Crypto Newbie / Simulators / Prediction Market
Prediction Market (Polymarket) Simulator
Polymarket settled $3B+ in trading volume on the 2024 US election alone. The mechanism is simple: binary outcomes (YES vs NO) trade against USDC in a constant-product market maker pool. Each share pays $1 if its outcome wins, $0 if it loses — so the share PRICE is literally the market's probability estimate. This simulator runs the exact CPMM math so you can place bets, watch probabilities shift in real time, and see how LP yield works.
Market state
YES shares in pool
10.00k
NO shares in pool
10.00k
Implied YES probability
50.00%
YES price
$0.5000
NO price
$0.5000
Place a bet
Resolution
LP yield (separate from trader bets)
LP daily yield
0.500%
LP annualised yield
182.5%
Why prediction market prices = probabilities
If YES shares trade at $0.65 and the resolution payout is $1 if YES wins, $0 if NO wins, then anyone with capital faces a clear question: 'do you think the probability of YES is above or below 65%?' If above, buying YES is +EV. If below, buying NO is +EV. Equilibrium pricing converges to the market's collective probability estimate — typically more accurate than polls because participants have real skin in the game. In 2024, Polymarket's election prices outperformed every major polling aggregator.
How the CPMM works
Polymarket uses a constant-product pool: YES_shares × NO_shares = k. When you BUY YES with $X USDC, the pool first mints (X YES + X NO) shares (always balanced), then you swap your NO shares for more YES shares using the CPMM. Result: you end up with MORE than X YES shares (because the swap converts NO → YES) but at an EFFECTIVE PRICE worse than the spot YES price. The price impact reflects how much your trade shifts the market's implied probability.
LP yield economics
Liquidity providers deposit USDC into both YES and NO sides. They earn a small spread (typically 1-2%) on every trade that goes through the pool — both buyers and sellers pay a fraction of their trade to LPs. For high-volume markets ($10M+ daily volume), LP yields can be 30-50% annualised. For thin markets, LPs barely break even after gas. The risk: if the market resolves and the LP is heavily concentrated in the losing side, they lose the difference between their share count and the payout.
Where prediction markets work and fail
WORK: elections, sports, well-defined news events (Will X get confirmed by date Y?). The combination of clear resolution criteria + real skin in game produces accurate prices. FAIL: ambiguous events ('Will AGI be achieved by 2030?' — what counts?), low-stakes markets (no incentive for sharp traders to participate), markets manipulable by single actors (small-cap stock prices). Polymarket's strength is choosing markets with clear binary resolutions; Augur (which allowed user-created markets) failed largely because ambiguity made many markets unresolvable.
Frequently asked questions
+Is Polymarket legal in the US?
Legally gray. Polymarket is technically blocked from US users via geo-IP + KYC, but enforcement is loose and many US users access via VPN. The CFTC has previously fined Polymarket for failing to register as a futures exchange. The 2024 election cycle massively raised regulatory attention. As of late 2024 the status remains uncertain — most US lawyers advise extreme caution. Non-US users (most of the world) have no regulatory issues.
+What if there's a tie or the resolution is unclear?
Polymarket uses Uma's optimistic oracle for resolution. Disputes can be raised, and the worst-case outcome is the market is 'voided' and all trades are refunded at the average price at time of dispute. Some markets have been voided historically (e.g., 'Will Trump be inaugurated' resolved YES in 2024 with no dispute; ambiguous market on 'Did X say Y' have been more contested). Resolution risk is real and worth understanding before placing large bets.
+Can I make money trading prediction markets long-term?
Statistically: most participants lose to the spread + fees. Sustainable edges require: superior information (you actually know more than the market), arbitrage between markets (Polymarket vs Kalshi vs sportsbook), or LP-side spread capture (not directional). Recreational betting is fine for entertainment; expecting it to be income is statistically unrealistic for ~98% of participants.
+How does Polymarket differ from a sportsbook like DraftKings?
Sportsbooks set the odds (with a 5-10% house edge baked in). Polymarket has NO house edge — the pricing comes from peer-to-peer trading. So Polymarket markets are often MORE accurate prices but have less liquidity / wider spreads for niche markets. For mainstream events (Super Bowl, presidential election), Polymarket is competitive with the best sportsbooks. For weird local sports, sportsbooks have better depth.
+Why does my buy move the price so much?
Constant-product pools have non-linear price impact. A $100 trade in a $10k pool moves the price ~1%; a $1000 trade moves it ~10%+. Pool depth (how much USDC is in the LP) determines how much your trade impacts the price. Smaller markets = more impact. The simulator above shows this directly — try buying $100 in a 10k×10k pool vs a 100k×100k pool to see the difference.