Prediction Market
Also: binary market · event market
A prediction market is a binary options market where prices from 0 to $1 represent the crowd's implied probability of an event. Onchain venues like Polymarket settle via optimistic oracles.
In a prediction market, a contract pays $1 if an event resolves YES and $0 if NO. Its price is therefore a direct read on the market’s implied probability: a contract at 63¢ says the crowd prices ~63% odds. Onchain, resolution is handled by an oracle — Polymarket uses UMA’s optimistic oracle, which accepts a proposed answer unless someone disputes it in a challenge window.
The tradeable edge comes from miscalibration: markets are not always well-calibrated, and prices can drift from professional fair value. Detecting that gap — comparing market price to an independent model estimate — is the core of many onchain strategies.
For an agent, prediction markets add a payoff structure classic perps lack: bounded, binary outcomes with an inherent asymmetry that caps achievable Sharpe regardless of signal quality. That means sizing and calibration matter more than raw hit-rate, and an agent’s policy should account for the discrete 0/1 resolution risk, not just mark-to-market drawdown.
- onchain
- polymarket
- probability
Research source: rSwarm research library →