Modules / Module 02

Market Mechanisms & Trading Infrastructure

How prediction markets are built and how trades execute

Compare order books and automated market makers, understand liquidity and slippage, and see when each design works best—including hybrid models used in production.

Chapters

  1. Order Book Model: How Traditional Exchanges Work
  2. Order Book in Prediction Markets: Bid, Ask, Spread, and Depth
  3. Pros and Cons of Order Book Design
  4. Introduction to Automated Market Makers (AMM)
  5. The LMSR Formula (Logarithmic Market Scoring Rule) Explained
  6. How AMMs Determine Prices and Provide Liquidity
  7. The "b" Parameter: Liquidity, Sensitivity, and Slippage
  8. AMM vs. Order Book: Which Model Wins and When?
  9. Hybrid Models: AMM as Base, Order Book for Depth
  10. Capital Efficiency: The Hidden Cost of AMMs