Trump has made Polymarket popular. What are the benefits of the crypto prediction market?

Author: Daniel Li

In recent years, as an emerging force in the blockchain industry, crypto prediction platforms have been rising rapidly and receiving widespread attention. This unique market form allows users to buy and sell shares related to the results of future events through collective wisdom, thereby predicting the direction of events. It not only provides investors with a new investment channel, but also provides valuable data resources for research institutions. According to industry reports, the scale of crypto prediction platforms is experiencing explosive growth and is expected to continue to maintain a high growth trend in the next few years.

Among many crypto prediction platforms, Polymarket stands out with its unique operating mechanism and hot event marketing that keeps up with current affairs, becoming a leader in this field. As a decentralized prediction market platform based on blockchain, Polymarket allows users to use cryptocurrency to bet on future results of various topics. It uses smart contracts to run on the Polygon blockchain, greatly reducing transaction fees and speeding up transaction processing. Since its launch, Polymarket has attracted a large number of users and followers with its high transparency and friendly interactive experience, and has become the largest crypto prediction platform.

This article will explore the operating mechanism and principles of Polymarket in depth, and analyze the new industry trends of the crypto prediction market, aiming to provide readers with a comprehensive and in-depth insight into the crypto prediction market.

01

Polymarket: Understanding the Real World with Betting

Polymarket, a decentralized prediction market platform based on blockchain technology, has begun to emerge in the public eye in recent years. The platform was founded by Shayne Coplan in 2020, and its birth background is closely related to the founder Coplan's profound insights during the epidemic. Faced with a large number of uncertain views and opinions in the market, both sides often stick to their own opinions and find it difficult to convince each other. Coupled with the proliferation of misinformation and the influence of profit-seeking algorithms, it is increasingly difficult for people to see the truth of things. Therefore, Coplan founded Polymarket, aiming to enable people to understand what is happening in the real world more accurately in a new way.

The theoretical basis of Polymarket comes from Hayek's famous paper "The Use of Knowledge in Society". Hayek believes that economic incentives are the key to driving people to understand uncertainty more accurately. When economic incentives work, people tend to read more and better sources of information, think more deeply, and try to invest their money in actual results that are more likely to occur. Coplan put this theory into practice. Simply put, it is to understand the real world through betting.

Open the Polymarket website, and the homepage prominently displays hot news events of global concern, such as Trump's chances of winning the upcoming presidential election, whether there will be a conflict between Musk and Zuckerberg, and the expected number of interest rate cuts by the Federal Reserve this year. Users can choose specific markets based on their personal interests and purchase "result shares" representing the potential results of these events. The market price of these shares reflects the collective perception of the possibility of events, providing users with an intuitive reference. Before the market resolution, users have the flexibility to sell their shares at any time, and usually do not have to pay high transaction fees in the process. Once the results of the relevant events are officially announced, users with accurate predictions have the right to redeem their shares at a price of $1 per share, while users with inaccurate predictions will lose their shares. It is worth noting that all transactions and settlements on the Polymarket platform are automatically executed through smart contracts, a mechanism that ensures the fairness, transparency and security of transactions.

Polymarket introduces a reward and punishment mechanism to encourage each user to be responsible for his or her own opinions, so that the statistics on the platform can better reflect the real situation of the market. Compared with previous platforms or social media, Polymarket's prediction results are closer to the truth. For example, in the case of room-temperature superconductors, although some authoritative media were skeptical, Internet celebrities still firmly confirmed its realization and even fabricated evidence. Polymarket gave a more rational prediction, with a true to false ratio of one to nine, showing the rationalization of user opinions under the reward and punishment mechanism.

At present, social media and spam are rampant, and people's ways of understanding things are often limited. These institutions may not be able to remain objective due to their vested interests, and social platforms will also recommend information based on user interests, leading to the information cocoon effect. As a decentralized prediction market platform, Polymarket maintains fairness and justice based on blockchain technology, providing an opportunity for change in public opinion. Its characteristics of being free of political correctness, emotionality, and objectivity show people's true judgments and provide a new perspective for understanding the real world. As founder Coplan said, Polymarket is a platform that uses the market to draw on the wisdom of the masses.

02

Can the popularity of Polymarket continue?

The encryption prediction platform is not a new industry. In fact, as early as 2018, Augur established the first encryption prediction platform based on blockchain technology. However, due to the limitations of technology and the lack of popularization of blockchain at that time, Augur's cumbersome operation steps and unfriendly interactive interface prevented it from really entering the public eye. It was not until the emergence of Polymarket that the encryption prediction platform was truly popularized in the blockchain industry and became a mature application.

