Decentralized Prediction Markets
Decentralized Prediction Markets: the Opportunities, the Threats, and the Platforms
In this article, a specific type of prediction market is introduced. Decentralized prediction markets are characterized by the lack of central parties involved. The aim of decentralized markets is to ensure that there is no bias and all aspects of the process are as transparent as possible. Decentralized markets are now being implemented on the blockchain. Due to the nature of technology, keeping prediction markets free of bias and completely transparent for consumers would be optimal. Technology is easier to dismiss bias than humans, so it would be must easier to regulate a decentralized market using technology. The government puts strict regulations on decentralized prediction markets and they usually categorize them under gambling or trading. This is due to the use of prediction markets in gambling settings such as betting on the point-spread of a football game or the winner of a boxing match. This article also outlines some of the platforms that use decentralized prediction markets.
This article allows us to revisit the idea the prediction markets are largely affected by network effects. The blending of economics, politics, sociology, and more in prediction markets has made predictions very valuable. Society is more unpredictable than it has been in the past. As seen in information cascades, the opinions of others can affect the way an individual picks. In today’s society, we are encouraged to think for ourselves, but the “bandwagon effect” will always be a factor unless outside measures take away the opinion of others. A decentralized prediction market will allow consumers to consider their own opinions before following the opinions of others.