Outcome Tokens
Web3 / defi
Outcome tokens are binary digital assets issued by prediction market protocols that represent a claim on one possible result of a future event. For every market, a protocol mints a complete set of outcome tokens — typically a YES token and a NO token — whose values always sum to one unit of the collateral currency (usually a stablecoin such as USDC). A trader who believes an event will occur buys YES tokens at a price below $1.00; if the event occurs, each YES token redeems for exactly $1.00 and the corresponding NO tokens expire worthless. This structure makes outcome tokens a precise, capital-efficient instrument for expressing probabilistic beliefs: the market price of a YES token is the crowd's implied probability of that outcome, updated continuously as new information arrives and participants trade.
Example
On Polymarket, a market on whether a central bank will raise rates before a given date issues YES and NO outcome tokens denominated in USDC. If the YES token trades at $0.72, the market implies a 72% probability of a rate rise. A trader who buys 1,000 YES tokens at $0.72 each risks $720 to win $280 if correct, or lose the full $720 if the central bank holds rates.
Why It Matters
Outcome tokens are the foundational primitive of decentralised prediction markets. Because they are ERC-20 compatible, they can be used as collateral in lending protocols, traded on automated market makers, or composed into more complex structured products — extending the information-aggregation function of prediction markets into the broader DeFi ecosystem.
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