PredMart > Documentation > What is Polymarket?

What is Polymarket?

Before diving into how PredMart works, it's important to understand Polymarket — the prediction market platform whose outcome shares serve as the foundation of PredMart's collateral system. This page provides a comprehensive introduction to prediction markets, how Polymarket works, what outcome shares are, and how they relate to PredMart's lending protocol.

If you are already an experienced Polymarket trader, you may want to skip ahead to the Getting Started guide.

Understanding Prediction Markets

A prediction market is a type of marketplace where participants trade contracts whose payoff depends on the outcome of real-world events. Instead of trading stocks, commodities, or currencies, prediction market participants trade on the likelihood of future events — elections, sporting events, economic data releases, regulatory decisions, geopolitical developments, and much more.

The fundamental mechanism is straightforward:

For example, if a "Yes" share for "Will it rain tomorrow in New York?" is trading at $0.70, the market collectively estimates a 70% probability that it will rain. If you believe the probability is higher than 70%, you would buy the share (expecting it to pay out $1.00). If you believe it's lower, you would sell or short the share.

This price-as-probability mechanism is what makes prediction markets uniquely powerful: they aggregate information from thousands of participants with different knowledge, incentives, and perspectives into a single, continuously updated probability estimate.

How Polymarket Works

Polymarket is the world's largest prediction market platform, operating on the Polygon blockchain. It allows anyone with a crypto wallet to trade on the outcomes of real-world events using USDC (a stablecoin pegged to the US dollar).

Market Structure

Each Polymarket market is built around a specific question — for example, "Will the Federal Reserve cut interest rates in March 2025?" Each market has two or more outcomes:

The Conditional Token Framework (CTF)

Under the hood, Polymarket shares are implemented using the Conditional Token Framework (CTF) — an ERC-1155 token standard developed by Gnosis. Each outcome in a Polymarket market corresponds to a unique token ID in the CTF contract.

Key properties of CTF tokens:

The Central Limit Order Book (CLOB)

Polymarket uses a Central Limit Order Book (CLOB) rather than an AMM, similar to a stock exchange — orders match at specific prices, giving tight spreads and accurate price discovery. The midpoint price (best bid + best ask, averaged) is what Polymarket displays. PredMart's oracle instead uses the average price to sell $1,000 of shares into the order book (manipulation-resistant) — see Oracle Pricing & Borrow Caps.

Trading on Polymarket

To trade on Polymarket, you need:

  1. A compatible crypto wallet (MetaMask, Coinbase Wallet, etc.)
  2. USDC on the Polygon network
  3. A Polymarket account (which involves deploying a Smart Wallet through their interface)

You can buy shares at the current market price (market order) or set a specific price you're willing to pay (limit order). When a market resolves, you claim your winnings directly from the Polymarket interface.

Polymarket Shares as Financial Assets

From a financial perspective, Polymarket shares have some unique properties that are important to understand when using them as collateral on PredMart:

Price Range: $0.00 to $1.00

Polymarket shares always trade between $0.00 and $1.00. A share cannot be worth more than $1.00 (since that's the maximum payout) and cannot be worth less than $0.00 (since the worst case is zero payout). This bounded price range is fundamentally different from stocks or cryptocurrencies, which have no theoretical upper limit.

This bounded range is what lets PredMart price collateral risk so conservatively. Because the protocol always knows the full range of possible values, it can apply a predictable flat LTV (the same at every price) and size per-market borrow caps to real orderbook liquidity. See Protocol Constants for the current LTV.

Binary Outcome

Unlike traditional assets that fluctuate continuously, Polymarket shares have a binary terminal value: they will ultimately be worth either $1.00 (if the outcome occurs) or $0.00 (if it does not). There is no middle ground. This creates a unique risk profile:

PredMart uses a flat 80% LTV at every price — see Protocol Constants.

Time-Limited

Every Polymarket market has an end date — the date by which the outcome will be determined. This means all Polymarket shares have a finite lifespan. After resolution, the shares are either redeemed for $1.00 or become worthless. PredMart handles both scenarios automatically through its market resolution system.

Liquidity Varies

Not all Polymarket markets are equally liquid. High-profile markets (like US presidential elections) may have millions of dollars in orderbook depth, while niche markets may have only a few thousand dollars. This liquidity variation is why PredMart implements its per-market borrow caps — to ensure that borrowing against a token is proportional to the market's ability to absorb liquidations.

How Polymarket Shares Connect to PredMart

PredMart accepts Polymarket outcome shares (CTF tokens) as collateral for USDC loans. Here's how the connection works:

Depositing Shares as Collateral

When you deposit Polymarket shares into PredMart, you are transferring your ERC-1155 CTF tokens from your wallet to PredMart's lending pool smart contract. The shares remain in the contract until you withdraw them (after repaying any outstanding debt) or until they are seized in a liquidation event.

To deposit, you must first approve PredMart's contract to transfer your CTF tokens. This is done through a standard ERC-1155 setApprovalForAll transaction.

Valuation

PredMart values your collateral using the oracle price — the average price to sell $1,000 of shares into the order book (manipulation-resistant). The price is computed by PredMart's backend, cryptographically signed, and submitted to the smart contract alongside your borrow. The contract verifies the signature, the signer, and that the price is recent. See Oracle Pricing & Borrow Caps for details.

The value of your collateral position is simply:

Collateral Value = Number of Shares × Oracle Price

For example, if you deposit 10,000 shares and the current oracle price is $0.65, your collateral value is $6,500.

Borrowing Power

Your maximum borrowable amount is:

Maximum Borrow = Collateral Value × LTV

PredMart uses a flat 80% LTV at every collateral price — see Protocol Constants. So with $6,500 in collateral value, you could borrow up to approximately $5,200 in USDC (6,500 × 0.80).

Resolution and Redemption

When the underlying Polymarket market resolves:

Key Polymarket Concepts for PredMart Users

Token ID

Every outcome on Polymarket has a unique token ID — a large number that identifies the specific outcome share within the CTF contract. When interacting with PredMart, positions are tracked by token ID. You may see this referenced in API responses, transaction data, and the PredMart interface.

Condition ID and Index Set

These are lower-level identifiers used by the CTF contract for share redemption. The condition ID identifies the market question, and the index set identifies which outcome within that question the share represents. PredMart handles these internally when processing market resolutions — you don't need to interact with them directly.

USDC on Polygon

Both Polymarket and PredMart operate on the Polygon (previously Matic) network and use USDC.e (bridged USDC) as the base currency. The USDC contract address on Polygon is 0x2791Bca1f2de4661ED88A30C99A7a9449Aa84174. Make sure your USDC is on the Polygon network before interacting with PredMart.

Safe Wallet (Smart Wallet)

Polymarket uses Gnosis Safe smart contract wallets for trading. When you first connect to Polymarket, it deploys a Safe wallet for you. PredMart also supports Safe wallet deployment for non-custodial order execution. If you are setting up through PredMart, the platform will guide you through the Safe deployment process.

Example Scenario

Market: "Will Company X announce earnings above expectations in Q2 2025?"

Alice buys 5,000 Yes shares at $0.60 ($3,000), deposits them into PredMart, borrows $1,500 USDC (under the 80% LTV cap), and buys 2,500 more shares. She now controls 7,500 shares with only $3,000 of her own capital (~1.5x leverage).

For more details, see Leveraged Trading.

Next Steps

Now that you understand what Polymarket is and how its shares work as collateral, proceed to: