In this article we are going to spill the beans, OK?
It is very exciting to know it, so pay attention, please. Nowadays we can observe an advancing progress of the blockchain and market symbiosis. A lot of markets of all kinds can be created on the top of blockchain technology. It is done due to the fact that blockchain technology is obviously flexible as well as adaptable.
To cut a long story, physical objects and digital products can be financial assets. We can see a potential market at the place where there are assets, which keep value. It is done no matter what kind of it we discuss.
So, let's start it and understand in what manner a special type of market can be useful significantly in blockchain technology – prediction markets.
For sure it is not a bummer that a prediction market performs conjectural kinds of markets.
In this case, its contributors trade not on crypto or options.
They trade on data, you know. Categorically, contributors in prediction markets wager on the final results of future situations and occasions.
In case if a broker wants to list it, it can lead to any possible outcome.
We can have a quick look at, for instance, such an example:
Will a plane from France to Georgia fly by 2027? It shows a question with two options: yes or no final result (outcome in other words).
We have got a carte blanche to say that there will be two possibilities in these circumstances: it will fly or, on the other hand, it will not fly by this period of time. If a person is absolutely sure that this plane will not be up and running in the next six years, a person is able to buy several ‘no’ contracts. We can observe prices here from zero dollars to one dollar.
Carry this example over now: in case our plane is not flying by the exact time, we will deal with exchangeable ‘no’ contracts. These contracts will be exchangeable for one dollar. On the other hand, ‘yes’ contracts will possess no value. Against this theory, if the plane functions, it means that ‘no’ contracts will get no value. To the contrary, ‘yes’ contracts will possess the value of one dollar.
As a severe advantage, the value, which differs in case of changing of market sentiment, we can obtain new data. It is partially understandable that there will be an increase of ‘no’ contracts values and, consequently, prices. It can be in case of lack of development in underwater tunnel technology as long as the deadline is coming. We will also be able to monitor the increase of ‘yes’ contracts prices if companies are going to roll the plane service out for 2025.
In this scheme, we can see a basic speculative market. Of course, all people that take part in buying contracts will hope that the contract's prices will increase in the future (perhaps even the near future).
Please, keep in mind that our basic speculative platform is really different from prediction markets. If we use them in a right and proper way, it can be the tools of forecasting. These tools will definitely be the greatest ones.
In any case, we should remember that "If you don't think about the future, you cannot have one".
Let’s move on!
Are prediction markets definitely functional?
"The best way to predict the future is to invent it." Do you agree with it?
The matter is that when we place some bets, we should have got enough information in this case. This information and loads of knowledge will make an effect on our conclusions and resolutions. Please, let’s divide placing bets and regular gambling. The key factor is that we can find several points that can affect the appearance of some definite results, you know.
- On the one hand, not big parties (investors) are going to do some research.
- On the other hand, big parties (experts) are going to weigh it in.
Surely, if you have got a lot of insider information on the topic or subject, we are going to know that there will be more worth and value of it. Outstanding the understanding of the fact that prediction markets function as aggregators of necessary data and knowledge.
Let’s see it with the help of an example about our plane.
Let’s imagine that ‘no’ contract is trading at a cost of ninety pence. On the contrary, ‘yes’ contract will be at a price of ten pence. It is clear from the example that not many people believe in the success of this phenomenon.
We can find some gathered insights of the market. In addition, people with such data are incentivized (economically) in order to announce their information.
It proves the rule that prediction markets are marvelous at collecting as well as showing the data. Without any exception, it is clear that the wisdom of the crowds will constantly prevail over the information that is known to few experts.
It is profitable to understand in what way this ecosystem makes things happen. It can be done with the help of these market examinations. In this case stakeholders in all spheres will be able to get profit from it.
Additionally, we understand that markets crowdsource data so as to obtain the definite view of later results.
Have you ever heard of futarchy?
Futarchy is the main method regarding democracy. (This opinion of proponents). There is no necessity of ‘no’ and ‘yes’ contracts, you know. Look at the election of the President. It is similar to mutually-exclusive results. See this logic: we have got two people. There are candidate one and candidate two. They compete. Betters can purchase candidate one contracts in case they consider that candidate one is going to win, and candidate two ones
Betters could buy Candidate A contracts if they believe Candidate A will win, and Candidate B ones or else.
Prediction markets as well as blockchain technology
"Those who have knowledge, don't predict". Surely, prediction markets are dreamy instruments. Nevertheless, the value proposition of them can get a lot of support in case there is decentralization. All of us know that we cannot get a lot from centralized platforms because there are a lot of limitations. These limitations include regulations and laws from local sides. There also can be owners’ unwillingness to point to definite contracts.
Eventually, people have to believe in the operator of this platform. They also have to pay extra fees if they want to be able to work with these services.
Do you know about a blockchain-based method?
The matter is that we can replace centralized models with decentralized options. Yes, it is not so conventional. In return, we can get a lot of profits and benefits. Let’s list such benefits as censorship-resistance, increased accessibility as well as a small amount of intermediaries. Let’s speak about censorship-resistance first.
All of us know that obligatory prediction markets function with the help of a single party.
In this case, there is a high probability of closing down these by government authorities or malicious actors, unfortunately.
To the contrary, decentralized platforms cannot be shut down very easily.
Nevertheless, let’s forget about failures and other issues in the case of smart contracts.
The matter is that every node on this network will run the code.
If contracts are done in a proper way, there will be no possibility to change as well as edit any program.
There are no middlemen
As far as blockchains are concerned, there is no need for administrators. We will deal with automated code in this case, so we will not need third parties or intermediaries. People will not pay extra money to third parties, what is more important. You remember that it is done regarding centralized platforms. There will not be counterparty risk because people don’t trust, for instance, anybody.
Permissionless
If you deal with decentralized prediction markets, it will be easy to place bets as well as create contracts throughout the world. In this case, these contracts will be available to people in the whole world. Such a problem as geographic and regulatory limits will not exist any more, fortunately.
Conclusion
Of course, "It was never easy to look into the future, but it is possible and we should not miss our chance".
Prediction markets are ready to help with this. They are powerful in order to bet on future results. They help glean trustworthy data. If we support people in a financial way, they will give their knowledge on a market.
By financially incentivizing individuals to share their own knowledge on a market, we can give rise to insights concerning social, industrial trends.
