In recent years, crypto prediction platforms have emerged as a new force in the blockchain industry, rapidly gaining widespread attention. This unique market format leverages collective intelligence, allowing users to buy and sell shares related to the outcomes of future events, thus predicting the direction of these events. It not only provides investors with a new investment channel but also offers valuable data resources for research institutions. According to industry reports, the scale of crypto prediction platforms is experiencing explosive growth and is expected to maintain high growth rates in the coming years. Among the many crypto prediction platforms, Polymarket has stood out due to its unique operational mechanism and marketing aligned with current events, becoming a leader in this field. As a decentralized prediction market platform based on blockchain, Polymarket allows users to bet on the outcomes of various topics using cryptocurrencies. It operates on the Polygon blockchain using smart contracts, significantly reducing transaction fees and speeding up transaction processing. Since its launch, Polymarket has attracted a large number of users and followers due to its high transparency and user-friendly interaction experience, becoming the largest crypto prediction platform today. This article will delve into the operational mechanisms and principles of Polymarket, while analyzing the latest trends in the crypto prediction market, aiming to provide readers with a comprehensive and in-depth insight into the crypto prediction market.

Polymarket: Understanding the Real World Through Betting

Polymarket, a decentralized prediction market platform based on blockchain technology, has begun to gain visibility in the public eye in recent years. Founded by Shayne Coplan in 2020, the platform’s inception is closely tied to Coplan’s profound insights during the pandemic. Faced with a market flooded with a plethora of uncertain viewpoints and opinions, where each side often holds firm and finds it hard to persuade the other, coupled with the rampant spread of misinformation and profit-driven algorithms, people are finding it increasingly difficult to see the truth. Therefore, Coplan created Polymarket, aiming to help people understand what is happening in the real world more accurately through a novel approach.

The theoretical basis of Polymarket originates from Friedrich Hayek’s famous essay, “The Use of Knowledge in Society.” Hayek posited that economic incentives are key to driving people to understand uncertainties more accurately. When economic incentives are at play, people tend to read more and better information sources, think more deeply, and try to put their money on the outcomes that are more likely to happen. Coplan put this theory into practice, essentially using betting as a way to understand the real world.

Polymarket, a decentralized prediction market platform based on blockchain technology, has begun to gain visibility in the public eye in recent years. Founded by Shayne Coplan in 2020, the platform’s inception is closely tied to Coplan’s profound insights during the pandemic. Faced with a market flooded with a plethora of uncertain viewpoints and opinions, where each side often holds firm and finds it hard to persuade the other, coupled with the rampant spread of misinformation and profit-driven algorithms, people are finding it increasingly difficult to see the truth. Therefore, Coplan created Polymarket, aiming to help people understand what is happening in the real world more accurately through a novel approach.

The theoretical basis of Polymarket originates from Friedrich Hayek’s famous essay, “The Use of Knowledge in Society.” Hayek posited that economic incentives are key to driving people to understand uncertainties more accurately. When economic incentives are at play, people tend to read more and better information sources, think more deeply, and try to put their money on the outcomes that are more likely to happen. Coplan put this theory into practice, essentially using betting as a way to understand the real world.

Upon visiting the Polymarket website, the homepage prominently displays globally relevant news events, such as the likelihood of Trump winning the upcoming presidential election, potential conflicts between Musk and Zuckerberg, and the expected number of rate cuts by the Federal Reserve this year. Users can select specific markets based on their interests and purchase “outcome shares” representing the potential results of these events. The market prices of these shares reflect the collective perception of the events’ probabilities, providing users with an intuitive reference point. Before the market resolution, users have the flexibility to sell their shares at any time, usually without incurring high transaction fees. Once the outcome of the relevant event is officially announced, users who predicted accurately can redeem their shares at $1 per share, while shares held by inaccurate predictors lose their value. Notably, all transactions and settlements on the Polymarket platform are automatically executed through smart contracts, ensuring fairness, transparency, and security.

Polymarket incentivizes users to take responsibility for their opinions through a reward and punishment mechanism, making the platform’s statistical data more reflective of the true market situation. Compared to traditional platforms or social media, Polymarket’s predictions are closer to the truth. For example, regarding the room-temperature superconductor event, while some authoritative media remained skeptical and internet celebrities confidently confirmed its realization (even fabricating evidence), Polymarket provided a more rational prediction, with a true-to-false ratio of one to nine, demonstrating the rationalization of user opinions under the reward-punishment mechanism.

