Why 42 Exists

What 42 was built to solve.

Prediction markets have long been considered powerful tools for aggregating information, but most real-world implementations fall far short of that promise. Their structural limitations restrict both user experience and the depth of information they can surface.

42 exists to remove these constraints and redefine what prediction markets can achieve.

The Problems With Conventional Prediction Markets

Most prediction markets today rely on binary, fixed-odds structures, which introduce several core limitations:

Capped, Linear Payouts

Fixed-odds systems cap the upside potential of returns. Even if a participant is early or highly informed, the payout remains the same unless the market is mis-priced. There is no marginal reward for being early or for expressing stronger conviction given a flat payout structure which may not necessarily scale with the quality or timing of information.

Lack of Payout Expressiveness

Markets collapse outcomes into simple YES/NO positions. The payoff curve cannot express varying levels of belief, conviction, or information updates. This reduces prediction markets to one-dimensional bets rather than dynamic belief systems.

(Severe) Fragmented Liquidity

Traditional prediction markets typically use a binary YES/NO structure supported by a central limit orderbook (CLOB) for secondary trading. This design introduces several systemic issues:

• Shallow depth with wide spreads

• Inefficient and unstable price discovery

• Heavy reliance on external market makers

While CLOBs are by far the most efficient trade instrument, it only performs adequately in markets with robust liquidity depth that are typically only present in those clear historical patterns or predictable volatility.

However, for long-tail topics (cultural events, emerging AI phenomena, politics, novel catalysts, etc.) market makers lack data to model risk and therefore avoid committing meaningful liquidity.

This leads to structurally weak markets. In the worst case, the order book can simply go empty, making positions untradeable and leaving users stuck. The entire system becomes brittle and dependent on external liquidity providers rather than intrinsic market design.

How 42 Changes the Game

42’s architecture is designed to solve these foundational issues and unlock the deeper potential of prediction markets.

Reimagining asset issuance for prediction markets from first principles, 42 introduces:

• infinite upside potential

• continuous pricing and flow dynamics

• unified liquidity across all outcomes

Instead of fixed odds or fragmented pools, 42 creates markets where belief intensity, trading activity, and timing directly determine payout.

Flow and Belief Determine Payout

Every mint or redeem action is driven mathematically by curve mechanics. Returns depend not only on being correct, but when and how a user enters or exits the market. The system inherently rewards early insight, strong conviction, and timely action to reflect the full lifecycle of market flow.

Dual-Archetype Market Structure (For Predictors and Traders)

42 is intentionally designed to support two distinct yet complementary participant archetypes:

• Predictors: Users who express directional belief about real-world outcomes, earning high convexity and potentially unlimited upside when they are early and correct.

• Traders: Participants who focus on exploiting price action and (short-term to mid-term) volatility rather than waiting for final outcome resolution.

Their coexistence is fundamental to 42’s design.

Predictors provide directional conviction, shaping the long-term orientation of the market. Traders provide momentum and turnover, ensuring constant flow, tighter pricing, and active liquidity.

In market microstructure terms:

• Conviction from predictors improves informational efficiency.

• Flow from traders improves market efficiency.

The whole idea behind combining both forces simultaneously is to create a self-reinforcing equilibrium that strengthens price discovery and stabilizes market dynamics.

Together, predictors and traders create deeper liquidity, richer flow patterns, and more reliable informational signals which making 42 a significantly more efficient and expressive market than traditional prediction systems.

Aligned Incentives + Hybrid Market Structure = More Efficient Markets

In 42, payouts are directly tied to market flow, conviction, and timing.

This alignment ensures that participants are economically motivated to express real beliefs rather than conceal information. Traditional prediction systems fail precisely because they lack this alignment, resulting in structurally limited markets with weak informational signals.

42’s architecture is designed to unlock this untapped potential. Every market action essentially feeds back into the pricing curve, allowing information and liquidity to interact continuously.

This leads to:

• More accurate price signals driven by true belief intensity

• More responsive markets that adjust instantly to new information

• Higher informational quality through active flow and incentive-aligned participation

42 ultimately transforms prediction markets from ‘primitively static betting interfaces’ into dynamic information markets supported by a robust trading mechanism.