According to the data, Polymarket is attracting widespread attention and participation from around the world at an unprecedented rate with its unique betting prediction model. Especially during the current US election, Polymarket has not only become a popular platform for ordinary people to bet on their voting intentions, but also attracted a large number of investors who hope to make profits by accurately predicting the victory of candidates. In the past few months, these active participants have invested hundreds of millions of dollars in Polymarket, directly pushing the platform's business scale and popularity to a new historical height.

Dune's latest data further confirms the popularity of Polymarket. Since April this year, Polymarket's trading volume and number of users have shown a blowout growth, especially under the global attention caused by Trump's assassination in July. As a representative of the prediction market, Polymarket has been widely reported by global media, further enhancing its popularity and influence. Affected by the incident, Polymarket's monthly trading volume in July doubled from June, breaking the $200 million mark, and its daily trading volume stabilized at more than $20 million, with more than 6,000 active traders per day.

Polymarket's popularity has not only attracted the enthusiastic participation of a large number of users, but also made some idealists in the encryption field regard it as an arbitrator of truth. They believe that Polymarket, with its decentralized and transparent characteristics, is expected to become one of the main sources of fair information. However, behind the current popularity, we have to face up to the many challenges and potential risks facing Polymarket.

First, the lack of continuous capital inflow is one of the key issues for Polymarket's sustainable development in the future. As a zero-sum game, the nature of the prediction market determines that it cannot attract continuous passive capital inflows like stocks, bonds or cryptocurrencies in traditional financial markets. This feature makes Polymarket face the challenge of how to maintain capital liquidity in long-term operations, which in turn affects its ability to continue to make profits and develop.

Secondly, market liquidity restrictions are also an important issue that Polymarket needs to address. Currently, the top topics on Polymarket are almost all related to the US election. These topics attract the attention of most users, but they still lack sufficient appeal for most markets, especially those involving non-instant payments and niche topics. This leads to relatively insufficient liquidity in these markets, making it difficult to form an effective market price discovery mechanism, which affects the accuracy and credibility of the forecast results.

In addition, the influence of market participants is also an aspect that Polymarket needs to pay attention to. In the prediction market, the lack of a sufficient number of market participants such as professional market makers may lead to market prices being manipulated or influenced by a small number of participants with advantages. This not only weakens the ability of the prediction market to provide accurate insights, but may also cause market injustice and a crisis of trust. For example, some industry insiders can often know some inside information in advance, and they can arrange a large number of bets in advance to harvest ordinary users. Therefore, how to establish a more fair and just supervision and review mechanism is also crucial to the future development of Polymarket.

Finally, Polymarket relies on hot news to create topics for people to bet on and predict the direction, so it often touches on some socially sensitive events. For example, some time ago, Polymarket was criticized for marketing because its official X account posted several tweets containing inappropriate language (especially the offensive word "Retardio" (meaning "mentally retarded")). Although Polymarket later issued an apology letter for the inappropriate use of words in the tweet, fired the relevant personnel and launched an internal review. But it still aroused public doubts, and some media believed that Polymarket was using some bad events to make money.

03

Looking at the Future Development of the Crypto Prediction Market from Polymarket

The popularity of Polymarket undoubtedly reveals the unlimited potential of the crypto prediction market. Looking back, prediction markets mostly remain in the theoretical stage. Even if there are practical attempts, they are often closely linked to gambling, and even used by criminals as a money laundering tool. However, the introduction of blockchain technology has brought profound changes to the prediction market. Its open and transparent characteristics make the on-chain crypto market easier for ordinary users to accept and trust. Although Polymarket is not the pioneer of the crypto prediction platform, it is undoubtedly the most mature and influential platform at present. Its success is not only reflected in the rapid growth of the number of users and the continuous increase in trading volume, but also in its successful promotion of the crypto prediction market to the general public, injecting new vitality into this field. The rise of Polymarket has allowed us to see new application cases in the blockchain industry, as well as the unique charm and broad prospects of the crypto prediction platform. For a long time, the prediction market has been regarded as the holy grail in the field of cognitive technology. As early as 2014, Vitalik, the founder of Ethereum, expressed a strong interest in using prediction markets as a governance mechanism. However, for a long time, prediction markets have faced many challenges in practical applications, such as irrationality of participants, insufficient market liquidity, and lack of betting motivation for holders of "correct knowledge". These problems have always restricted the development of prediction markets.

