Prediction Markets: Gold Rush or Startup Graveyard? - Full Transcript
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code that nobody will interrupt us anymore, or maybe it was some kind of, you know, influence
from the calcium or pearl market that maybe they don't want us to discuss this topic today.
Anyway, we are here and I can see all the speakers. So let me start with the
introduction. So today we have several participants, ours from our, Nico from DELPII,
Yorgi from Function Space. Maybe Lucas will join us but I'm not sure from cash,
Dimitri from Credit Time, Zack from AGG Market, Pipe from Trendle,
Bartik from Dimitro, Morgan from Aritz, and Jordan from Proflation. So we have quite
interesting topics for today. Overall, it will be of course about prediction markets and
main topic is that we have a significant difference between biggest players and smaller companies
on the market. So we will try to discuss why we have a graveyard of startups or we have a
gold rush and many new projects and that's why we just in the middle of the great trial.
Or we have a significant topstitches for the startups and because of that we have a lot of issues
that prevent startups from being successful. So I will start with the first question and once you
will answer please I will ask you to make a short introduction about you together with the
answerer. So a very easy start, just one, how many prediction market X are you using right now?
And when the last time you opened one, the two wasn't the two everybody names.
Maybe I'll start here. So yeah, what's good guys, very happy to be on a space as Dimitri from
Prodict Time. Actually, I think this is a simple question because mostly I would consider myself
still using only Polymarket but recently I'm also checking the interface of Predic because
guys are doing really really cool stuff and checking beta version of Doxa because it's also something
that people should pay attention at. But mostly as I said, I'm using Polymarket because you know
everything is out there. And yeah, to make a small intro, I'm the co-founder and the host of
Predic Time, the podcast and media about prediction markets and technology. We've been interviewing
most of the biggest projects that are building something call around prediction markets and doing
high quality content to make people aware of what the hell is happening in Predic
market area. Super happy to be on a space. Thank you Alex. I'll jump in next.
First fake answer, slash casual shell as we have as of today we'll have nine venues integrated
into Ag as an aggregated order book with Spark routing and order splitting. So in theory, I'm
trading nine venues VR interface, Coliseum Polymarket of course, also Hyper-Liquid, Predic Fun,
Limitless, Murid, Pred, As of today we're launching Betdex and then I'm blinking on one at the
moment but I'll keep moving. Oh, Propidex. And then you know, I'm also on top of that.
It's football season here in the US and everyone's sending their best consumer offers which I'm
taking advantage of. So I'm also trading, you know, directly through the interfaces, no big
quality market US. I think that may be missing one but happy to continue to take advantage of any
you know, brief sign-up credits underdog would be the other one. So I've written a lot of platforms
right now. Hi everyone, this is Karthik here from Demita. I guess I'll jump in next. To my favorite
sort of Polymarket for sure, I think it has that breadth of coverage that really appeals to the
kind of markets that are typically trade. And a second one that's coming up on a horizon is Unimarket.
So it's just coming out of beta, it's an aggregated play, but they have some exciting new products coming
up that are going to be fleshing out the roadmap very very soon. In terms of Demita, we are definitely
going to integrate more and more aggregators. We are an RWA yield app that is going to bring a
suite of options trading alongside in a very simplified form. And Prediction Market Integration seems
very very intuitive way to go, but very happy to elaborate as we continue on the space. Thank you.
Hey guys. Go ahead. Go ahead.
It's all good. All right, I appreciate it. All right, hello everyone. It's very nice to be here as well.
My name is Jorge. I work as function spaces for our research engineer mechanism designer.
So in our case, well, apart from Polymarket and Colchee, which I don't really trade on
as much, but I find them very interesting to understand like odds about a certain event and
like just as a tool to, you know, take advantage of their information aggregation properties,
so to speak. One that we've been using lately is we've been dog fooding the function space platform.
So there's a product we build called Culture Space, which is built on the function space mechanism.
