Prediction markets are emerging as a new investment market, and the most frequently asked questions by investors are "What is a prediction market?", "How do you place bets on a polymarket?", and "Can a trading strategy consistently generate profits?". This article focuses on polymarkets , providing a comprehensive analysis of the development of prediction markets, probability principles, betting processes, and risks.
Predicting the history of market development
What are prediction markets? Why have they become so popular?
The modern electronic prediction market took shape in the 1980s and 1990s. One representative example is the Iowa Political Stock Market/Iowa Electronic Markets (IEM), launched by the University of Iowa in 1988. Empirically, it was repeatedly proven in the 1980s and 2000s to consistently outperform traditional polls in predicting US presidential election results. Intrade commercialized the prediction market in the 2000s, becoming one of the world's leading platforms. However, in 2012, it was sued by the US CFTC and its US accounts were closed. Ultimately, in 2013, it ceased all trading due to financial irregularities, and by the end of 2014, it confirmed it would not restart in the original model.
Following the emergence of Ethereum, Augur launched mainnet in 2018, building a prediction market protocol with decentralized oracles and crowd-judgment mechanisms. Gnosis, since 2015, has also pursued a decentralized prediction market vision, launching infrastructure such as Conditional Tokens, which later became one of the underlying technologies for several applications, including Omen and Polymarket. Polymarket, founded in 2020, significantly reduced transaction fees and barriers to entry by running on Polygon and using stablecoins such as USDC. During the 2024 US presidential election, its "Presidential Election Results" single market accumulated a trading volume of over $2 billion, with monthly active users approaching 100,000, making it one of the world's largest prediction markets and bringing Web3 prediction markets into the mainstream political and financial media spotlight for the first time.
Meanwhile, in 2020, Kalshi in the United States obtained authorization from the CFTC, becoming the first federally regulated exchange specializing in trading event contracts. It initially focused on "major economic events" such as inflation and interest rates, and in 2023–2024, it engaged in disputes and litigation with the CFTC regarding political contracts such as control of Congress, pushing the market and regulatory agencies to redefine the legal boundaries of "event contracts." Technological advancements, the attention brought by political elections, and the dual development of decentralization on one end and regulation on the other led to the rapid growth and explosive popularity of prediction markets in the mid-2020s.
Differences between Polymarket and Kalshi
Polymarket has become a leading on-chain platform thanks to its decentralized settlement, high media adoption, and funding from ICE-led investments. Kalshi, requiring users to be based in the US and comply with KYC regulations, has become a mainstream event trading platform in the US due to Robinhood integration and large venture capital backing. Both platforms now boast trading volumes exceeding tens of billions of dollars and have expanded from politics to sports, financial reports, and macroeconomics, officially establishing the prediction market as a global emerging asset class with both financial and informational value.
(Learn more: 2026 Three Prediction Market Platforms Showdown: From Politics to Sports, Who Will Dominate the Era of "Everything Can Be Bet"? )
How to place bets in the prediction market Polymarket?
Polymarket interface environment (you can bet on politics, economics, sports, and lifestyle).
Polymarket's main interface allows users to search markets, view trending topics and new betting openings, and manage assets, leaderboards, and rewards on their account page. Leaderboards are used to track top-performing traders and popular markets, while the rewards mechanism encourages users to provide liquidity with limit orders and act as market makers.
The trading interface consists of a probability chart , an order book , and an order placement area . Users can choose market or limit orders and pay attention to market rules, settlement methods, and comments/discussions. Polymarket's markets are divided into binary result markets and multiple-choice markets: the former only has Yes/No, while the latter has multiple competitors but usually only one wins. The prices of both are summed to 100. The multiple-choice market may have increased variability due to the emergence of unexpected winners.
How do I place bets on Polymarket? How is Polymarket used in Taiwan?
Connection and registration : Taiwanese users usually need to switch to a trading region via VPN first, and then log in with Google/Email (which automatically generates a custodial wallet) or Web3 wallet.
Deposit methods : After logging in, you can choose to deposit USDC via wallet transfer, credit card, Coinbase connection, or PayPal/MoonPay.
Understanding the pricing mechanism : The Yes/No price represents the market probability of the event occurring and not occurring, respectively. The sum of the two is approximately equal to $100, and the price difference comes from the order book and the matching mechanism.
When placing orders : It is recommended to use limit orders to avoid slippage of market orders; for example, buy Yes at 24¢, and if the event occurs, you will receive $100, otherwise it will be worth nothing.
Sell early or cut losses : You can sell without waiting for the event to end. You can take profits as long as the price rises. If the situation reverses, you can stop losses early and get back the remaining principal.
How to understand Yes/No pricing? This is about market probability.
In prediction markets, events only have two outcomes: Yes or No. Therefore, the sum of the two prices must equal 100. The Yes price for events like whether the US will acquire Greenland or complete the ascent of Mount Everest is the "probability" given by the market. These prices are not predicted by the platform, but determined by the matching of buy and sell orders on the order book. The platform usually displays the probability at the lowest bid and ask prices, and uses the last executed price if there is insufficient liquidity. When traders believe that the probability of an event is underestimated, they will buy Yes, driving up the price, and vice versa, so that the price constantly reflects the collective judgment.
After the event, Polymarket settled the settlement through UMA's "Optimistic Oracle": anyone can submit the result, and if no one raises a dispute within two hours, the result is automatically finalized; if someone challenges it, the UMA community will vote to decide, ensuring that the settlement is transparent and conducted in accordance with market rules.
Advanced Polymarket Play and Strategies
In prediction markets, advanced traders leverage market inefficiencies, event correlations, and information gaps to find profit opportunities beyond simple betting. Common strategies include:
- "Hedge arbitrage" refers to hedging against pre-market valuation differences and earnings events.
- "Investment-oriented arbitrage" aims to capture high-probability, small-profit opportunities when the overall market situation is settled or when there is a market imbalance.
- The "information asymmetry strategy" leverages information advantages, the movement of smart money on the blockchain, and the interconnectedness of events.
However, all operations ultimately depend on a precise understanding of the settlement rules. Only by mastering how the platform defines events can one avoid risks amidst information overload and truly turn probability differences into profits.
What are the risks of the prediction market Polymarket?
Risk of funds being frozen: If regulatory authorities suddenly intervene and rule the platform illegal, your funds may be temporarily unavailable for withdrawal.
Market manipulation risk: The liquidity of the market is not as good as that of stocks, and a single large investor can manipulate prices, causing the probability to be temporarily distorted.
Risk of rule change: Regulators may determine that certain markets are "in violation of the public interest" and force trading to cease.
Market rules and information sources (most easily overlooked, most prone to problems): Every prediction market has clear rules that determine "how the results are defined" and "which information sources to rely on".
This article, "What is the Prediction Market? Polymarket Beginner's Guide: Betting Methods, Settlement Methods, and Risk Analysis," first appeared on ABMedia ABMedia .
