# What Are Prediction Markets?

A prediction market is a trading platform where you buy and sell Shares based on the outcome of future events.

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## How It Works

Every market poses a question — "Will X happen?" — and each possible outcome has a Share you can trade. Share prices are always between **$0.001 and $0.999**, and the price reflects the crowd's estimated probability: a Share at **$0.70** means the market sees a 70% chance.

{% hint style="info" %}
**Yes + No = $1.00.** Every market has two sides — Yes and No — and their prices always add up to $1.00. If Yes is $0.70, No is $0.30. One side's gain is the other side's loss.
{% endhint %}

If the outcome happens, your Shares settle at **$1.00**. If not, **$0.00**. But you don't have to wait for the result — you can **sell your Shares anytime** before settlement. If the price moves in your favor, you can lock in profit early. If it moves against you, you can cut losses.

> **Example**: "Will Team A win the championship?" — Yes Share is trading at $0.60. Buy 100 Shares at $0.60 = $60 cost. Team A wins → 100 × $1.00 = $100. **Profit: $40 (+67%)** Or — Yes rises to $0.80 before the game ends. Sell at $0.80 = $80. **Profit: $20** without waiting for the result.

### Profit Structure

| Outcome  | Calculation     | Example(Limit Order: Yes $0.600 × 100 Shares) |
| -------- | --------------- | --------------------------------------------- |
| **Cost** | Shares × Price  | 100 × $0.600 = **$60**                        |
| **Win**  | Shares × $1.000 | 100 × $1.000 = **$100** → Net **+$40**        |
| **Loss** | Shares × $0.000 | **$0** → Net **-$60**                         |

### Settlement (CROSS Prediction)

Each market's outcome is determined by an **oracle** — an external data source that confirms the final result.

{% content-ref url="/pages/J44SRrcTBTgnVJpG8cZp" %}
[Settlement](/market-structure/market-structure/settlement.md)
{% endcontent-ref %}

| Market Category                                                                     | Oracle                                       | Resolution                                                |
| ----------------------------------------------------------------------------------- | -------------------------------------------- | --------------------------------------------------------- |
| **Crypto Up/Down** (BTC)                                                            | Verifiable BTC Price Oracle                  | Auto-settled per round                                    |
| <p><strong>Event Markets</strong></p><p><strong>(Polymarket Inherited)</strong></p> | UMA Oracle + Polymarket API (cross-verified) | After 1-hour cooling period following result confirmation |

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