And this one is about predicting outcomes for numerical events in like let's say the real world
and let's take a culturally relevant event. So if you go to culturespace.exchange, you'll see
the latest one was what will resident evils IMDB user rating B on September 21st, 2026.
So it's kind of cheating with an answer into question, but I think an important part of building
is dog fooding, right? So like, yeah, using what you're using what you build. So that's a nice little
one for people who would be interested in checking that out. Go. I'll go next. I get some August with
auger, kind of the old school decentralized prediction market oracle, the co-founder of
the latest foundation and where the ones revive in the project. So happy to be here on the space of
the bunch of builders in the prediction market space. And turns the question, I've been on Polymarket,
been on Calchee, been on Limelace. And I've also been looking at all the other kind of use cases
that are coming up right now. Like there's some interesting ones that don't use a resolution,
like some constant product prediction markets. I believe Phil lost a pretty cool one with
like an information one. So yeah, just look at forward to seeing where this all goes and,
hopefully we get closer to like the other previous guy said, the information aggregation angle of it.
You know, I think prediction markets are really good insights that they can generate some good insights
for society and just kind of looking forward to all that. Okay guys, thank you. So let's,
yeah, I think I think I didn't introduce myself. So, hey, I'm Phil. I'm the commander of
trendl and rocket market. So I'm going to be a bit biased here. So I do trade on Polymarket. I'd
never trade on Calchee. Just I think that Polymarket is better from my perspective. Kind of it's
easier and like I love one chain stuff. Besides that I also like because I'm the commander of
trendl, of course, I trade on noise.exe which is kind of like a prediction market as well. And
also as I used to work in Azure, I'm very close connected with the team. I'm like, if I do sports
betting, then I go especially this specific bet. I go to Azura apps like bookmaker
X-Bats, if I make bets. And yeah, of course, I like to do trade on the apps. I made trendl,
rocket markets. I think actually at 90% of the time I trade on my own just to improve the
experience for everyone. So let's see fellow builders, so many familiar faces. I like to see
you all. Let's start this space. Okay, thank you. So probably no one told but I can add that it is
really hard to open a counter in Calchee. And probably it will be same situation with the
Polymarket soon because of the local regulations. And we all know how they struggle with their
internal hers. So probably it should be one additional topic to discussion. But nevertheless,
we have other interesting questions. And the next one is if the two platforms take almost all the
volume and steal new venue lunches, basically every week. And I don't want the market size answer.
I want the real one. When you decided to build here anyway, what was the actual bet?
What did you tell yourself for your investors about why you would be the exception?
Let's already talk to the beginning. Maybe I'll also jump in because we also have very different
product comparing to everybody else here in the space. So as we are not building the product,
but building the media about prediction markets, I think our bet was pretty clear. We just saw
there is a huge gap comparing to crypto space in general and to traditional finance. There's not
a huge, there's enormous gap between prediction markets and what is happening out there. So we basically
decided that there is a lack of high quality content and the market is not represented in the correct
way even though there are a bunch of very interesting builders and the space itself is super exciting.
So we just decided to show it to the people and make it affordable for the day to day users
just to go and check what is actually happening inside of this industry.
That's basically it. I think guys with the products will tell a different perspective because
yeah, it's very interesting, especially looking at the fact that prediction market generally looks like
everything is already built and nothing else is needed, but we still see more and more interesting
products are being launched. So I'm going to be super excited to hear what other speakers would
add on this part. Yeah, let me follow up on this. So yeah, but totally agree with you Alex that
like, Paul market and calcium, maybe a few other plays. They kind of took the whole market and
I think there is no sense in competing with them because like they are getting all the traffic from
like most of the people and the only thing like why actually I started building
trend on the rocket markets, I feel like they actually opened a niche for like they are
on-graping people into prediction market and then with the newer products with something different,
we can kind of like benefit from them on-graping this amount of people. So that's
so that's why I started building in space because I still have many enormous work,
probably I have something to offer to them as well. I think I can, yes, it's true. Most of the volume
is going to those two platforms, fully market and calcium and although the prediction market
space has a rich tradition both from our research but also like building right with initial
iterations often going back to the auger days and the likes shout out to our friends at auger.
