Polymarket, a leading prediction market platform, has transitioned from an Automated Market Maker (AMM) model to a Central Limit Order Book (CLOB) model to address liquidity challenges. The shift, which occurred in late 2022, allows traders to set prices and market makers to profit from bid-ask spreads, improving the trading environment.
The CLOB model facilitates higher liquidity by enabling large trades without significant price changes, a common issue under the AMM model. To further enhance liquidity, Polymarket introduced a reward system to incentivize liquidity provision. While political markets on the platform typically enjoy high liquidity, mention markets often experience lower liquidity levels.
Polymarket Shifts from AMM to CLOB to Enhance Liquidity in Prediction Markets
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