Stablecoin Collateral and What Self-Custody Means Here
Positions are backed by a dollar-pegged stablecoin held in a contract. What that protects you from, what it does not, and the security rules that follow.
Positions on an on-chain venue are backed by a dollar-pegged stablecoin locked in a smart contract. Understanding what that structure does and does not protect you from is worth a few minutes.
How the collateral works
Buying a share does not send money to a company. It results in collateral being locked in a contract that will pay out according to the resolved outcome.
The complete set of outcomes for a market can be minted from one unit of collateral and redeemed back to one unit. That is the mechanism forcing the prices of a full set to sum to about one: if they drift apart far enough, minting or redeeming becomes profitable and someone does it. How multi-outcome markets sum covers the arithmetic and why the sum is never exactly one in practice.
What this protects against
The venue spending your money. Collateral in a contract is not an operating balance. A company cannot quietly use it.
Opaque accounting. Balances and flows are publicly observable. Nobody has to take a statement on trust.
Discretionary withholding of a payout. Once resolution is final, redemption is a contract call.
What it does not protect against
Smart contract risk. Code can have bugs. Audits reduce the chance; they do not eliminate it.
Stablecoin risk. The collateral is a claim on an issuer's reserves. Pegs have broken before, and a peg break during a position's life is a loss that has nothing to do with your forecast.
Bridge and network risk. Moving collateral between chains involves infrastructure with its own failure history.
Resolution risk. The contract pays whatever the oracle says. If the oracle says something surprising, the collateral mechanism does exactly what it should and pays the wrong person. Disputes.
Your own mistakes. Sending to the wrong address is irreversible. There is no support desk that can undo it.
Counterparty and platform risk puts these beside the equivalents at a custodial venue, which are different rather than strictly worse.
The security rules
These are short and they are absolute.
Nobody legitimate needs your seed phrase or private key. Not the venue, not support, not a data site, not a tool that shows prices, not this one. Any request for either is an attack. There is no exception and no context in which it is reasonable.
A site that only reads public prices needs nothing from your wallet. This site does not connect to a wallet, cannot place a trade, and has no authenticated functionality at all.
Approvals are permissions. Granting a contract permission to spend a token is a standing authorisation. Review what you have approved periodically and revoke what you no longer use.
Check the address, not the name. Interface names are easy to imitate. Addresses are not.
Test with a small amount first. On any new route, any new bridge, any first withdrawal.
The capital cost
Collateral committed to a position earns nothing while it sits there. For a market resolving next week that is trivial. For one resolving in eight months it is a material drag that never appears in any fee table. Capital lockup is the arithmetic, and it is a large part of why some cross-venue gaps stay open indefinitely.
Next
How the order book works — the part that is not on-chain, and why.
Educational content only. Nothing here is financial advice, a solicitation, or an offer to trade. Prediction markets can move against you and a position can lose its entire value. Where this guide describes a difference between venues it describes a theoretical cross-market edge in observed prices, which is not a profit: fees, spreads, capital lockup, transfer time and differing settlement rules all come out of it first.
Keep reading
Polymarket · 3 min readWhen Resolution Is Disputed, and What It TeachesMost markets resolve quietly. The contested ones follow recognisable patterns, and those patterns tell you which questions to be careful with.
Polymarket · 3 min readHow Polymarket's Order Book Actually WorksMatching happens off-chain and settlement happens on-chain. What that hybrid means for spreads, fills, latency and the data you can read from outside.
Polymarket · 3 min readHow Polymarket Resolves a MarketAn optimistic oracle proposes an answer, a window opens for challenges, and a dispute process exists behind it. What each stage means for a position you hold.
Prices and Probability · 4 min readWhat Implied Probability Does Not Tell YouA market price is a probability weighted by money, not by knowledge. The difference explains most of the cases where a confident price turns out to be wrong.