What is Polymarket Decentralized Prediction Market and How Does It Work?

Polymarket represents an innovative decentralized prediction market platform that utilizes blockchain technology to create a transparent and secure environment for betting on real-world events. The platform operates on the Polygon network, providing users with the ability to place bets on various events - from political elections to sports competitions and economic indicators. Through the use of USDC stablecoin and smart contracts, Polymarket ensures high liquidity and transaction stability.

In October 2025, the platform demonstrated impressive growth: monthly trading volume reached $2.76 billion, and the number of active traders exceeded 445,000 people. This represents a significant increase compared to $110 million in trading volumes in June and approximately 30,000 users. These indicators have made Polymarket the world's largest decentralized prediction market.

What is Polymarket?

Polymarket is a decentralized prediction market platform built on the Polygon blockchain that revolutionizes the way users interact with predicting future events. The platform allows participants to purchase shares representing the probability of a specific event occurring. Each share is valued from $0.01 to $1.00 depending on the current market assessment of the outcome's probability.

The main advantage of the platform lies in using blockchain technology and smart contracts, which ensures complete transparency and security of all transactions. The platform uses the Polygon Layer-2 solution to improve scalability and reduce transaction fees. For example, if a user believes that a certain candidate will win an election, they can purchase "Yes" shares at the current market price. If the prediction proves correct, each share will be worth $1; otherwise, they will become worthless.

The platform was founded by Shayne Coplan, a young entrepreneur who attracted significant investment for project development. Polymarket received a total of $70 million in funding across two rounds, including Series A ($25 million) and Series B ($45 million) from prominent investors, including Ethereum co-founder Vitalik Buterin and Peter Thiel's Founders Fund.

How Does Polymarket Decentralized Prediction Market Work?

Polymarket functions as a full-fledged decentralized Web3 application, providing users with the ability to place bets without traditional KYC procedures. Users can connect their non-custodial Web3 wallets and immediately begin trading, ensuring a high level of privacy and accessibility.

The platform's technological architecture is based on several key components. First, smart contracts automatically manage and execute all transactions on the platform. When a user places a bet or purchases shares, the smart contract records the transaction on the blockchain, ensuring its immutability and protection against manipulation. This system guarantees that all deals and market resolutions are transparent and reliable.

Second, the platform pays special attention to user fund security. Through the use of self-custody wallets, users maintain complete control over their private keys. Polymarket never has direct access to user funds, which minimizes centralized storage risks. Additionally, robust encryption and modern authentication methods are applied to protect data and transactions.

The platform operates predominantly on the Polygon network, a Layer-2 solution for Ethereum, which allows processing large transaction volumes efficiently and with minimal costs without overloading the main Ethereum network.

Polymarket Fees: Details

Polymarket uses a minimalist fee model that differs from traditional betting platforms. The main fees are associated with covering transaction costs and incentivizing liquidity providers. It's important to note that the platform does not charge trading fees for buying and selling outcome shares, making it economically attractive for active traders.

Liquidity providers play a critically important role in the Polymarket ecosystem. They provide necessary funds to maintain sufficient liquidity in markets, allowing users to easily buy and sell shares without significant price slippage. As compensation, liquidity providers receive a portion of transaction fees in USDC.

To become a liquidity provider, a user must deposit funds into the corresponding liquidity pool. These funds are used to service trades across various platform markets. In return, the liquidity provider earns passive income in the form of a share of transaction fees paid by traders. This creates a mutually beneficial ecosystem where trader activity rewards liquidity providers.

However, there are additional costs associated with deposits and withdrawals. Network (gas) fees are charged for these operations due to blockchain transaction processing. Deposits also incur a relay fee - either $3 plus network fee, or 0.3% of the deposit amount, whichever is greater. Gas fee amounts vary depending on network congestion.

How Does Polymarket Make Money?

Polymarket's business model is based on earning revenue from transaction fees paid by users in USDC. Each trade executed on the platform generates a small fee, which is used predominantly to incentivize liquidity providers. This model ensures platform sustainability, as growing trading volumes directly increase revenues.

