How Polymarket shares work: conditional tokens, split, merge and redeem
A Polymarket share is a token on Polygon, created by the Conditional Token Framework. Four operations — split, merge, trade and redeem — explain why YES and NO add up to about a dollar and why a trader's profit cannot be read from fills alone.
A market is a condition
Each Polymarket market is a condition in the Conditional Token Framework (CTF) contract on Polygon. A binary market has two outcomes, and each outcome is an ERC-1155 token — a position — backed by collateral held in the contract. YES and NO are those two tokens. Their token IDs are derived from the collateral and the outcome, so the same outcome backed by a different collateral is a different token.
Split: collateral into a full set
Splitting puts collateral into the contract and mints one YES and one NO for every unit. Holding both is exactly as good as holding the collateral, whatever happens. Market makers use splits to create the inventory they quote, and the exchange can split on a trader's behalf when two buy orders on opposite outcomes match.
Merge: a full set back into collateral
Merging burns one YES and one NO and returns one unit of collateral. Split and merge together are why YES and NO prices stay close to a dollar in total: if they drifted far apart, anyone could buy both and merge, or split and sell both, for a riskless profit.
Redeem: collect after resolution
When the market resolves, the oracle reports a payout for each outcome — normally the whole dollar to the winner and nothing to the loser, occasionally a split such as 50/50. Redeeming burns the winning tokens and pays out the collateral. A resolved position is worth its payout whether or not it has been redeemed yet.
Why fills alone mislead
A wallet that splits, sells the NO side and keeps the YES has bought YES without a single buy fill. A wallet that holds to resolution and redeems never sells. Profit has to be computed from every flow — fills, splits, merges, redemptions, transfers — and from what the remaining positions are worth. PMWallets builds each record from all of them, read from the Polygon ledger.
Questions
Why do YES and NO prices on Polymarket add up to about $1?
Because one YES plus one NO can always be merged into one unit of collateral, and one unit of collateral can always be split into one of each. If the two prices drifted far from a dollar in total, splitting or merging would be a riskless profit, and traders take it.
What happens to Polymarket shares when a market resolves?
The oracle reports a payout per outcome. Winning shares can be redeemed for their payout in collateral; losing shares are worth nothing. Polymarket also redeems many winning positions automatically.
Is a split a trade?
No. A split mints a full set of outcome tokens from collateral at a fixed one-for-one rate; nothing is bought from anyone. It still changes what a wallet holds, so a correct profit calculation has to count it.