In the current landscape of rampant social media and misinformation, people’s ways of understanding events are often limited. These institutions may not remain objective due to vested interests, and social platforms tend to recommend information based on user interests, leading to echo chambers. As a decentralized prediction market platform, Polymarket maintains fairness and impartiality through blockchain technology, offering an opportunity to change social opinion. Its characteristics of being free from political correctness, emotion, and bias present people’s true judgments, providing a new perspective for understanding the real world. As founder Coplan stated, Polymarket is a platform that harnesses market wisdom to draw on the collective intelligence of the crowd.

Can Polymarket’s Popularity Be Sustained?

Crypto prediction platforms are not a new industry. As early as 2018, Augur established the first blockchain-based crypto prediction platform. However, due to technical limitations and the nascent state of blockchain technology, Augur’s cumbersome operation steps and unfriendly user interface prevented it from entering the public eye. It was not until the emergence of Polymarket that crypto prediction platforms truly became widespread in the blockchain industry and evolved into a mature application.

Latest data from Dune Analytics further confirms Polymarket’s booming trend. Since April of this year, Polymarket’s trading volume and user numbers have shown explosive growth. In July, the Trump assassination attempt garnered global attention, leading to extensive media coverage of Polymarket as a representative prediction market, further enhancing its recognition and influence. As a result, Polymarket’s monthly trading volume in July doubled from June, surpassing $200 million, with daily trading volumes consistently over $20 million and more than 6,000 daily active traders.

Polymarket’s success has not only attracted enthusiastic participation from users but also led some idealists in the crypto space to view it as an arbiter of truth. They believe that Polymarket’s decentralized and transparent nature could become a major source of unbiased information. However, behind its current popularity, Polymarket also faces several challenges and potential risks.

Key Challenges and Risks for Polymarket

1. Sustained Funding Inflow: One of the key issues for Polymarket’s future development is the lack of continuous funding inflow. As a zero-sum game by nature, prediction markets cannot attract continuous passive capital inflows like traditional financial markets (stocks, bonds, or cryptocurrencies). This characteristic presents a challenge for Polymarket in maintaining liquidity, which in turn affects its ability to remain profitable and grow sustainably.
2. Market Liquidity: Market liquidity is another crucial issue Polymarket needs to address. Currently, the top-ranked topics on Polymarket are mostly related to the U.S. election, attracting the majority of user attention. However, for most markets, especially those involving non-immediate payouts and niche topics, there is still a lack of sufficient interest. This leads to insufficient liquidity in these markets, hindering the formation of effective market price discovery mechanisms and affecting the accuracy and credibility of prediction results.
3. Influence of Market Participants: The influence of market participants is another aspect Polymarket needs to consider. In prediction markets, the lack of a sufficient number of professional market makers can lead to market prices being manipulated or influenced by a few advantaged participants. This not only undermines the ability of prediction markets to provide accurate insights but also risks market unfairness and a trust crisis. For instance, industry insiders often have access to insider information and can place large bets in advance, profiting at the expense of ordinary users. Therefore, establishing fair and just regulatory and review mechanisms is crucial for Polymarket’s future development.
4. Handling Sensitive Topics: Polymarket’s reliance on hot news to generate topics for betting predictions often touches on socially sensitive events. For example, Polymarket faced criticism recently when its official X account posted tweets with inappropriate language (specifically using the offensive term “Retardio”). Although Polymarket issued an apology, fired the responsible personnel, and initiated an internal review, it still sparked public questioning. Some media outlets accused Polymarket of exploiting negative events for profit.

Future Development of Crypto Prediction Markets: A Look at Polymarket

The explosive growth of Polymarket has undoubtedly revealed the limitless potential of crypto prediction markets. Historically, prediction markets have mostly remained theoretical, and even practical attempts were often closely tied to gambling, sometimes even exploited by criminals as money laundering tools. However, the introduction of blockchain technology has profoundly transformed prediction markets. Its open and transparent nature makes on-chain crypto markets more accessible and trustworthy to ordinary users.

Although Polymarket is not the pioneer of crypto prediction platforms, it is undoubtedly the most mature and influential one to date. Its success is not only reflected in the rapid growth of its user base and trading volume but also in its ability to bring crypto prediction markets to the general public, injecting new vitality into this field. The rise of Polymarket showcases a new application case for the blockchain industry and highlights the unique appeal and vast potential of crypto prediction platforms.

Prediction markets have long been considered the holy grail in the field of cognitive technology. As early as 2014, Ethereum founder Vitalik expressed a strong interest in using prediction markets as a governance mechanism. However, prediction markets have faced numerous challenges in practical applications, such as participant irrationality, insufficient market liquidity, and lack of betting motivation among those with “correct knowledge.” These issues have continually hindered the development of prediction markets.

