Backpack Ventures Launches Tokenized Prediction Market! Is the former FTX executive's exchange with tokenized prediction markets promising?

The exchange Backpack recently entered the U.S. election prediction market by launching US Election Prediction Markets. Users can participate in the prediction by purchasing TRUMPWINS or HARRISWINS tokens. It is understood that Backpack uses the OutcomeMarket smart contract created by market maker Wintermute to mint tokens, ensuring transparency and security in the prediction market.

Playing Predictions through Smart Contracts, Balancing Transparency and Security

OutcomeMarket is Wintermute's latest smart contract where Backpack mints TRUMPWINS or HARRISWINS tokens, allowing users to participate in predictions by buying and selling these tokens. The smart contract will act as a treasury before the election ends, receiving USDC and minting OutcomeERC20 tokens.

The protocol is currently deployed on Ethereum, Arbitrum, and Base, with settlement managed by Chaos Labs using Edge Proofs Oracle. The benefit of using this smart contract is to provide a clear payment structure for prediction markets, and Wintermute's role as a market maker should ensure liquidity for the tokenized prediction market. Additionally, this is a permissionless smart contract that cannot be altered after deployment. It has undergone audits by Hexens and Cyfrin without major issues.

Election Approaching, Huge Potential in Tokenized Prediction Markets

According to Dune data, the prediction market Polymarket saw a record high trading volume of $533 million in September, with a quarterly increase of 12.9%. The active trading users in September reached ninety thousand, also a record high, showing a 41.5% growth from the previous quarter. There were ninety thousand new users in a single month, setting a new high and a quarterly increase of 25.5%. These numbers may continue to rise as the election approaches, indicating the huge potential of prediction markets.

In the US Election Prediction Markets, the prices of TRUMPWINS and HARRISWINS tokens will both be below 1 USDC, fluctuating based on the market's predicted winning probabilities. For example, if the market favors Trump with a 60% chance of winning, the price of TRUMPWINS may be 0.6 USDC. If the market believes Harris only has a 40% chance of winning, the price of HARRISWINS tokens would be 0.4 USDC.

At the end of the election, the tokens of the winning side can be exchanged for 1 USDC each. In the unlikely event of a third outcome where neither wins, both tokens will be exchanged for 0.5 USDC each.

Following FTX's Legacy? Former FTX Executives Launch Exchange in Prediction Markets

The biggest challenge for on-chain prediction markets is regulatory scrutiny. Looking into Backpack's background reveals that its top management has been involved in the FTX and Solana ecosystems. This might be the reason why they are taking over from FTX and launching the prediction market business as a centralized exchange. However, the exchange is registered in Dubai, which may have given them the confidence to venture into the prediction market.

Previously, we mentioned why many exchanges choose to register in Dubai, as they see the local government viewing the crypto industry as a hope rather than a crime.

Former FTX executives and Solana wallet Backpack to establish a new exchange in Dubai