Betfair Exchange Market
2 - How do players bet against each other?
We will take an example to explain how players bet against each other at a Betting Exchange Market (in this case, Betfair). Consider two friends who decide to bet on a football match between Barcelona and Real Madrid at Betfair. Friend-A thinks the football match will end up with a Draw, and Friend-B thinks one of the teams be victorious. After they agree on the amount to bet, each one of them bets against each other, asking someone independent to hold the money until the end of the match who will give it to the winner.
Now consider someone who is at home watching the same football match as in the previous example, and who is pretty sure that Barcelona is winning the match. There is another person on the other side of the world who thinks Barcelona is not winning the match, which means, he thinks the match will either end up with a draw or with Real Madrid victorious.
These two persons have never met before, but thanks to the Betting Exchange they are able to bet against each other the same way as the previous friends did. Thousands of people from all over the world meet every day at Betfair with different opinions about sports events outcomes. Betfair guards the money, and once the winner is decided, Betfair gives the money to the winner directly. Couldn't be easier.
3 - Back betting and Lay betting
When you bet at a Betting Exchange, you may place a Back bet on a certain outcome, working the same way as bets placed at traditional bookmakers, or you can either place a Lay bet if you have the opposite opinion. If you say to a friend of yours "I bet you won't beat me on this table-tennis match", you are actually saying you would place a Lay bet on him for the match.
By wagering a Lay bet you are offering your odds to another user from the Betting Exchange, betting against the result he betted on. On a betting exchange there is not a single Back bet placed without its respective lay bet. Whenever you try to place a bet, you have to wait for another user to match it so it can be accepted by the betting exchange.