“most prediction markets fail because builders bet on the wrong machine for price discovery”
Schema Research breaks down the five mechanisms powering every prediction market: LMSR, central limit order books, AMMs, bonding curves, and parimutuel pools. It explains the math behind each, their trade-offs, and how the strongest modern designs combine several mechanisms across different stages of a market's lifecycle.
Some technical background helpful
Platforms mentioned: Polymarket, Kalshi, Augur, Gnosis, Omen, Pump.fun, Betfair, Inkling Markets, Consensus Point, Microsoft, Yahoo