How do Bitcoin contracts work?

Bitcoin contracts work through a decentralized mechanism on the blockchain, allowing users to trade without actually owning bitcoins. These contracts can be used to predict price movements and hedge risks, similar to futures trading in traditional markets. Traders can choose to go long or short, and leverage can be applied to magnify potential profits or losses. The contracts have no expiry date, meaning positions can be held indefinitely until closed by the trader or liquidated due to margin requirements.