Polymarket’s emergence has successfully broken this deadlock. It has not only attracted significant attention from industry insiders but also demonstrated strong vitality and broad prospects in practical applications. Vitalik himself once used Polymarket to track the Sam Altman board exit event, which undoubtedly added more authority and influence to Polymarket. Additionally, a16z Crypto advisor Packy McCormick has highly praised Polymarket, stating that its page might be the best place to start a day on the internet. This evaluation not only reflects Polymarket’s excellence in user experience but also underscores its unique value in information acquisition and decision support.

Richard’s perspective provides another angle for us to consider. He believes that the crypto industry should reduce zero-sum games and shift towards providing positive-sum experiences. Prediction markets are one of the best choices to accomplish this mission. They can serve as betting platforms, offering users entertainment and potential profits; at the same time, they can be sources of information, helping users make more informed decisions. This dual characteristic endows prediction markets with a unique position and value in the crypto industry.

However, we must also soberly recognize the challenges faced by crypto prediction markets in their future development. Uncertain regulatory policies, the prevention of compliance risks, and the construction of market ethics are issues we need to focus on. Only by ensuring compliance, fairness, and transparency can crypto prediction markets achieve healthy, stable, and sustainable development. This requires collective effort and continuous exploration within the industry.

Noteworthy Crypto Prediction Market Platforms

In the realm of crypto prediction markets, several platforms have emerged alongside Polymarket, each standing out with its unique operational mechanisms and advantages. These platforms not only offer innovative prediction market models but also enhance transparency and credibility through blockchain technology. As a result, they have attracted growing attention from crypto enthusiasts and investors. Below are a few notable crypto prediction market platforms worth paying attention to:

Augur

As a pioneer in blockchain prediction markets, Augur has been dedicated to advancing this field since 2014. Its community-driven operational mechanism not only allows users to place bets but also supports them in creating their own markets, significantly increasing market participation and customization. Augur operates using its native token, REP, which plays a crucial role in reward distribution, market creation, and dispute resolution, further enhancing market transparency and credibility. To address the scalability challenges of Ethereum, Augur introduced the Turbo version, leveraging the Polygon network to improve transaction efficiency and scalability, thereby significantly enhancing the user experience.

In recent years, Augur has continuously improved its features and expanded its community, attracting more crypto enthusiasts and investors. However, its community-driven model may introduce a certain degree of human influence on market outcomes, a risk that investors need to be aware of when participating.

Gnosis

Gnosis is a comprehensive blockchain ecosystem that includes prediction markets, decentralized exchanges, wallet services, and other infrastructure tools. Its operational mechanism centers around the GNO token, linking users and the platform through governance and staking mechanisms. To address Ethereum’s scalability challenges, Gnosis developed its own Layer 2 solution—Gnosis Chain, providing robust support for Ethereum-based applications, including prediction markets.

Gnosis’s development model emphasizes the ecosystem’s comprehensiveness and versatility, aiming to provide users with an integrated and convenient blockchain environment. Currently, Gnosis is gradually expanding the application scope of its ecosystem to meet the needs of more users. However, due to the complexity of its ecosystem, new 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 operational mechanism combines social price predictions, gamification elements, and community-driven cycles, providing a secure and reliable environment for user interaction. XRADERS offers curated expert insights, providing investors with actionable information and ensuring transparency and integrity through a decentralized voting system.

In recent years, XRADERS has established partnerships with well-known projects such as UXLINK, SecondLive, and DIN. Its core feature, Guess2Earn, and its decentralized voting system have attracted a large influx of users. XRADERS also successfully completed seed funding, attracting several top crypto investors and institutions. However, due to its decentralized nature, information on the platform may contain subjectivity and uncertainty, requiring investors to carefully evaluate before making decisions.

PredictIt

PredictIt is a non-profit research project operated by Victoria University of Wellington in New Zealand. It has received special exemption from the CFTC at the federal level in the United States, allowing it to operate legally in certain states. PredictIt’s operational mechanism is relatively simple and straightforward, primarily relying on user predictions and bets on market events. To comply with relevant regulatory requirements, PredictIt limits the amount users can invest. Currently, PredictIt offers markets on political, economic, sports, and other events, attracting a large number of users. However, due to its non-profit nature and regulatory restrictions, PredictIt may face challenges in market promotion and commercialization. Investors need to be mindful of compliance and investment risks to ensure their rights are protected.

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