will win the 2024 U.S. Presidential Election?” with multiple potential outcomes).
You can buy as many shares (or combinations of shares) as you like, including fractional shares.
Once the event concludes, the outcome is verified by trusted oracles—services or entities that provide accurate information to the blockchain. After the market is resolved, users holding shares of the correct outcome receive payouts proportional to the number of shares they hold ($1 per share). Those who hold incorrect shares lose their investment, as shares of the wrong outcome become worthless.
It’s important to note that share prices fluctuate based on demand for each outcome. If more people believe an outcome is likely, the price of shares for that outcome increases. This dynamic market allows users to trade shares, potentially profiting before the event is even settled—similar to selling your betting position to a bookie before a game ends.
Users can propose new markets on specific questions, such as “Will [Team X] win the Superbowl 2025?” or “Will the price of Bitcoin exceed $70,000 by a certain date?” These markets are created using smart contracts on the blockchain, ensuring transparency and fairness.
Step-by-Step Guide to Using Polymarket
Now, let’s walk through how you can place a bet on Polymarket.
Sign Up on Polymarket:
To place a bet, users need to have funds in the form of the USDC (USD Coin) stablecoin. You can either register with an email and then deposit crypto/buy the stablecoin using a credit card or connect to Polymarket directly using an already topped-up cryptocurrency wallet (supported wallets include Metamask, Coinbase, and WalletConnect).
Top-Up Your Account:
While buying USDC with a credit card directly on Polymarket is the simplest option, it is also the most expensive, as a fee will be charged by Moonpay, which operates Polymarket’s integrated on-ramp. We recommend depositing USDC from a cryptocurrency wallet (make sure to transfer via the Polygon network!) or better yet, interact with Polymarket directly through a cryptocurrency wallet.
Choose a Prediction Market:
Proceed to select the event you want to bet on and make your prediction. Polymarket categorizes its events into “Politics,” “Crypto,” “Pop Culture,” “Sports,” “Business,” and “Science.” As you engage with events, Polymarket will also create a personalized category called “For You.”
Buy Outcome Shares:
Sell Outcome Shares or Wait for the Event to Resolve:
When you own shares for an outcome, it’s up to you whether to sell them before the event itself or wait for the event to resolve.
How Does Polymarket Make Money?
As of now, Polymarket does not charge any platform fees. However, users still incur a small transaction fee for each trade, as blockchain validators require payment for transaction processing. The company is currently supported by venture capital funding and potentially through liquidity provision and market-making services. It’s likely that Polymarket will introduce fees in the future to generate revenue.
“We’re focused on growing the marketplace right now and providing the best user experience. Monetization will come later,” Polymarket Founder Shayne Coplan revealed in a recent interview with Forbes.
Is Polymarket Legit?
Yes, Polymarket is a legitimate platform. It has been offering its services to bettors since 2020, and the development team stands behind their product with their real identities and reputations. Furthermore, Polymarket is built on a decentralized blockchain, with the entire process governed by smart contracts. This ensures the platform operates transparently, without the need for a central authority.
While Polymarket strives to comply with regulations, it operates within the decentralized finance (DeFi) space, which often faces regulatory scrutiny. Unsurprisingly, Polymarket does not have a spotless record either. The company was involved in a major controversy and was fined $1.4 million by the U.S. Commodity Futures Trading Commission (CFTC).
The CFTC alleged that Polymarket was offering event-based binary options contracts without proper registration as a designated contract market (DCM) or swap execution facility (SEF). As part of the settlement, Polymarket agreed to cease offering its services to U.S. customers.
What to Watch Out for When Using Polymarket
While Polymarket is a reliable platform, the quality of its markets can vary significantly. There have been heated debates and disputes over what constitutes the correct outcome of an event. This typically occurs with events that have poorly defined outcomes.
To avoid disputes, it is advisable to participate only in markets with clearly outlined criteria for determining outcomes. Additionally, it’s always a good practice to maintain strong password hygiene and avoid holding large amounts of crypto in online custodial wallets.
The Bottom Line
Polymarket leverages blockchain technology to create a transparent, user-driven prediction market where anyone can participate and potentially profit from their insights on real-world events. While the platform is legitimate, it has faced regulatory challenges, much like other cryptocurrency platforms. To minimize risks, focus on markets with clearly defined outcomes and practice good security measures.
By Andrej Kovacevic
Updated on 30th August 2024