[TL;DR]

The 2024 U.S. presidential election has been full of twists and turns, with a lot of buzz, triggering a large number of players to flock to Polymarket to predict the election results. The current total bet amount has exceeded $6.8 billion.

Polymarket stands out in the fiercely competitive market, mainly due to its efficient operation based on the Polygon blockchain, low Transaction Cost, and compatibility with traditional payment methods.

Projects like Polymarket, which involve prediction markets and event trading, also face challenges and limitations such as legal regulations, market manipulation, and Smart Contract security risks.

Introduction

Recently, with the heat of the US election, many users have started to bet on the election results, and prediction market Polymarket has quickly become a new focus of the market.

The following will focus on Polymarket, revealing the development status and participation opportunities of event prediction and trading markets for you.

The presidential election betting is heating up, and Polymarket is gaining popularity.

Polymarket, as a well-known on-chain prediction market on Polygon, has quickly gained popularity in the recent discussions about the U.S. election, and is becoming an important testing ground for collective wisdom gaming.

As of the writing date, the most popular betting topic on the platform is 'Presidential Election Winner 2024', with players' total bets on the US presidential election exceeding 680 million US dollars.

Figure 1 Source: Polymarket

According to the platform rules, users choose to buy shares of 'yes' or 'no' to bet on the election results, using the price (odds) to reflect the market's consensus probability. In the market speculation of 'Presidential Election Winner 2024' shown in the above figure, 52.7 cents for 'yes' can be understood as the market's current estimate of a 52.7% chance of Trump winning. If users agree with this win rate, they can buy 'yes'. If Trump wins, they will earn 47.3 cents per share; otherwise, if the prediction is wrong and Trump fails to win the election, users holding 'no' shares will not need to pay any additional fees, but the 'yes' shares they previously purchased will become invalid, meaning they will not receive any returns.

It is not difficult to find that this mechanism encourages users to make accurate predictions based on personal judgment and market information, in order to pursue potential profits or take risks, which not only reflects the decision-making ability of market participants, but also demonstrates how prediction markets dynamically adjust their expectations of future events based on collective wisdom.

In fact, the contest for this round of presidential elections, after news of Trump being shot and Biden dropping out, has far exceeded the heat of other gaming events, and market bettors have also adjusted their bets repeatedly as the situation evolves.

According to Dune Analyst's statistics, after Trump was shot, his presidential election winning rate reached as high as 71%. Following Biden's withdrawal, the current vice president Harris's campaign winning rate has continued to rise and has now slightly surpassed Trump's.

Figure 2 Source: Dune Analyst

Of course, players on Polymarket can not only speculate on the basic trend of the election, but also the possibility of Biden's withdrawal, the popular candidate J.D Vance for the Republican vice presidential candidate, and the vocabulary that may be involved in the dialogue between Trump and Musk. These predictive contents greatly enrich the dimensions of election discussions, demonstrating the diverse perspectives and creativity of the user base.

The betting events on Polymarket are not limited to presidential elections. There are multiple topic zones such as Crypto Assets, sports, and pop culture. For example, predicting which country will win the most Olympic medals, or predicting movie box office performance, predicting English Premier League results, predicting the number of times the Federal Reserve will cut interest rates, etc. It can be said that as long as there are topical events, bets can be created for gambling and guessing.

How did Polymarket cultivate its explosion behind the scenes?

Polymarket has rapidly risen in the prediction market field since its establishment in 2020, with its innovative Blockchain technology and Decentralization model.

At that time, the global pandemic was raging, the world was in panic, information channels were blocked, and the real situation was difficult to accurately reflect. So the founder Shayne Coplan, inspired by Hayek's 'The Use of Knowledge in Society', believed that economic incentives should be applied to the prediction market to truly reflect people's views or opinions on a certain event.

He referenced and improved the early prediction market Augur based on Ethereum, with the first betting topic being the reopening time of New York City under the epidemic.

