Overview of Decentralized Prediction Markets platforms and the future of the industry
Recently held US presidential elections pumped up decentralized prediction market with people hopping on, hoping to make some quick bucks. The volume of a single question ‘Will Trump win the 2020 U.S. presidential election?’ went upwards of $11,000,000 on PolyMarket, a popular decentralized betting platform with people placing bets costing less than a dollar on each bet.
Decentralized prediction markets cater to almost anything someone could speculate on, be it a political party expected to wrest power, the winner of a sports event, change in the price of a cryptocurrency, or even the weather next week.
Prior to the arrival of blockchain, centralized betting markets held the sway. However, several issues plagued these markets:
These platforms promise to make bettors rich quickly, but they never hesitate to grow at the cost of their customers, penalizing the best of bettors by lowering their limits and closing their accounts. The shortcoming abound:
- Their operations are closed and siloed.
- The threat of markets facing forced closures by regulators discourages bettors.
- Low betting caps prevent ambitious players from playing their way out.
- Trading fees is unusually high.
Blockchain-based decentralized markets bring in transparency. All transactions happen on a decentralized ledger, meaning no single authority can unroll them. Thanks to distributed ledger, these markets are more flexible and secure, compared to their centralized counterparts such as PredictIt and IEM.
Top five decentralized prediction markets (DPMs) today are Augur, Polymarket, Omen, Gnosis, and Stox. Let us take a dive into the operations of each of them.
To cut long story short, Augur allows you to
- Create your own markets and let others bet on it
- Place bets on existing markets and earn profits if you predict it right
To go for betting, all you need is some Ether or Dai in your wallet. For creating a prediction market however, you will need Reputation (REP) token.
For any action you use REP, your reputation is at stake. You may gain or lose REP, depending on the way you interact with the Augur platform. REP holders act as the oracle for Augur system, reporting on the outcome of the markets listed. Augur uses several oracles to arrive on the outcome of an event. As for the placement of shares, these are placed in order books depending on what the market creator regards to be the current fair price.
While you use REP to create a prediction (refundable), it is also a sort of assurance that no one will create malicious markets else they will lose their tokens. REP users can also use it to dispute a prediction outcome and purchase participation tokens.
The platform has been designed to reward the creators of the markets and the holders of REP tokens. Users make predictions in Augur by trading shares in the outcome of real-world events. The profit one can make is determined by the probability of an event happening.
As for liquidity, it never really took off Augur v1. It is better though in Augur v2.
Gnosis rolls out infrastructure for dApps that can act as useful forecasting tools and sources of information for bettors. The platform allows access from all parties and is willing to aggregate public opinion from uncensored sources as they believe the mechanism in conjuring up a dependable forecasting tool.
For operation of the predictive market, Gnosis uses two cryptocurrencies — GNO and OWL. Users lock GNO (available via exchanges) for a certain amount of time to earn rewards. OWL tokens, pegged to US dollar, are used to pay fee on the platform.
In Gnosis system, only one or a few oracles churn out the outcome, leading to faster validation. The outcome shares can be traded on Gnosis as well as elsewhere, allowing liquidity. Creators of outcome shares attach a market-maker contract, which decide on pricing.
Decentralized only to an extent, Polymarket retains financial infrastructure of Ethereum but keeps its oracle centralized. It has been more focused on building a good UX. Stablecoin USDC is the underlying currency of the platform while Uniswap and Balancer serve as AMMs (automated market makers) to guarantee tight spreads.
With a Metamask wallet, USDC, and ETH for transaction fees, one can begin trading on Polymarket. You pick a market, connect your metamask wallet and choose the outcome you consider to be ‘True’ and input how much you did want to buy. Be attentive regarding the average price and optimum winnings as these parameters change dynamically to the order size. Click ‘Buy’ and sign the transactions which emerge.
When an outcome market resolves, correct shares are cashed out at $1.00. The rest of shares carry no value. Resolution of the market depends on the sole discretion of the Markets Integrity Committee (MIC).
