Reference
Prediction Markets Glossary
A complete reference guide to prediction market terminology. From basic concepts like YES/NO shares to advanced topics like AMMs and conditional markets - all terms explained clearly with real examples.
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Prediction Market
A financial market where participants trade contracts whose value depends on the outcome of future events. Prediction markets aggregate information from many participants to produce probability estimates for events. They are used for political elections, economic indicators, sports outcomes, and more.
Example
On Kayxa, you can trade a prediction market asking "Will Bitcoin reach $100,000 by end of 2026?" with YES and NO shares priced to reflect market probability.
Binary Market
A type of prediction market with exactly two possible outcomes: YES or NO. The market resolves at $1 per share for the winning outcome and $0 for the losing outcome. Binary markets are the most common format on prediction market platforms.
Example
A binary market "Will Ethereum complete the next major upgrade before July 2026?" resolves YES ($1) or NO ($0) when the event occurs or the deadline passes.
Market Resolution
The process by which a prediction market determines the winning outcome and pays out to holders of correct shares. Resolution is triggered when the real-world event concludes or the market deadline passes. On decentralized platforms, resolution is governed by smart contracts.
Example
When a Bitcoin price prediction market reaches its target date, the market resolves based on the official closing price. Holders of the correct outcome shares receive $1 per share.
USDC
USD Coin - a stablecoin pegged 1:1 to the US dollar, issued by Circle. USDC is the primary currency used on Kayxa for trading prediction markets. Unlike volatile cryptocurrencies, USDC maintains a stable $1 value, making it ideal for denominating prediction market contracts.
Example
Depositing 100 USDC on Kayxa gives you $100 worth of buying power to trade prediction markets. Your winnings are also paid out in USDC.
Polygon
A layer-2 blockchain network built on Ethereum that offers fast transactions with near-zero gas fees. Kayxa is built on Polygon, which enables cheap and fast prediction market trading without the high fees of the Ethereum mainnet.
Example
Trading on Kayxa costs a fraction of a cent in gas fees thanks to Polygon. A $50 prediction market trade might cost less than $0.01 in network fees.
Liquidity
The availability of buyers and sellers in a market. High liquidity means you can enter and exit positions quickly at fair prices with minimal price impact. Low liquidity leads to wide bid-ask spreads and difficulty executing large trades.
Example
A highly liquid prediction market on a major election might have $500,000 in trading volume, allowing large trades with minimal slippage. A thin market might only have $1,000 in liquidity.
Order Book
A list of outstanding buy and sell orders for a prediction market, organized by price. The order book shows the current best bid (highest price buyers will pay) and best ask (lowest price sellers will accept). Order book depth indicates market liquidity.
Example
An order book showing bids at $0.55 and asks at $0.57 for YES shares means the current mid-market price is $0.56, implying 56% probability for that outcome.
AMM
Automated Market Maker - a smart contract that automatically provides liquidity for trading using a mathematical formula. AMMs replace traditional order books with liquidity pools, allowing trades at any time without a counterpart. Many DeFi prediction markets use AMM mechanisms.
Example
An AMM-based prediction market automatically adjusts YES and NO share prices based on how much of each has been bought, ensuring continuous liquidity without requiring a human market maker.
Smart Contract
Self-executing code deployed on a blockchain that automatically enforces the terms of an agreement. Prediction markets use smart contracts to hold funds, record trades, and automatically pay out winnings when markets resolve - eliminating the need to trust a central party.
Example
When you buy YES shares on Kayxa, a smart contract locks your USDC and records your position on-chain. If the market resolves YES, the smart contract automatically releases your winnings to your wallet.
Decentralized Exchange
A trading platform that operates without a central authority, using smart contracts to facilitate trades directly between users. DEXs give users full custody of their funds and operate transparently on a public blockchain.
Example
Kayxa operates as a decentralized prediction market exchange, meaning no company holds your USDC. Your funds remain in smart contracts until you withdraw them to your wallet.
KYC
Know Your Customer - the process of verifying the identity of customers through government-issued ID, address verification, and other documentation. Many centralized financial platforms require KYC for regulatory compliance. Kayxa does not require KYC.
