How cryptocurrencies are changing prediction markets sanewnetworks.com
Redirect markets are speculative platforms where traders can place bets on the outcome of future events such as Will Joe Biden Win the 2024 Presidential Election? If their bet was correct, traders make money, but if they are wrong, they lose the amount wagered.
Users obviously want to make money in these markets including PredictIt and Iowa Electronic Market. But the reason the prediction market generates so much academic interest is because they have a solid track record of making correct predictions, and sometimes even predicting the future.
Some believe that cryptoassets have a role to play in improving these markets. Markets in the US are currently highly regulated and require relatively high fees to participate.
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Advocates argue that cryptocurrencies can avoid these problems. This is because with cryptocurrencies, users do not need to trust a central entity. The idea behind Ethereum is that rules embedded in its code can guide certain actions in a project.
To test this lofty hypothesis, several prediction markets are currently deployed on Ethereum, including Augur and Omen.
Translation Markets: Frequently Asked Questions
How are cryptocurrencies improving prediction markets?
Advocates believe that cryptocurrency helps predict markets for a number of main reasons:
- Open: Cryptocurrencies have no boundaries. Users from all over the world can buy Ether (ETH, + 1.9%) and other cryptocurrencies required for prediction markets. By purchasing a cryptocurrency, users will be able to send it anywhere in the world. Typically, the use of forecast markets is limited to the countries in which they were created. In the case of cryptocurrencies, limiting this is not so realistic.
- Less stringent: Many of today’s most popular prediction markets have restrictions. For example, if a user wins in many markets, he is no longer allowed to place bets. The Augur website claims that cryptocurrency prediction markets are lifting such restrictions.
- Lower fees (sometimes): Most of the time, fees in centralized markets are higher than Ethereum fees. But it is not always the case. Ether fees have been on the rise lately as the network has become more popular and, as such, congested.
- Cannot be closed: Central prediction markets have been closed before. Most notably, Intrade stopped serving US customers in accordance with US law, which led to the closure of the platform. One of the goals of adding cryptocurrencies to this mix is that users can create markets that governments cannot close.
However, experts argue that there are other reasons why these types of markets are not gaining much popularity yet, including the fact that they are easy to manipulate. For example, someone might wager that Apple will announce its latest iPhone within a certain time frame and have inside information about the event.
How do they work with cryptocurrency?
They use smart contracts, a type of innovative computer program that can perform actions automatically without the help of intermediaries. In the case of prediction markets, smart contracts receive money sent by players and then automatically distribute it to the winners at the conclusion of each market.