Overview
A prediction market is a market where users trade on the outcome of future events, with prices reflecting probability. Outcomes are resolved by oracles or decentralized judges. They aggregate diverse information into a consensus forecast.
How It Works
Users buy shares in possible outcomes, and the price of each share approaches the market's assessed probability. When the event resolves, winning shares pay out. Arbitrage keeps prices efficient.
Why It Matters
Prediction markets provide a transparent, incentive-aligned way to forecast events, from elections to protocol upgrades. They are a powerful application of market mechanisms. Their regulatory status and oracle dependence are ongoing considerations.
Related Concepts
Prediction Markets rely on Oracles for resolution and on DeFi infrastructure for settlement. They connect to the broader economy of incentive design.