Example
Platforms like PredictIt and Kalshi require KYC before allowing trading. Kayxa requires only a crypto wallet - no identity documents, no email, no personal information.
On-chain Settlement
The process of finalizing and recording financial transactions directly on a blockchain. On-chain settlement ensures that trade outcomes, fund transfers, and market resolutions are permanently recorded and verifiable by anyone without requiring trust in a central party.
Example
When Kayxa resolves a prediction market, the settlement is recorded on the Polygon blockchain. Anyone can verify the outcome and that winnings were correctly distributed using public blockchain explorers.
Outcome Token
A blockchain token representing ownership of a specific outcome in a prediction market. Outcome tokens are fungible, tradeable, and automatically redeemable for their payout value when the market resolves. They are the tokenized form of outcome shares.
Example
Kayxa issues YES tokens and NO tokens for each prediction market. These tokens can be bought, sold, or held until resolution. At resolution, winning tokens are worth $1 each in USDC.
Event Contract
A financial contract whose value is contingent on the outcome of a specified real-world event. Event contracts are the core instrument of prediction markets. Each market is structured around a specific, objectively verifiable event with a defined resolution criteria.
Example
"Will the Federal Reserve raise rates in Q2 2026?" is an event contract. The resolution criteria is clear: the Fed either raises rates or it does not, and the contract pays accordingly.
Information Market
Another term for prediction market, emphasizing their role in aggregating dispersed information from many participants into a single probability estimate. Information markets are theorized to produce accurate forecasts because they create financial incentives for sharing accurate information.
Example
Academics and policy researchers use information markets to gauge expert opinion on scientific developments, geopolitical events, and economic outcomes more accurately than surveys.
Forecasting Market
A prediction market specifically designed to generate accurate probability forecasts for future events. Forecasting markets leverage the wisdom of crowds and financial incentives to create predictions that are often more accurate than expert panels or polls.
Example
Kayxa's forecasting markets on crypto prices aggregate the predictions of thousands of traders, often producing more accurate Bitcoin price forecasts than individual analysts.
Implied Probability
The probability of an event occurring as implied by the current market price of outcome shares. If YES shares trade at $0.65, the implied probability is 65%. Implied probability is a key metric for evaluating whether a market offers value.
Example
If you believe Bitcoin has a 75% chance of reaching $150,000 in 2026, but YES shares only trade at $0.55 (55% implied probability), that gap represents potential trading value.
Market Maker
A participant who provides liquidity to a market by continuously offering to buy and sell at quoted prices. Market makers profit from the bid-ask spread while reducing friction for other traders. In DeFi prediction markets, AMM smart contracts often fill the market maker role.
Example
A professional market maker on Kayxa might quote YES shares at $0.48 bid / $0.52 ask, earning the $0.04 spread on each round-trip trade while providing liquidity to other traders.
Arbitrage
The practice of exploiting price differences for the same asset across different markets or inefficient pricing within a single market. In prediction markets, arbitrageurs help keep prices aligned with true probabilities by buying underpriced and selling overpriced shares.
Example
If a Kayxa prediction market prices a candidate's election win at 60% but another platform prices it at 55%, an arbitrageur could buy on the cheaper platform and sell on the more expensive one for a risk-free profit.
Long Position
A position that profits if an event occurs (YES shares) or if prices rise. In prediction markets, holding YES shares is considered a long position on that outcome. Going long means you believe the probability of the event is higher than the current market price implies.
Example
Buying YES shares on "Will Ethereum ETF reach $10B AUM in 2026?" at $0.40 is a long position. You profit if the outcome occurs and the market reprices to reflect a higher probability.
Short Position
A position that profits if an event does NOT occur (NO shares) or if prices fall. Holding NO shares is a short position on that outcome. Going short means you believe the probability is lower than the current market price implies.
Example
Buying NO shares on an outcome currently priced at 80% (NO shares at $0.20) is a short position. You profit if the outcome fails to materialize and the probability falls.
Conditional Market
A prediction market whose resolution depends on another prior event occurring. Conditional markets allow traders to express nuanced views about outcomes that only matter if a prerequisite condition is met.
Example
"If candidate X wins the primary, will they win the general election?" is a conditional market. It resolves meaningfully only if the primary condition is met, allowing traders to isolate specific probability scenarios.
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