Prediction Markets
What do I know that the market doesn't?
Prediction markets aggregate beliefs into prices. They reveal what the crowd thinks—and where the crowd might be wrong.
Context
- Probability — Size bets correctly
- AI Agents — Agents making predictions
- Futarchy — Prediction markets for governance
Prompts
Before placing a prediction market bet:
- "Is the market pricing this correctly?" — Compare your estimate to market price
- "What do I know that the market doesn't?" — Identify your edge
- "What's the expected value of this bet?" — EV = (probability × payout) - stake
- "Am I betting size proportional to edge?" — Kelly criterion thinking
- "When does this resolve?" — Understand the time value of capital
See prompts for more.
When to Bet vs Observe
| Situation | Action |
|---|---|
| Market price matches your estimate | Observe — no edge |
| Market price differs by <5% | Observe — noise, not signal |
| Market price differs by 10%+ | Investigate — potential edge |
| You have specific domain knowledge | Consider betting — you may have information edge |
| High uncertainty, low conviction | Observe — wait for more data |
Platforms
| Platform | Focus | Notes |
|---|---|---|
| Polymarket | General events | Largest volume, Polygon-based |
| Metaculus | Long-range forecasting | Reputation-based, no money |
| Kalshi | US-regulated | Legal in US, limited events |
| Drift.Trade | DeFi predictions | Solana-based |
| azuro.org | Sports/events | Decentralized liquidity |
Polymarket
Polymarket is built on the Polygon blockchain, specifically the Polygon Proof-of-Stake (PoS) network. This choice of blockchain infrastructure offers several advantages for Polymarket's prediction market platform:
Scalability and Low Costs
Polygon PoS provides Polymarket with high scalability and extremely low transaction costs. As of October 2024, the average transaction fee on Polygon PoS was just $0.0077. This allows Polymarket users to make frequent trades and adjust their positions without incurring significant fees, which is crucial for a dynamic prediction market.
Speed and Efficiency
Transactions on Polymarket through Polygon are near-instant, enabling real-time trading and quick position adjustments. This speed is essential for maintaining accurate market prices that reflect the latest information and sentiment.
Blockchain Benefits
By leveraging Polygon's blockchain technology, Polymarket gains several key advantages:
- Transparency: All transactions are recorded on-chain, providing full transparency to users.
- Decentralization: The platform operates without the need for a central authority, fostering fairness and global participation.
- Security: Utilizing blockchain technology enhances the security of user funds and market integrity.
Ecosystem Growth
Polymarket has become a significant success story for Polygon, driving substantial transaction volume and attention to the network. In October 2024, Polymarket accounted for about 8% of the gas used on Polygon PoS, making it the largest individual contributor.
While the direct financial impact on Polygon in terms of transaction fees has been relatively small, Polymarket's success has brought significant attention and new users to the Polygon ecosystem. This aligns with Polygon's strategy of fostering successful applications to drive adoption and showcase the network's capabilities.