Prediction Markets

Definition ∞ Prediction markets are decentralized platforms where participants can trade contracts whose payouts are contingent on the future outcome of specific events. These markets aggregate collective wisdom and provide probabilistic forecasts based on trading activity. They function as a mechanism for price discovery regarding uncertain future occurrences.
Context ∞ The application of prediction markets within the cryptocurrency sphere is an area of active development, with discussions focusing on their utility for forecasting market trends, political outcomes, or technological advancements. Key considerations include the design of incentive structures to ensure accurate reporting and the regulatory landscape surrounding these platforms. Analyzing prediction markets offers a lens into how decentralized mechanisms can gauge future probabilities.