The Present and Future of Crypto-Based Prediction Markets
07:58 Share

Welcome back to the breakdown with me and L W. It's a daily podcast on mro, bitcoin and the big picture, powerless PS remaking our world. What's gone on, guys, that is sunday, november twenty. That means it's time for longer. Read sunday before we get into that.

However, if you are enjoying the breakdown, please go subscribe to IT, give IT a rating, give IT a view or if you want to dive deeper into the conversation breakers, you can find a link that we're going to bit that I slash breakdown pod. All right, friends will. Today, we are discussing one of the most discussed process stories around the election, which is the rise of prediction markets.

Polly market was obviously a big phenomenon in the encrypt space, but even calls, which the cftc tried to shut down and was rebutted by a federal judge had a big part of the story as well. The question is where prediction markets are going to fit in the future. And so to get to start, let's first turn IT over to an A I me from eleven labs to read an essay by carl, vocal partner at six ventures called forget polls.

Crypto based opinion markets are the future of collective wisdom. Here is carles essay. Opinions are like at everyone has one.

Polls have long been the predominant method to capture public opinion and collective insight, largely because they offer a quick and scalable way to gage public sentiment on a variety of topics. However, they are also subject to low engagement. Spam and chick just asked the U.

K. How I ended up with a research vessel named bodies c boat face opinion markets offer an alternative way to address the flaws in traditional polling. They can be a superior method to gage market sentiment because they obviate the failure modes of traditional polls through blockchain enabled capabilities like economic incentives, social credible credential beyond aging sentiment, or merely wagering on the outcome of events in prediction markets.

Opinion markets can be used to influence the outcomes themselves. Everyone from A I agents to big brands can use them to mind insights and make decisions in a way that is transparent, efficient, globally accessible and highly engaging. Opinion markets are not new.

One famous example is the keynesian beauty contest, which was popularized by economist john main, or keys. In this thought experiment, contest participants were shown photographs of people in the newspaper and asked to select the faces they believed others would find the most attractive. Participants who successfully chose the most popular faces were awarded a prize for the sophisticated.

The goal was not to choose based on individual preferences, but to predict which faces would be the most popular overall when applied to the stock market. One of king's core insights was that participants can get trapped in an infinite loop of trying to out predict what others will select, showcasing the chAllenges of investing based on market sentiment versus fundamentals. However, I posit two more insights.

The polls effectively codify the the uk's collective definition of beauty, and people loved playing the game. Unlike the largest opinion market in which few have an edged the stock market, everyone believes they have an advantage. Many aspects of regular everyday life, such as determining who's pretty st, for example, who is a Better match for Taylor swift and travel's Kelsey, we all know they are an odd match.

What is the best french restaurant in manhattan? Which of these outfits is best for a first date? These are all examples of markets where certain individuals believe they have an advantage, making them more likely to participate while the stock market represents a narrow goal of economic valuation with well defined framework for valuation, for example, discounted cash, low models and P, E ratios, opinion markets can have a broad range of subjects, objection functions and analysis methods.

This, of course, creates a much more quality ative versus quantitative relative set of markets for brought appeal beyond the F U N D market examples discuss above, opinion markets represent a major opportunity for businesses to gage sentiment and build loyalty with their customers in a hyper local way. For example, starbucks could submit what street corner would be best for a new store. Netflix could ask, what should be our next city for love is blind.

A creator may ask, what product should I review next? Today, corporations spend billions of dollars trying to identify these answers. With advanced analytics teams.

Opinion markets could provide a fast and in many cases, more accurate answer, while simultaneously creating direct, meaningful engagement with customers. In addition to the shortcomings of polls discuss earlier, they do not have intrinsic quality the way economic markets do. In an age of infinite content, game fiction of opinion markets with economic outcomes will drive radically more engagement and viral than polls.

What will these opinion markets look like? And can we trust their outputs? The wisdom of the crowd is a well research phenomenon, suggesting the collective decision making when aggregated often leads to more accurate outcomes than individual judgments.

Unlike traditional polls, are one of surveys, cyp to bed markets offer new primitives such as economic incentives and participation history to increase accuracy. We don't know what the end state will be, but the most effective forming factor will be determined by an explosion of research and experimental, and the cypher advantages will undoubted produce Better outcomes. The next generation of cyp to builders will have the opportunity to create products that transform how we engage with public sentiment, forecasts, trans, and make decisions both as individuals and as communities.

The final question is, how will opinion markets evolve in an age of A I, where advanced algorithms can sift through massive data sets to predict social outcomes? A I agents will undoubted participate a longside human users, contributing their data driven insights to the mix. I think rather than replacing human judgment, A I will compete with IT to create dynamic interplay between machine intelligence and human intuition.

This will make opinion markets a unique arena for collaboration and competition between A I and human participants. Opinions are like at everyone has one. Does your stink want a bet? All right, back to real N, L, W.

here. First of all, thanks to call for writing this and getting this conversation going. I think key brings up a ton of really interesting questions for me.

One of the things that I was really interested to observe over the course of this particular election was the extent to which prediction markets represented a more accurate representation of where things were, or if instead, they represented a tool for self, a filling propac's, basically an election influencing tool. I don't know that. I think that these things are mutually exclusive.

My general sense is that for much of this particular cycle, prediction markets were much more about influencing the election than they were about actually pricing the chances of different outcomes. One of the other realities that prediction markets interact with is the news media's incessant need for the latest data in information. Polls can possibly move as fast as, or fill as much air as media outlets need.

And so prediction markets got to boost this cycle of being reported alongside poll numbers. And indeed, they have a lot to offer in that respect. You can watch how prediction markets change during the course of a speech.

That level of fidelity at be just doesn't exist with polls. Because of that, I think that some folks got the idea that they could produce the election in one direction by making the spreads bigger than they were in the polls. I think that for much of the end of the cycle, that's what we had going on when trumpets were read something like sixty percent verses, commonly thirty five percent.

Now it's important to keep in mind that all of this is in the context of what is likely to be the smallest user base that these markets will ever have. I also think that by the end of the election, particularly on election day, this was no longer the case. And IT seemed to me that most of the behavior was simply about trying to arbitrage to make money, which, of course, is what the presumption is that that's going to be the Normal behavior.

And so I think you kind of had a both and situation where some people were trying to influence the shape of the elections, taking advantage of the prediction market to media pipeline and others, we're just out there trying to make money. My guess is that the more people start to use these things, the less easy to nudge them in a particular direction, we'll be, and the more likely we'll just settle into their intended purpose for being a more skin in the game way of assessing public. In either case, I think they are a fascinating phenomenon.

Even if they were simply a tool for influencing elections, I still think they would be interesting that might take for now though, big. Thank you again to call for your essay, and thanks to you guys is always for listening. Till next time, be safe and take care of each other. peace.