And Vitalik Buterin also expressed optimism about the prediction market in that year: "I expect that in the coming years, prediction markets will become an increasingly important application technology for Ethereum. The 2020 US election is just the beginning, prediction markets will attract more follow, covering not only elections, but also conditional forecasting, decision-making, and other ecological applications."

After years of deep cultivation, the platform finally gained a large number of users betting on the results of the US presidential election in May this year, and the volume continued to rise, thus becoming popular. As shown in the figure below, it exceeded 100 million US dollars in June, and the volume in July approached 4 billion US dollars in a single month, and it is expected to exceed 1 billion US dollars by the end of the year.

Figure 3 Source: Dune Analyst

This significant rise not only attracts the attention of election experts, political analysts, and public figures like Trump, but also wins the favor of investors including Founders Fund and Vitalik Buterin, co-founder of Ethereum. The cumulative financing has reached 74 million US dollars.

Figure 4 Source: ROOTDATA

Polymarket stands out in the competitive market mainly due to its efficient operation based on the Polygon blockchain, low transaction cost, and compatibility with traditional payment methods (such as allowing users to use bank cards or credit cards to purchase USDC for betting through MoonPay).

In addition, the platform has successfully attracted a large number of retail investor's participation through extensive marketing strategies, including cooperation with the Reddit channel WallStreetBets.

It is worth noting that the protocol has not yet clearly stated whether to issuanceToken, and we will continue to follow this.

MEME frenzy subsides, will event trading become the new on-chain trend?

Represented by Polymarket, the event trading protocol, compared to traditional platforms, its core advantage lies in its decentralized market mechanism and the transparent execution of smart contracts.

For those who are concerned about grabbing sales opportunities, insider information, and a large number of MEMEs that have little practical use, user participation in event prediction is more interesting, relatively fair and pure, which is also an important reason why prediction markets are becoming more and more active.

In fact, users can place bets on various events on the platform, including political elections, sports events, Cryptocurrency trends, and the betting results are determined by the collective wisdom and Consensus of market participants, and automatically Settled through Smart Contracts. This 'all-or-nothing' betting model incentivizes users to conduct more in-depth research and more accurate predictions, adding more strategic gameplay and social discussion, greatly enriching the real-world application of encryption technology.

However, projects like Polymarket, which are prediction markets and event trading, also face some challenges and limitations.

1. Legal and Regulatory Risks: Polymarket's gambling-like business is subject to strict regulatory restrictions in many jurisdictions. The CFTC has fined it $1.4 million and required it to gradually cease its services in the United States. There are still a large number of American users participating in bets through the platform, and this judicial jurisdiction restriction is currently the biggest practical obstacle for such platforms.

Figure 5 Source: CFTC

2. Insufficient Liquidity Leads to Game Theory Error: Although the volume surges in popular events such as the US election, the lack of Liquidity in other niche markets may lead to the failure of price discovery mechanisms, resulting in unnecessary disputes and losses.
3. User trust and fairness: The influence of market participants' funds and public opinion may lead to price manipulation, and some events may cause users to have different opinions about the results due to differences in evaluation criteria. Therefore, how to establish a fair market environment is a key issue that Polymarket needs to solve.
4. Inter-bank competition risk: With the popularity of the prediction market, the Solana ecosystem Drift Protocol prediction market B.E.T, Sui ecosystem prediction protocol Karma Protocol, etc. have successively launched, intensifying industry competition.

In summary, Polymarket has become an important barometer for presidential election sentiment, and the platform is expected to expand its betting topics and open up market space in this opportunity. The popularity of Polymarket not only reflects the strong interest of the current young generation in political events, but also demonstrates that prediction markets, as a new way of information aggregation and opinion exchange, are gradually changing the pattern of traditional political discussions and the reality of the encryption market.

Author: Carl Y.

This article represents only the author's point of view and does not constitute any trading advice.

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