Collateral
When you split 100 USDC into 100 YES + 100 NO, the 100 USDC is held as collateral in the smart contract.
Prediction Markets 101 editorial team Updated April 16, 2026 1 min read
Definition
Collateral is the asset backing a position. In Polymarket, USDC is the collateral — every conditional token is backed by USDC in the exchange contract.
Plain-English explanation
Conditional tokens are always fully collateralized — there's always enough USDC in the contract to pay out all winning tokens at $1. This is how the system stays solvent without a house taking risk.