The current state of prediction markets looks like it's very centered about a specific type of
mechanism that is good at certain things and not so good at other things, right? So I can pull
the market and calcium you'll see these order book types of markets with the underlying
centralization, let's say, or realities that that brings and they bring a model that works well for
let's say binary types of outcomes, right? Like yes, no or so. But to go back to the point,
we see there's such a large possibility to innovate in how prediction markets are actually
built like from, let's say, how from the ground up how they work and by means of this innovation,
making them better geared towards different kinds of use cases. So like make it an easier to spin up
prediction market and not necessarily depend on some type of white list or on like having
a market maker who is able to help you out or having markets that are better suited towards
markets, which is like the core focus of a function space. Having markets are better suited towards
numerical outcomes. So instead of like yes, no questions, like the example I gave before,
like what's going to be the rating of resident will win comes out or what's going to be the price
of compute in terms of like renting out GPUs like three months from now, which you can it can also
double as a hedge for the proper parties, right? So in a nutshell, the reason we're building here is
yes, there's a lot of volume that is captured by these platforms, but there's not a lot of
innovation in how prediction markets are built that has been successful yet. We think there's
still an opportunity for that kind of success and that kind of success will open the door for
prediction markets to be used in so many more ways that will add value to society both from
opening up entirely new categories of financial instruments and also creating the right incentives
for information aggregation to happen at a much broader scale than what we have right now.
I'll jump in here. For me, prediction market aggregation was an obvious bet and therefore
we're going to be a really competitive space. And so my decision to enter was a team bet.
We've been building SNAG 4 plus years already built a profitable multi-million dollar
loyalty in sevenths business and saw that there was both an obvious market opportunity. I think
you know, relay is not yet a token, but we really view ourselves as building relay predictions
and that's going to be a billion dollar token and an opportunity here. And I think, you know,
that there's obviously a similar pan, maybe like 50% of the pan should exist in predictions.
And then there's a lot of hard problems to solve here. And that's really what drew me to the
space. Our last product was really a crop app and that's made it not that defensible with the
rise of AI versus with predictions aggregation. There's three or four things we're doing that are
pretty differentiated and we've seen other aggregators try and fail. Many are, you know, months post
launch and site is still going down. Others have pivoted entirely. The first problem is pretty straightforward
but like market matching. We use the deterministic plus LLM based approach that matches events at
sub 30 seconds across the nine then use we integrate. We then have a real time aggregated order
book that's architected entirely in Rost or is everything in memory and enable sub 100 micro-second
queries to our back end so that we can then support smart routing and orders splitting, which is
really the key IP actually leveraging relays our back end to do bridge plus swap transactions as
needed to facilitate transactions across the nine plus venues that we offer all at like sub four
seconds for bridge plus trade and sub 500 milliseconds for you know same change transactions
when you already have the funds on chain and then the way we built this is just super scalable so
we'll announce mentioned that Dex already will have to have another integration going live later
this week for tip-in-new bend and then integrations that sub two days at this point and we're actually
tokenizing off-chain venues on Solano starting with profit acts so actually acting as a tokenization
layers that can build meaningful liquidity with shared account balances so that you know crypto
native applications can integrate off-chain venues profit acts will have two other major regulated
venues live in the next couple weeks here and so we're really just excited to kind of like outchip
and outchump and be in the competitive space that's worth winning in.
