What Are Prediction Markets? From Concept and History to On-Chain Evolution

I. Basic Definition of Prediction Markets: Why Are They Called “Price Oracles for the Real World”?

Soure: https://polymarket.com/

A prediction market is a probability aggregation tool built on market mechanisms, where participants place bets on future events. The market price ultimately reflects the probability of those events occurring.

Simply put: Prediction markets = Using trading to obtain real-time probabilities for future events.

Examples

• If a contract for a U.S. election candidate winning rises from 0.45 to 0.62, it means the market believes their odds of winning increased from 45% to 62%.
• If a contract for an ETF being approved by a certain date is priced at 0.30, the market estimates a 30% probability.

Why are prediction markets more effective than surveys or polls?

• Participants “put their money where their mouth is”—information carries real cost.
• The market continuously updates prices—an endogenous forecasting mechanism.
• Continuous trading—dynamically reflects the latest information.

Therefore, prediction markets are known as:

• Sentiment barometers
• Market-based pricing tools for future event probabilities
• The best information aggregators (“wisdom of crowds”)