Overview
- Every Question in the Damat Tween Markets game is a prediction market.
- For every Question, there are two or more possible Answers.
- Every Answer has a price between 0 and 1 $TWEEN, and the sum of the price of all the Answers is always 1.
- The price of the Answer corresponds to the probability that market participants assign to that Answer.
- To predict an Answer, you buy shares of that Answer at the current market price.
- After each buy or sell transaction, the price of the Answer changes: the more people believe in Answer A, the higher its price will be, and the lower will the price of other Answers be.
- You can buy and sell shares of Answers anytime when a Question is open, which might give you a profit in $TWEEN if you’re selling at a higher price than the one you bought the Answer shares for.
- When a Question expires (that is to say, when the prediction market closes), the price of the shares of the right Answer will become 1, and the price of all other Answers will become 0.
- If you’ve waited until the Question expired, and the Answer you chose is the right one, all shares that you bought will give you a profit of 1 minus the price that you paid for each share.
Example
- Take a Question that has two possible Answers.
- Answer A is priced at 0.6, which means that the participants currently believe that there’s roughly a 60% probability that Answer A will be the correct outcome for the Question.
- Therefore, Answer B is priced at 0.4.
- Let’s assume that you believe that Answer A will happen, and not Answer B.
- You decide to buy 10 shares of Answer A at 0.6, which will cost you 6 $TWEEN.
- When the Question expires, your 10 shares will be worth 10 $TWEEN, and your profit will have been 4 $TWEEN.
The precise maths is a little bit more complicated than this, but the website will always tell you how many shares you’re buying for the amount of $TWEEN you’re putting in. In practice, for example, whenever you’re buying or selling shares you’re already impacting the price of the shares (making it go up or down).
If you’re interested in the precise maths, checkout the Polkamarkets Protocol documentation.