Participants will purchase contracts in the hopes that they’ll increase in value over time. It seems like a standard speculative market. An announcement that a major company plans to roll this train service out for 2024 might, however, cause the price of yes contracts to increase. In our above example, for instance, prices of no contracts might increase if there is no development in underwater tunnel technology as the deadline nears. In the meantime, the value will fluctuate as market sentiment changes, and new information becomes available. Conversely, if it does operate, then no contracts will be worth nothing while yes contracts will be worth $1. If the train is not running by the deadline, no contracts will be redeemable for $1, and yes contracts will have no value. These might be priced somewhere between $0 and $1. If you’re confident that such a train will not be operational in the next five years, you could purchase a number of no contracts. Let’s take the example of a question with a yes/no outcome: Will a train from the US to Europe run by 2025? This can be any event conceivable (provided, of course, that a broker is willing to list it). Specifically, investors in prediction markets bet on the outcomes of future events. In this article, we’ll take a look at a particular kind of market that could benefit significantly from blockchain technology – prediction markets.Ī prediction market is a speculative market where participants trade not on options or cryptocurrencies, but instead on information. But regardless of the type, where there are assets that hold value, there is a potential market. Blockchain technology is incredibly versatile, however, and allows for markets of all sorts to be built on top of it.įinancial assets can be either physical objects (tangible) or digital goods (intangible). When you stumble across the terms blockchain and markets in the same sentence, you no doubt consider the booming ecosystem of exchanges facilitating cryptocurrency trades.
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