What are prediction markets?

Prediction markets are speculative markets created for the purpose of making predictions. A market represents a question about the likelihood of future events or specific outcomes. In a market, users are able to place points, in the hopes of winning more points, on the outcome(s) they deem are most likely. Though, the traders must evaluate their 'Potential Profit' value to the odds of the outcome occurring.

What is a continuous market?

A continuous market is a question where the choices that the user must pick between are continuous (numbers, dates, etc.). An example would be a market in which users estimated the future price of a gallon of gas on some specific date.

What is a discrete market?

A discrete market is a question where the potential outcomes are discrete and have no relationship to one another. An example would be a market in which users placed their points on which color they thought would be the most popular for a newly released vehicle. These are not quantifiable or numerical predictions.

Why does the 'Potential Profit' value change for the same outcome over time?

The potential profit of an outcome will change based on the actions of other users within the market. For example, users who get in early on market trends will lock-in a better profit (better odds), if the outcome was to occur. The reverse is also true, if you are always lagging behind market trends, then you will receive a significantly lower potential profit. The market rewards traders who correctly predict market trends: the earlier the prediction, the larger the reward.

How does the range affect the 'Potential Profit' value?

In a continuous market, you are allowed to pick a range for your prediction. The points you place are distributed across the range you choose. Smaller ranges provide larger profits, for a given amount of points, while larger ranges reduce your 'Potential Profit' value, but increase your chances of choosing the correct outcome.

How does the payout occur?

Only the winning outcomes are paid out. Payouts occur when the actual result of the market in question has been released. We will specify the official source we are using to determine winning outcomes. Depending on the market, this may be within a few hours of the market closing, or within a few weeks. When payouts occur, all user's accounts are updated based on their bets.

How is the market prediction calculated?

The market prediction constitutes several statistical values and is calculated based on the total volume of placed points and their spread across each of the outcomes. The market prediction will change each time a user interacts with the market. It is also an excellent indicator of market trends.

Why is the 'Cash Out Value' higher/lower than the 'Potential Profit' value?

The 'Cash Out Value' is the market's current valuation of the outcome(s) in which you have placed points. The 'Potential Profit' value is the estimated amount you would win less the points that you originally invested, if one of the outcome(s) you predicted turned out to be true. Thus, if the market is accurate, a highly unlikely outcome will have a low 'Cash Out Value' and a high 'Potential Profit' value. Savvy traders will increase their winnings by determining when the market is overvaluing or undervaluing an outcome, and acting accordingly.

This is a canonical reference for the terms and verbiage used within the CrowdClarity software.

Bet - A user's prediction of a specific outcome tied to a specific amount of points.

Estimate - In a continuous market when the user places a bet they are actually picking an outcome. However, this does not read well in the form. For the purposes of readability, we refer to the outcome in this case as an estimate.

Holdings - An active bet, one that a user owns, is not cashed out, etc. This is to be used in place of "shares" and such.

Outcome - In this specific context, a possible outcome of a market that can be verified. A discrete market betting on the Michigan vs. OSU game, two possible outcomes are "Michigan Wins" and "Ohio State Wins"

Points - The currency used in the CrowdClarity system. This should be used in place of "dollars", "money", "cash", etc.

Market Prediction - The prediction refers to the most likely outcome based upon user's bets as well as the manager's initial prediction.