Etherdrake
132 lines
6.2 KiB
Markdown
132 lines
6.2 KiB
Markdown
> ## Documentation Index
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> Fetch the complete documentation index at: https://docs.polymarket.com/llms.txt
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> Use this file to discover all available pages before exploring further.
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# Polymarket 101
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> An intro to Polymarket - the world's largest prediction market
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Polymarket is a prediction market platform where users trade on the outcomes of real-world events. Instead of betting against a house, you trade shares with other users in an open, peer-to-peer market. Prices reflect the market's collective belief in the probability of an event occurring.
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The platform is non-custodial, meaning you always control your funds. All trades are settled through smart contracts on the blockchain, ensuring transparent and trustless operation.
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## Self-Custody
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Polymarket operates on a non-custodial model. You maintain full control of your funds at all times.
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* **You control your funds** - Assets are held in your wallet, secured by your private key
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* **Smart contract enforcement** - Trades execute automatically through audited smart contracts
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* **No intermediary risk** - Polymarket never takes possession of your funds — you maintain full control through your private key
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* **Full transparency** - All trades and positions are recorded onchain and publicly verifiable
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* **Trustless execution** - Settlement happens automatically based on market resolution
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<Warning>
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Keep your private key safe and never share it with anyone. If you lose your
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private key, you lose access to your funds. If you signed up via Magic Link or
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have a proxy wallet, recovery may be possible through
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[recovery.polymarket.com](https://recovery.polymarket.com).
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</Warning>
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## How Polymarket Works
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<Frame>
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<img src="https://mintcdn.com/polymarket-292d1b1b/FOMte3ewbG-LVy3k/images/core-concepts/polymarket-101.png?fit=max&auto=format&n=FOMte3ewbG-LVy3k&q=85&s=059e9831d1c51b99996d9747c0139d49" alt="Polymarket Overview" className="dark:hidden" width="1526" height="952" data-path="images/core-concepts/polymarket-101.png" />
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<img src="https://mintcdn.com/polymarket-292d1b1b/FOMte3ewbG-LVy3k/images/dark/core-concepts/polymarket-101.png?fit=max&auto=format&n=FOMte3ewbG-LVy3k&q=85&s=4e929eca98a2bb83ef7421f7bbaf9f1d" alt="Polymarket Overview" className="hidden dark:block" width="1526" height="952" data-path="images/dark/core-concepts/polymarket-101.png" />
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</Frame>
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### Prices Are Probabilities
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Every share on Polymarket is priced between `$0.00` and `$1.00`. The price represents the market's belief in the probability of that outcome occurring.
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For example, if "Yes" shares for an event are trading at `$0.65`, the market believes there's approximately a `65%` chance the event will happen.
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### Collateral and Tokens
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Polymarket uses pUSD (Polymarket USD) as collateral. Every Yes/No pair is fully backed:
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* `$1 pUSD` creates one Yes share and one No share
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* Winning shares are redeemable for `$1.00`
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* Losing shares are worth `$0.00`
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Shares are represented as tokens using the [Gnosis Conditional Token Framework](https://github.com/gnosis/conditional-tokens-contracts/) (ERC1155 standard), enabling seamless onchain trading and settlement.
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### Trading
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Polymarket uses a peer-to-peer order book (CLOB) for trading. You trade directly with other users, not against the house.
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* **Buy shares** when you think the market underestimates the probability
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* **Sell shares** when you think the market overestimates the probability
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* **Exit anytime** - Sell your position before resolution to lock in profits or cut losses
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| Action | When to Use | Profit Scenario |
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| ------- | ------------------------------------- | ------------------------- |
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| Buy Yes | You think the probability is too low | Event occurs |
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| Buy No | You think the probability is too high | Event does not occur |
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| Sell | Lock in gains or limit losses | Price moves in your favor |
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### Resolution
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When an event concludes, markets are resolved through the **UMA Optimistic Oracle**:
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1. A proposer submits the outcome with a bond
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2. There's a challenge period where anyone can dispute
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3. If disputed, UMA token holders vote on the correct resolution
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4. Winning tokens become redeemable for \$1 pUSD
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This community-driven process ensures fair and accurate market resolution.
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## Why Blockchain
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Polymarket is built on **Polygon**, a blockchain network, for several key reasons:
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* **Global accessibility** - Anyone with an internet connection can participate
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* **Non-custodial** - You control your funds, not a centralized entity
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* **Transparent** - All activity is publicly verifiable onchain
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* **Fast and affordable** - Polygon enables quick, low-cost transactions
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* **Stable value** - pUSD is a standard ERC-20 backed by USDC, with backing enforced onchain by the smart contract — avoiding crypto volatility
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## Smart Wallets
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Polymarket uses smart wallets so users can trade without manually submitting
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every onchain transaction. New API users use deposit wallets. Existing Safe and
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Proxy users can continue using their current wallet.
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Deposit wallets hold the user's pUSD and outcome tokens on Polygon and validate
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orders through ERC-1271. Safe and Proxy wallets remain supported for existing
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users and integrations.
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Using smart wallets allows Polymarket to provide an improved UX where multi-step
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transactions can be executed atomically and transactions can be relayed by
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Polymarket's relayer. If you are a developer looking to programmatically access
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positions accumulated through an existing Polymarket account, continue using
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that account's current smart wallet type.
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### Deployments
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Each smart-wallet user has their own wallet address. See
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[Contracts](/resources/contracts) for all deployed factory and trading contract
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addresses on Polygon.
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<Tip>
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For details on signature types (`EOA`, `POLY_PROXY`, `GNOSIS_SAFE`,
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`POLY_1271`) and how to configure your trading client for each wallet type,
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see [Signature Types](/trading/overview#signature-types).
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</Tip>
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***
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## Getting Started
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Ready to start trading?
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<CardGroup cols={2}>
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<Card title="Quickstart Guide" icon="rocket" href="/quickstart">
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Set up your account and make your first trade.
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</Card>
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<Card title="Explore Markets" icon="chart-line" href="https://polymarket.com">
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Browse active prediction markets on Polymarket.
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</Card>
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</CardGroup>
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