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How HoodMarkets works, in plain terms.
What is HoodMarkets?
HoodMarkets is a permissionless prediction market: anyone can create a yes/no question, anyone can trade shares in the outcome, and prices move in real time to reflect the market's implied probability. It's built on Robinhood Chain — the public Arbitrum-based Layer 2 Robinhood launched in July 2026 — making HoodMarkets the first prediction market deployed there.
How prices work: the bonding curve
Instead of matching buyers with sellers order-book style, every market is its own automated market maker using a Pythagorean bonding curve: reserve = c × √(yesSupply² + noSupply²). Buying Yes shares increases yesSupply and pulls the price of Yes up (and No down) continuously — there's always someone to trade with, even for the very first trade in a brand-new market. The displayed "chance" percentage is exactly yesSupply² / (yesSupply² + noSupply²), independent of trading fees.
Buying and selling
You can buy by specifying either the USDC amount you want to spend, or the exact number of outcome shares you want to end up with — the app solves for the required cost either way. Selling always works in shares. Every winning share redeems for exactly $1 of collateral once a market is settled, so the number of shares you hold is exactly your potential payout if that outcome wins.
Settlement
Markets are settled by an AI agent (an LLM) that determines the outcome once trading closes — a single on-chain call sets the final outcome. There's no bond, no dispute window, and no oracle module. This is a deliberate simplicity tradeoff: it keeps the protocol small and fast to reason about, in exchange for trusting a single settlement agent rather than a decentralized dispute process.
Categories
Every market can be tagged with a category (Politics, Crypto, Sports, Culture, or Other) at creation time, so the markets list can be searched, filtered, and sorted — by category, by trending volume, by newest, by soonest-to-close, or by most-recently-resolved.
Fees
A flat protocol trading fee (1% by default) applies to every buy and sell, set globally by the platform admin. It is not configurable per market. 5% of every fee collected goes to that market's creator rather than the protocol treasury — withdrawable any time from the market page — as the only return a creator earns on the liquidity they seeded.