42 Markets

The Why and How 42 Markets work.

Core Principle

42 combines continuous trading with parimutuel settlement into a single market primitive.

During the life of an event, Outcome Tokens trade freely as liquid assets. Participants can enter, exit, rebalance, or rotate positions as new information emerges. Prices are not fixed representations of probability, but dynamic expressions of relative conviction and capital flow.

At resolution, the market concludes deterministically into a single winning outcome. All collateral committed to losing outcomes is pooled and redistributed pro-rata to holders of the winning token. There are no partial wins, no probabilistic payouts, and no residual liquidity.

This structure delivers three core properties simultaneously:

1. Sustained activity before resolution

   Markets remain tradeable throughout their lifetime, encouraging continuous information expression rather than one-off bets.

2. Clean capital redistribution at settlement

   Resolution is final and atomic: capital is either reclaimed or reallocated, leaving no zombie pools or stranded liquidity.

3. No reliance on fixed payoff ceilings

   Upside is not predefined and payouts scale organically with market size, participation asymmetry, and captured mispricing.

The Lifecycle of a 42 Market

Phase 1: Market Discovery

When a 42 market opens, it enters a fully tradeable discovery phase. All possible outcomes are instantiated as Outcome Tokens, each backed by collateral and governed by it's individual power curve.

During this phase, participants express beliefs by minting (buy), redeeming (sell) existing positions, or rotating exposure between outcomes as information evolves. Prices adjust continuously as the relative supply of each Outcome Tokens shifts, reflecting where capital is flowing rather than fixed probabilities.

• Traders simply trade based on relative value i.e. entering when prices feel cheap, exiting when they feel expensive, and repositioning as new information emerges.

• Predictors may form views on the implied likelihood of an outcome relative to others and choose to enter when they believe an outcome is meaningfully underrepresented by current prices.

As a result, price formation is path-dependent and conviction-weighted, emerging from collective capital flow over time rather than any single participant’s accuracy.

Phase 2: Outcome Resolution

At resolution, the market permanently transitions from a trading system to a settlement mechanism. This occurs when (1) market deadline has crossed or (2) the market has been deliberately resolved early. During this phase:

1. A single set of outcome(s) is declared the winner based on predefined, objective resolution rules.

2. All trading halts (minting, redeeming, and transfers are disabled.)

The market then awaits for finalisation (final step confirmation) on the resolved outcome(s), and once done existing collateral is pooled and redistributed pro-rata to holders of the winning OT(s).

This state of finality is atomic and absolute where there will be no residual liquidity or future rollover states.