Polymarket: the rising star in prediction markets

In the first six weeks of 2024, Polymarket witnessed a surge in trading volume by over 700% and a 90% increase in its user base

Polymarket stands as a pioneering force in the realm of prediction markets, offering users a dynamic platform where they can capitalize on their insights into the future.

As the world's largest prediction market, Polymarket provides an expansive array of topics for users to engage with, spanning from sports and politics to current events and cultural phenomena.

Polymarket experiences meteoric rise in 2024

Since the beginning of 2024, Polymarket has seen a remarkable surge in popularity, with its trading volume and active user base skyrocketing by over 700% and 90%, respectively, during the first six weeks of 2024.

This surge is attributed to a growing interest in blockchain-based prediction markets, fueled in part by recent political and sporting events.

For example, Polymarket observed approximately $100m in cryptocurrency bets placed on the upcoming US presidential election, notably seeing 52% of wagers in favor of former President Donald Trump.

Additionally, Polymarket's partnership with Magic's Wallet-as-a-Service platform, announced in February, facilitated frictionless onboarding, leading to a 300% increase in daily volume within just three weeks, reaching a staggering $28m.

As Polymarket CEO and founder Shayne Coplan acknowledged, Magic has played a pivotal role in Polymarket’s recent success.

While challenges like user education and regulatory uncertainties persist, Polymarket's rapid growth exemplifies the transformative potential of web3 technologies.

Together with infrastructure providers like Magic, Polymarket aims to unlock the full potential of blockchain technology and empower individuals to participate in the web3 economy without barriers, shaping a brighter future for decentralized finance.

How Polymarket utilizes blockchain technology

Spearheaded by Coplan, whose background spans internships at blockchain-powered ventures like Chronicled and music annotation platform Genius, Polymarket harnesses blockchain technology to offer a wide variety of prediction markets.

What sets Polymarket apart is its decentralized nature, operating on the Ethereum blockchain and utilizing Polygon for enhanced scalability and security. This setup ensures secure and transparent transactions, as well as low transaction fees compared to traditional financial institutions.

The platform's decentralized structure eliminates the need for intermediaries, fostering an environment where users can confidently engage in trading based on their beliefs about future events.

The mechanics of Polymarket are rooted in smart contracts, ensuring fair outcomes for all participants.

Users navigate the platform to find markets aligned with their interests or expertise, buying and selling shares to capitalize on their predictions. The market prices reflect the collective wisdom of traders, offering real-time insights into the perceived probabilities of various outcomes.

Users trade future outcomes with USDC

Founded in 2017 on the principle of empowering individuals to leverage their knowledge, Polymarket enables users to trade shares on the outcomes of diverse events.

When a user believes that a certain outcome will occur, they can buy shares representing that belief. These shares are priced between $0.00 and $1.00, with prices fluctuating based on the collective sentiment of traders. For instance, if the price of a “Yes” share is $0.75, it indicates that the market believes there is a 75% probability of that event occurring.

The trading process on Polymarket involves using USDC (USD Coin), a stablecoin pegged to the US dollar, as the trading currency. Users need to have USDC in their Polymarket account to participate in trading.

When a user purchases shares on Polymarket, they are essentially expressing their belief in the likelihood of a particular event occurring. If their prediction turns out to be correct, they stand to profit, receiving $1.00 per share. Conversely, if the outcome is different from their prediction, their shares become worthless, resulting in a loss.

Additionally, Polymarket offers a Liquidity Rewards Program that incentivizes liquidity providers to post resting limit orders, aiming to foster a healthy marketplace. This program encourages liquidity across all markets, motivates balanced quoting, and discourages exploitative behaviors. It rewards participation, boosts two-sided depth, and considers spread, distributing rewards directly every week.

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Written by Silvia Pavlof

Silvia has explored various forms of writing, ranging from content creation for social media to crafting movie scripts. Drawing on her experience as a journalist specializing in the gambling sector, she is currently investigating the impact of cryptocurrencies and blockchain on traditional gambling and iGaming.

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