Conditional Tokens

Advanced crypto tokens that let you bet on "If X happens, then will Y happen?"

#Plain-English Definition

Conditional Tokens (often based on the Gnosis CTF standard) are like "Lego blocks" for prediction markets. They allow developers to create markets that depend on each other.

Instead of just "Will Trump win?", you can have a token that represents "Will Trump win GIVEN THAT he wins the primary?"

#How It Works

Conditional tokens split outcomes into trees.

1. Parent Condition: "Will the GOP Primary happen?" (Yes/No)
2. Child Condition: "Will Trump win the General Election?" (Yes/No)

This creates four possible "future worlds":

1. Primary happens + Trump wins
2. Primary happens + Trump loses
3. Primary doesn't happen + Trump wins (Impossible/Invalid)
4. Primary doesn't happen + Trump loses (Impossible/Invalid)

By trading these specific tokens, you can bet on the conditional probability of Trump winning if he is the nominee.

#Why It Matters

• Combinatorial Markets: They enable complex betting strategies (e.g., "I bet on Biden winning, but ONLY if the economy grows >2%").
• Deeper Liquidity: Instead of fragmenting liquidity across many separate markets, conditional tokens can share liquidity pools.
• Polymarket Power: This standard powers many of the advanced markets on platforms like Polymarket.

#Key Takeaways

• Conditional tokens enable "If This, Then That" betting.
• They allow for more nuanced views than simple binary bets.
• They are a key technical building block for decentralized prediction markets.