Prediction Market Glossary

A binary market is a prediction market with exactly two outcomes — YES or NO. Shares pay $1 if your side wins, $0 if it doesn't.

An event contract is a financial instrument that pays out based on whether a specific real-world event occurs. They are the building blocks of prediction markets.

A multi-outcome market lets traders bet on which of several possible results will happen. Each outcome trades independently, and all prices should roughly sum to $1.

Payouts in prediction markets are the amounts distributed to winning shareholders when a market resolves. Winning shares pay $1, losers pay $0.

A prediction market is a trading platform where participants buy and sell shares tied to the outcome of real-world events. Prices reflect the crowd's estimated probability.

Resolution is the process of determining the outcome of a prediction market and distributing payouts to holders of winning shares.

Implied probability is the likelihood of an event as estimated by the market price of a prediction market share. A $0.70 share implies a 70% probability.

A limit order lets you specify the exact price at which you want to buy or sell prediction market shares. Your order only fills at your price or better.

Liquidity refers to how easily you can buy or sell prediction market shares without significantly moving the price. Higher liquidity means tighter spreads and better fills.

A market maker is a trader or firm that provides liquidity by continuously placing buy and sell orders, profiting from the bid-ask spread.

An order book is a list of all open buy and sell orders for a prediction market. It shows available prices and quantities, enabling transparent price discovery.

Shares (or outcome tokens) are the tradeable units in prediction markets. Each share pays $1 if the associated outcome occurs, $0 if it doesn't.

Slippage is the difference between the expected price of a trade and the actual execution price. It occurs when your order is too large relative to available liquidity.

The spread is the difference between the highest buy price (bid) and lowest sell price (ask) in a prediction market. Tighter spreads mean lower trading costs.

An Automated Market Maker (AMM) is an algorithm that provides liquidity and sets prices using a mathematical formula instead of a traditional order book.

On-chain means transactions and data are recorded directly on a blockchain. On-chain prediction markets offer transparency, censorship resistance, and automatic settlement.

An oracle is a service that provides real-world data to smart contracts, enabling prediction markets to determine outcomes and settle automatically.

A smart contract is self-executing code on a blockchain that automatically enforces rules and settles prediction markets without intermediaries.

HIP-4 is Hyperliquid's native standard for prediction markets. It enables binary and multi-outcome event trading with the same performance as Hyperliquid perps.

Hyperliquid is a high-performance Layer 1 blockchain purpose-built for derivatives trading. It powers Purrdict's prediction markets with sub-second settlement.

Arbitrage in prediction markets means exploiting price discrepancies between outcomes or platforms to lock in a guaranteed profit regardless of the result.

Edge is the difference between the true probability of an event and the market's implied probability. Traders with edge consistently profit over time.

Expected value (EV) is the average outcome of a trade if repeated many times. Positive EV trades are the foundation of profitable prediction market trading.