You profit by buying shares at a price you believe is too low and selling them later at a higher price or holding them until the market resolves.
Example: You believe a human landing on Mars by 2030 is more likely than 25%. You buy 100 YES shares at 25¢ each, for a total cost of $25.
Scenario A (You're Correct): As more people agree with you, the price of
YESshares rises to 60¢. You can sell your 100 shares for $60, locking in a profit of $35.Scenario B (You Hold to Resolution): If a human successfully lands on Mars by 2030, the
YESoutcome is declared the winner. Your 100YESshares each become worth $1.00, and you can redeem them for a total of $100. Your net profit is $75.Scenario C (You're Incorrect): If the event does not occur, the
YESshares become worthless (0¢). Your initial investment of $25 is lost.
Unlike traditional sports-books or casinos, you are not betting against "the house." You are trading with other users, and the prices are determined by real-time supply and demand, making prediction markets a pure form of peer-to-peer speculation and knowledge aggregation.
The results of the markets are tied to real-life events which distinguish it from mere community hype.
Most important, trading on prediction markets requires analysis and judgement, instead of a mere luck and random gambling arena.