Gnosis Conditional Tokens are a core building block used to create prediction markets and related mechanisms on-chain. Think of it as a standard for splitting value into outcome tokens that can later be redeemed based on what happens.
What Conditional Tokens Are
A conditional token framework takes an asset and partitions it into outcome claims. Example:
- You lock collateral.
- You mint outcome tokens for each possible result.
- After resolution, winning outcomes redeem, losing outcomes do not.
This is powerful because outcome tokens can be traded, pooled, and used in other DeFi systems.
Where You See It in Practice
Conditional Tokens are often used in:
- Multi-outcome markets (more than Yes and No).
- Market makers and liquidity pools that price outcome tokens.
- Custom forecasting apps built by third parties.
Resolution and Oracles
Conditional Tokens require a condition resolution source, often called an oracle:
- The oracle provides the final outcome.
- The system redeems tokens accordingly.
The oracle model you choose determines trust and risk.
Strengths
- Standardized primitive: builders can reuse it.
- Composability: outcome tokens can be traded and integrated elsewhere.
- Flexible: supports complex event structures.
Limitations
- Not a consumer-facing platform by itself.
- Requires an oracle and a trading venue to be useful.
- Complexity increases quickly with many outcomes.
Key Takeaways
- Conditional Tokens are infrastructure that enables many market designs.
- Oracle trust is the critical risk factor.
- Builders use this to create prediction apps, not end users directly.