The emergence of Polymarket has successfully broken this deadlock. It has not only attracted the attention of a large number of industry insiders, but also demonstrated strong vitality and broad prospects in practical applications. Vitalik himself used Polymarket to track Sam Altman's board exit, which undoubtedly added more authority and influence to Polymarket. At the same time, Packy McCormick, an advisor to a16z Crypto, also highly praised Polymarket, believing that its page may be the best place to start a day on the Internet. This evaluation not only reflects Polymarket's outstanding performance in user experience, but also highlights its unique value in information acquisition and decision support.

Richard's point of view provides us with another perspective. He believes that the crypto industry should reduce zero-sum games and turn to providing positive-sum experiences. And prediction markets are one of the best choices to accomplish this mission. It can be used as a betting platform to provide users with entertainment and profit possibilities; it can also be a source of information to help users make more informed decisions. This dual nature gives the prediction market a unique position and value in the crypto industry.

However, we must also be aware of the challenges facing the crypto prediction market in its future development. The uncertainty of regulatory policies, the prevention of compliance risks, and the construction of market ethics are all issues that we need to focus on. Only under the premise of ensuring compliance, fairness and transparency can the crypto prediction market achieve healthy, stable and sustainable development. This requires joint efforts and continuous exploration within the industry.

04

Inventory of current crypto prediction market platforms worthy of attention

In the crypto prediction market track, in addition to Polymarket, there are many platforms that stand out with their unique operating mechanisms and their respective advantages and have become the focus of market attention. These platforms not only provide innovative prediction market models, but also achieve transparency and credibility through blockchain technology, attracting more and more attention from crypto enthusiasts and investors. The following are several crypto prediction market platforms that are currently worthy of special attention:

Augur

Augur, as a pioneer in blockchain prediction markets, has been committed to promoting the development of this field since 2014. Its operating mechanism is community-driven, allowing users to participate in betting and create their own markets, significantly improving the participation and customization of the market. Augur uses the native token REP for operation, which plays a key role in reward distribution, market creation and result dispute resolution, further enhancing the transparency and credibility of the market. In order to meet the scalability challenges of Ethereum, Augur launched the Turbo version, which uses the Polygon network to improve transaction efficiency and scalability, thereby significantly improving the user experience.

In recent years, the Augur platform has been continuously improving its functions and expanding its community, attracting more and more crypto enthusiasts and investors. However, its community-driven model may also lead to a certain degree of human influence on market results, which is a risk that investors need to pay attention to when participating.

Gnosis

Gnosis is a comprehensive blockchain ecosystem that covers a series of infrastructure tools such as prediction markets, decentralized transactions, and wallet services. Its operating mechanism is centered on the GNO token, which closely links users to the platform through governance and staking mechanisms. In order to solve the scalability challenges of Ethereum, Gnosis has developed its own layer 2 solution, the Gnosis chain, which provides strong support for Ethereum-based applications such as prediction markets.

Gnosis's development model focuses on the comprehensiveness and versatility of the ecosystem, aiming to provide users with an integrated and convenient blockchain environment. At present, Gnosis is gradually expanding the scope of application of its ecosystem to meet the needs of more users. However, due to the complexity of its ecosystem, novice users may need some time to familiarize themselves with and master its various functions and services.

XRADERS

XRADERS is a decentralized market prediction and expert opinion sharing platform that uses blockchain technology for transparent data recording and trust building. Its operating mechanism combines social price prediction, gamification elements and community-driven cycles to provide a safe and reliable environment for user interaction. XRADERS provides carefully curated expert insights, provides actionable information for investors, and ensures transparency and integrity through a decentralized voting system.

In recent years, XRADERS has reached cooperation with many well-known projects, such as UXLINK, SecondLive, DIN, etc. Its core gameplay Guess2Earn (guess and earn mode) and decentralized voting system have also attracted a large number of users. In addition, XRADERS has successfully completed its seed round of financing, attracting the participation of multiple head crypto investors and institutions. However, due to its decentralized characteristics, the information on the platform may be subjective and uncertain, and investors need to carefully evaluate when making decisions.

PredictIt

PredictIt is a non-profit research project operated by Victoria University of Wellington, New Zealand. It has obtained a special exemption from the CFTC at the federal level in the United States, allowing it to operate legally in some states in the United States. PredictIt's operating mechanism is relatively simple and clear, and mainly relies on users' predictions and bets on market events. In order to comply with relevant regulatory requirements, PredictIt has set limits on the amount of investment users can make. Currently, the event market on PredictIt covers multiple fields such as politics, economy, and sports, attracting a large number of users to participate. However, due to its non-profit nature and regulatory restrictions, PredictIt may face certain challenges in marketing and commercialization. At the same time, investors also need to pay attention to compliance and investment risks when participating to ensure that their own rights and interests are not harmed.