Each day, Coinrule will run through the state of the digital assets market for Blockbeat, your home for news, analysis, opinion and commentary on blockchain and digital assets.
Prediction markets allow users to bet money on specific outcomes. If run on the blockchain, they can be trustless, open and permissionless, meaning that in theory, they could become unstoppable, ‘real-time,’ financially incentivised predictors of what is the highest likelihood outcome for any event. For years, crypto enthusiasts and leaders, including Ethereum-founder Vitalik Buterin, expected that prediction markets would be one of the first blockchain use-cases to achieve escape velocity. Until recently, this prediction about prediction markets failed to materialise. But this year, Polymarket, the leading prediction market, has started to take off in a big way.
The ability for users to bet on political events, such as who would be the Democrat candidate for US President at a time when it still seemed clear it would be President Joe Biden, attracted large swathes of users. Even before the presidential candidates TV debate, at which Biden performed poorly, Polymarket had him on a 10% probability to leave the race. This was a higher likelihood than predicted by any traditional forecaster. The successful prediction, among others, attracted significant attention. Markets for various political events continue to open up.
Polymarket’s total-value on the platform is still ‘only’ around $60 million. But it has more than tripled this year. The platform landed a particularly big coup by bringing on Nate Silver, statistician and founder of the famous political blog FiveThirtyEight. Nate Silver was previously included in Time magazine’s list of 100 most influential people in the world due to the accuracy of FiveThirtyEight’s predictions for US elections. The fact that Polymarket can bring in such a high-profile forecaster widely known in the traditional media is a sign that the platform is breaking barriers and growing beyond pure ‘crypto’ industry circles.
If prediction markets such as Polymarket continue to take off, they may be able to achieve more accurate forecasts for a wide range of issues. Whilst traditional pollsters depend on oftentimes unreliable surveys, prediction markets are fully driven by financial incentives. After all, a user is likely to bet money on an outcome she truly believes will materialise. Initially, this is useful for political forecasting and sports betting. In the future, prediction markets could become an important tool for any researcher and analyst to obtain reliable probabilities for future events.