Governed by the DXdao, Omen is a decentralized prediction market that functions on an open framework developed by Gnosis. Anyone can create a prediction market and customize its features including outcomes and initial probabilities. For working on the platform, stablecoins and an array of crypto assets can be used.
Omen markets can have a custom oracle. The platform is oracle-agnostic, meaning technically market creators can designate the custom data source they did want to use as an oracle. Kleros dispute resolution is the final arbitrator on the platform.
Makers of Omen have designed it to open and modular. It is one of the few platforms developed on the conditional token framework.
Unlike many prediction markets which use conventional orderbooks suffering from high spreads generating from insufficient liquidity, Omen uses an AMM which enables to easily contribute to liquidity pools.
Unlike Augur and Gnosis, Stox has a single token economy. The business model is designed to power growth through business providers.
The three types of agents operating on the platform are providers, operators and users. The role of providers is to drive traffic into the ecosystem. Operators would create, manage and resolve events. The ecosystem allows any individual, company or organization to act as a provider and/or an operator. In case they are separate entities, they would cooperate through user affiliation and event syndication. The third type of users are investors who participate in the events.
The platform offers tools for growing the platform using event discovery features as well as incentivises agents using various mechanisms. Oracle operations are facilitated by implementing collateral and dispute programs.
Enters Value Network
What difference another prediction market will make when so many are already there, you may ask. Well, it does.
Value Network belongs to the next generation of prediction markets, which makes it a step ahead of the others. The structure and design boost the trust factor which has always been the biggest issue in the prediction markets. In the binary options market around the world, the boiler rooms are busy scamming the people and making them lose their deposits. Anyone who happens to win bets and garner money is eventually penalised. Eventually, it is the prediction market promoters, who grow at the expense of bettors. Anyone with a metamask wallet and a sum on the account to spend can make a bet.
A blockchain-based prediction market, Value Network operations function on smart contracts, which are beyond any interference, be it the promoters or any other stakeholder. Moreover, Value Network relies on Chainlink to serve as oracle. Chainlink itself is a decentralized network rolling out reliable, real-world data to smart contracts running on top of blockchains.
Availability of Value Network tokens (VNTW) on Uniswap resolves the liquidity problem that has been an issue on several prediction markets. For liquidity providers, Value Network offers 500 VNTW tokens for 1 ETH in the pool for one month (till January 1, 2021), providing liquidity providers a strong reason to park their ETH with VNTW. 10% of the total supply of the token has been earmarked for the liquidity reward program. As the rewards are distributed by the smart contract, everything is automated. Today, Chainlink is regarded the most trusted price feed provider.
When using the interface of a platform like Augur, you cannot avoid the feeling that the list of events is usually very small. Value Network, however, expands these markets to a much broader base. Graphics on the Value Network interface substantially boost the users’ experience. Moreover, you are also able to determine where your bet is now. Thanks to the intuitive interface, the fiat users can easily switch to the platform instead of scam-filled fiat binary options providers.
Till February 2021 Binary options prediction markets MVP will be ready.
Till March 2021 Value Network will allow webmasters, community owners, and other participants to apply for a multi-level referral program, refer the traffic to the platform and make money from the commissions on the trades.
Value Network brings across UX of betting your money on a well-built web 3.0 product. With a process siloed on blockchain through a public oracles, the platform introduces you to a UX of complete trust, followed by easy liquidity.
Public advent of Value Network happened when, in 2008, binary options were publicly made available as tradable assets on CBOE (Chicago Board Options Exchange). Value Network has now taken this journey to another level.
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Roadmap for Q1 2021 — Value Network — https://valuenetworklive.medium.com/roadmap-for-q1-2021-value-network-9d582795bfe5
VNTW token vesting period explained (07.12.2020) — Artem Levin- https://valuenetworklive.medium.com/vntw-token-vesting-period-explained-07-12-2020-artem-levin-b31fcee9b5d5
Value Network project history — a lookback to 2018- https://valuenetworklive.medium.com/value-network-project-history-a-lookback-to-2018-9cc5c30eb2ad