How do prediction Markets work?
Let's talk about futures. A good example to explain is presidential elections:
If a futures contract, stating that Candidate X will become president trades at 70 cents, that means, according to the market, there’s a 70% chance that Candidate X will win the elections.
If Candidate Y’s contract trades at 30 cents, the market puts their chances at 30%.
If the contract that you bought supports the eventual outcome, you will get $1 for that contract.
If the outcome goes the other way, you get nothing.
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