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MARKET SYSTEMS · COURSE 001

Prediction Markets: How Views Become Prices

You do not need a finance or blockchain background. Six short lessons use characters, orders, and virtual credits to explain why a prediction market works—and why price is not truth.

6 lessonsabout 42 minbeginner friendly
Start lesson oneOpen sandbox ↗
COURSE EXAMPLEWill humans return to the Moon before 2028?

Turn this sentence into a tradable, collateralized, and settleable market contract.

PARTICIPANTS
  • AAlice: thinks it will happen
  • BBob: remains skeptical
  • CCarol: looks for a fair price
  • YYou: choose how much risk to take
COURSE OUTLINE

One question per lesson

The lessons are ordered so that each one uses concepts introduced earlier.

  1. 01
    THE MARKET CONTRACT

    Write a Question That Can Settle

    KEY QUESTIONIf a headline is clear, why can’t we trade it as-is?

    A vague question cannot create a reliable asset. Put the deadline, source, and resolution condition into the rule.

    Market ruleResolution conditionInvalid market
    6 MIN
    →
  2. 02
    COLLATERAL · OUTCOME SHARES

    100 Credits, Two Futures

    KEY QUESTIONWhy does locking 100 credits create both YES and NO?

    See why YES and NO form a pair, and why the winning side can always redeem 100 credits.

    Outcome shareComplete setCollateral
    7 MIN
    →
  3. 03
    QUOTES, NOT VOTES

    How Views Enter the Order Book

    KEY QUESTIONIf Alice believes 80%, why might she refuse to buy at 80?

    Alice, Bob, and Carol hold different beliefs, but only a price and quantity someone will fund can enter the market.

    Limit orderOrder bookBUY NO conversion
    7 MIN
    →
  4. 04
    PRICE · TIME PRIORITY

    How Matching Produces a Price

    KEY QUESTIONA buyer accepts 72 and a seller accepts 68. Why can the trade print at 68?

    Make orders meet and watch resting prices, partial fills, and the bid–ask spread create a trade.

    Best bid / askSpreadPrice-time priority
    9 MIN
    →
  5. 05
    PRICE · PROBABILITY

    0.70 Is Not a Cosmic Truth

    KEY QUESTIONYES 62 + NO 45 = 107. How can market probability exceed 100%?

    A YES price can be read as an implied probability, but liquidity, fees, preferences, and manipulation can move it away from reality.

    Implied probabilityLiquidityMarket depth
    7 MIN
    →
  6. 06
    ORACLE · RESOLUTION

    Who Announces That the Future Happened?

    KEY QUESTIONIf 99% of the market buys YES, can the oracle still report NO?

    Trading ending is not the end of the story: an outside result must enter the system before positions can pay out.

    OracleChallenge windowResolution
    6 MIN
    →
WHAT IT COVERS

Questions covered in this course

01

Why can one YES share pay 100 credits at resolution?

02

How do orders turn two different views into one price?

03

Why can 0.70 be read as an implied probability without being an objective probability?

04

If the oracle is wrong, why can a precise market still settle incorrectly?