Trump or Biden? 2020 U.S. election accelerates the development of blockchain prediction markets
Whether in Eastern or Western countries, "elections" have always been a major topic that people love to predict, and at the same time, it is the "peak season" for predicting market platform trading volume. The upcoming election to be announced tomorrow has brought a large number of users to decentralized prediction platforms. Does this mean that the "prediction market" will become a killer application of blockchain in the next few years?
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The Prominent Prediction Market
The "prediction market" is a trading market that allows users to bet on the outcomes of future events. It is also a key application in the decentralized finance (DeFi) sector. Due to the characteristics of blockchain, prediction markets align well with the demands for platform security, fairness, and neutrality. David Marcus, co-founder of Libra and head of Facebook's financial group F2, suddenly inquired last night:
"Apart from Uniswap, Maker, Compound, what other DeFi projects should I be aware of?"
In response to this query under his tweet, the founder of Ethereum mentioned that if prediction markets fall within the scope of DeFi, they would be significant applications to watch. Additionally, Larry Cermak, the research director at The Block, also believes that prediction markets will thrive in the coming years.
I'm surprised the OI is still so low for the election, which might quite literally be the biggest betting event in history. Likely UI/UX concerns still for non-crypto users. But I also think prediction markets will blow up in the coming years
โ Larry Cermak ๐ซก (@lawmaster) November 3, 2020
Elections Drive User Growth
In fact, as the heat in the market gradually cools down after the reduction in liquidity mining rates, the prediction market has shown signs of revival in recent months. This resurgence is closely tied to the upcoming U.S. presidential election. Elections, whether in eastern or western countries, have always been major topics for prediction and serve as the "peak season" for trading volumes on prediction market platforms. Augur, the longest-running decentralized prediction market platform on the Ethereum blockchain, tweeted today (3rd) that the open interest for their "2020 Election Prediction" has exceeded $3.6 million.
Augur's #Election2020 markets have passed $5M+ in volume and $3.6M+ open interest with over $1M+ in 24 hour volume ๐
With only ~24 hours left, who are you betting on? pic.twitter.com/J3fsUoZnCX
โ Augur (@AugurProject) November 3, 2020
Furthermore, another decentralized prediction platform, Polymarket, has seen its trading volume increase from 0 to nearly $3 million within just three weeks. Shayne Copland, the founder of Polymarket, mentioned in an interview:
"More and more people are using our platform, some of whom are not even users of the cryptocurrency community and may not fully understand crypto technology, yet they are still using Polymarket."
This illustrates the significant impact of election activities on people's willingness to gamble. However, retaining these users after the election will pose a challenge for platform operators. As one of the co-founders of the decentralized prediction platform YieldWars mentioned in an interview:
"Elections inject vitality into the prediction market, but what happens after the elections end? Will people continue to be enthusiastic?"
Decentralized Prediction Platforms Still Have Low Trading Share
As mentioned earlier, blockchain has long been considered the ideal development platform for prediction markets. However, despite many years having passed, the actual adoption rate of decentralized prediction platforms has not shown significant improvement. After analyzing data from various prediction markets in the cryptocurrency field, Larry Cermak found that the total open interest of decentralized prediction platforms is still less than $5 million.
Furthermore, popular platforms like PredictIt still dominate this sector. PredictIt has 214 "markets" or "betting subjects," and as of Monday, the "2020 Presidential Election Winner?" market on PredictIt has traded a total of 116.7 million shares. It is evident that the "prediction market" is indeed a lucrative field, but decentralized prediction platforms still have significant room for improvement to become mainstream.