Conditional Token Framework

What is the conditional token framework?

The conditional token framework (CTF) is a set of Ethereum smart contracts originally developed by Gnosis to represent the outcomes of events as onchain tokens, so they can be traded and later redeemed once an oracle finalises the result. It’s a foundational building block for prediction markets because it lets a single pool of collateral (like USDC) be “split” into outcome tokens for a specific question, such as a binary contract with two sides. In practice, traders end up holding outcome positions that behave like yes shares no shares, and those positions can be transferred, used in AMMs, and settled transparently when the market resolves.

Ctf gnosis

CTF is closely associated with Gnosis because Gnosis designed the framework to make outcome tokenisation composable across DeFi. The key idea is that outcomes are not represented as separate bespoke ERC-20 tokens per market, but as token IDs inside one ERC-1155 contract. Under the hood, the framework defines a “condition” (an oracle address + a question identifier + the number of outcomes) and then derives outcome collections from that condition. This design makes it easier for apps to create many markets without deploying new token contracts each time, while still keeping each market’s outcome balances distinct and auditable.

Gnosis conditional tokens

Gnosis conditional tokens are the ERC-1155 tokens minted by the CTF contract to represent claims on collateral that depend on how a condition resolves. A typical flow looks like this: (1) a market defines a question and points to an oracle that will report the result; (2) users deposit collateral into a market mechanism; (3) the collateral is split into outcome positions (for a binary market, one position corresponds to “Yes” and the other to “No”); and (4) once the oracle reports the outcome, holders of the winning position redeem it for collateral while the losing position becomes worthless. Because the positions are ERC-1155 token IDs, wallets and protocols can track balances for many markets efficiently, and settlement can be handled by deterministic onchain rules.

Why does polymarket use erc-1155

Polymarket uses ERC-1155 because prediction markets create lots of distinct outcome assets, and ERC-1155 is designed for managing many token types within a single contract. With ERC-20, each new market typically implies deploying (or at least indexing) separate token contracts for each outcome, which adds overhead for developers, indexers, and sometimes users. With ERC-1155, each outcome is just a different token ID, enabling batch transfers and batch balance checks that can reduce complexity and improve efficiency. This structure also fits how a market naturally works: a trader may hold positions across many questions at once, and ERC-1155 provides a standard way to manage those multi-asset portfolios while keeping the “Yes” and “No” sides of each binary contract clearly separated.

Conditional tokens vs erc-20

Conditional tokens differ from ERC-20 tokens mainly in how they represent “many related assets.” ERC-20 is best when you have one fungible asset per contract (like USDC), whereas conditional tokens represent a large set of fungible positions (each position is fungible within itself) inside one ERC-1155 contract. In a prediction market, each question can generate multiple outcome positions; CTF encodes those positions as token IDs derived from the condition and an outcome set, rather than spinning up new ERC-20 contracts. Another practical difference is settlement logic: conditional tokens are designed to be redeemed based on an oracle’s resolution, so their value is explicitly contingent on a reported outcome. ERC-20 tokens can represent anything, but they don’t come with a standard, shared framework for splitting collateral into outcome claims and later merging or redeeming those claims after resolution.

Why the conditional token framework matters

The conditional token framework matters because it standardises how outcome claims are created, traded, and settled onchain, which makes prediction markets more composable with the rest of crypto. Instead of every platform inventing its own token format for yes shares no shares, CTF provides a common settlement primitive that AMMs, wallets, and analytics tools can integrate once and reuse across many markets. It also enables more complex market structures by letting outcomes be represented as precise tokenised claims that can be combined or held alongside other positions. For users, the benefit is clearer accounting and more reliable redemption after an oracle resolves a binary contract; for builders, it’s a reusable framework that reduces bespoke token engineering and helps prediction markets scale without reinventing core plumbing each time.