It's important to understand the distinction between different types of fees on the platform. Polymarket does not charge direct fees for trading outcome shares, which distinguishes it from traditional betting platforms with their high margins. Instead, users' main costs are related to network (gas) fees for USDC deposits and withdrawals, which are caused by Ethereum blockchain transaction processing.

To minimize these costs, Polymarket has integrated the Polygon Layer-2 solution, which significantly reduces transaction costs compared to the main Ethereum network. The platform does not receive a share of gas fees, ensuring maximum transparency for users.

Transaction fees play a key role in the sustainability of the Polymarket ecosystem. They are paid directly to liquidity providers, which incentivizes participants to provide funds to ensure smooth market operation. This structure not only maintains liquidity but also promotes active user participation, creating a self-sustaining ecosystem.

How to Get Started on Polymarket

Getting started on Polymarket is a simple and intuitive process that takes just a few steps. The platform is designed with user convenience in mind, allowing quick connection of Ethereum-compatible wallets such as MetaMask.

The first step is platform registration. Users need to visit the official Polymarket website and register using an email address. The platform will automatically create an Ethereum-based wallet, with users receiving full control over private keys, guaranteeing fund security.

The second step is account funding. Users need to deposit USDC into their Polymarket wallet. USDC can be purchased on major cryptocurrency exchanges or using other methods. The platform also supports USDT deposits with automatic conversion to USDC.

The third step is selecting a market for trading. Polymarket offers a wide selection of markets with various outcome types: binary (yes/no), categorical options, and scalar markets. Users can use built-in filters to search for events of interest.

To place a bet, users need to select an event of interest and purchase shares of their preferred outcome at the current market price. Shares can be sold at any time before market closure. If the prediction proves correct, shares will be worth $1 each when the market closes. After the outcome is determined, users can cash out their shares.

Withdrawing funds is also simple: navigate to the funds page, click the "Withdraw" button, specify a USDC address on the Polygon network, and confirm the transaction. Funds will arrive instantly at the specified address.

Polymarket vs. Competitors: Comparison

Polymarket occupies a unique position in the prediction platform market, distinguished from both traditional and decentralized competitors across several key parameters.

Compared to PredictIt, a traditional centralized platform, Polymarket offers a decentralized alternative with greater privacy and lower fees. PredictIt is regulated by US authorities, which imposes significant restrictions on trading and market creation. While PredictIt is accessible to US residents, Polymarket provides a significantly wider selection of markets and greater trading flexibility.

In comparison with Augur, another decentralized prediction platform, Polymarket offers a simpler user experience. Augur requires users to own and use the REP token for various operations, which can lead to higher costs. Augur recently launched a "Turbo" version on the Polygon network to improve efficiency, using similar infrastructure to Polymarket.

Gnosis represents a more comprehensive ecosystem, offering a wide range of services beyond prediction markets, including decentralized trading and infrastructure tools. The GNO token plays a central role in Gnosis governance mechanisms. The platform has created its own Layer-2 solution - Gnosis Chain. While Polymarket focuses on simplicity and accessibility, Gnosis aims to provide an integrated universal platform for the Ethereum ecosystem.

Kalshi is a CFTC-regulated platform based in the US, operating within traditional regulatory frameworks while offering prediction market services. Unlike Polymarket's decentralized approach, Kalshi provides regulatory compliance and fiat currency integration, making it accessible to users seeking traditional market structures with regulatory oversight.

FAQ

What is Polymarket?

Polymarket is a decentralized prediction market platform powered by blockchain technology. Users can create and trade markets on real-world events, with smart contracts automatically verifying outcomes and executing payouts. It aggregates collective intelligence to provide insights into event probabilities.

Can you actually make money on Polymarket?

Yes, you can make money on Polymarket through information edges, arbitrage, and market making. The platform offers low transaction costs and a large, active user base with strong retention rates, creating genuine profit opportunities for informed traders.