A Catholic from D&T and just to take a much more general stance and step back for a second I think
that the process of iteration and specialization is natural and intuitive so you're going to have a
situation where there'll be new models emerging new applications new verticalization as well
simply because the diaspora of the people that you're going after to use the platforms are completely
different they'll want to play different games they'll want to kind of categorize markets into
different areas and they'll also flock to exactly where they see an edge and specialize so it's
kind of reflective of human nature. We are going to focus very much on whatever's happening in the
capital market side it makes sense for us to initially engage with a whole bunch of aggregators
because then we can sense the depth of the market we can see where the activity is and then we can
narrow down our focus to the venues that have the deepest liquidity and the most engaged users
to be able to interact with and and help our derivative product to blossom so for us we're kind of very
happy to ride the wave and we're very intrigued that there's some amazing builders on this show that
are talking about some incredible features yet to come especially on Solana so yeah very much
looking forward to interacting with and hopefully integrating you all. Yeah I can jump in so I think
there's some truth of the statement I think the verticals that Pauli Marker and Kalachikin
Peter are a little bit crowded but I think when it comes to prediction markets there's so much
untapped potential here that we kind of haven't really kind of had the ability to capture yet
like we can it's a new financial primitive at the end of the day and you know we can go from
disrupting the sports boat to disrupting like things like options things like even governance right so
I think there's just so much potential in this tool and you know we're just in the early days of
of kind of getting there right so just looking forward to see what where where everything goes and
you know from the auger perspective we were a prediction market but we were also empirical and I
think the Oracle piece is actually really key infrastructure for a lot of these prediction markets
like the whole resolution layer is still kind of sketchy you know you have a lot of trust assumption
you have a lot of permissioned takes you're doing you're kind of trusting a lot of people to do the
resolution properly and then when that goes wrong you know a lot of controversy happens so
you know that's that's kind of what got me into the space and what got me interested in
in reviving this project it's delivering this like holy decentralized permissionless and trustless
tool up for these prediction markets to you so you know again you know looking forward to
everything that we can do with prediction markets and and really these new verticals that we can
create and kind of route people to you and daily day just like extract some societal value out of it
right it's pure information that we're creating and and there's there's a lot of beauty to that
yeah I just also want to jump in so basically from what everyone has said it's a lot more to
come with prediction markets overall because right now there is still a lot to figure out there's still
a lot to kind of like walk through and kind of like solve in terms of what is currently possible with
current on-chain prediction markets and off-chain prediction markets and yeah that is one of the
reasons why I and the team at Lotus we have been quite resolved to solve in intent-based execution
overall across different venues so it's like although today the venues are interchangeable you
can route through them you can actually build on them and stuff but there is still a lot more
to come in terms of resolution compatibility cross venue execution infrastructure liquidity
ZRFQs a lot of primitives that the on-chain defy products initially add and transition towards
what they are today and I feel like there is still an option open up for on-chain prediction markets
and off-chain prediction markets to build new primitives and open up new innovations for
buters but although the current market share is basically divided between the two majors which is
polymarket and calcium I feel like the incentives for builders are not just shifting towards
being able to capture a percentage of that value they're trying to create without having to
on displays on the users and themselves
because of our infrastructural costs, the low turnout in terms of
children and stuff like that. So that is a really big space to
and a big market size to basically capture from. And yeah, I would
love to hear what every other beauty you're saying and basically
see how we can actually transcend prediction markets to become the
next big thing, if I must say. Okay, thank you guys. And now
uncomfortable one about users, some analysis, put it, it
roughly 70% of traders on this platform's losing market.
Even that's the base trade, what are you actually selling?
And what does retention even mean in a product where most people are
supposed to lose? Yeah, thank you. So I'll jump in with a very
quickly, with a very quick one here, because I have a direct
comparison always when I'm being asked about prediction markets having
a very low wind rate, I'm asking people how do you see in what's the
wind rate for the purpose traders? So if we take into statistics for
hyperliquid, so the analysis that we publish in May 2026, we see that
approximately 25% of the traders implied by 75 of addresses that are
losing. So basically, we see that it's pretty similar wind and
lose rate as we have in prediction markets. And from what the real
statistics show, some when we look kind of deeper into what crypto
traders have when it's come to the day-to-day profit and loss
statement, we see that this number is even lower. So apparently from my
personal information, it's around 10% of winning traders and those who
actually earn on the constant basis from their in-a-day trading is like
five or even 3%. So talking about prediction markets are being
not that profitable, I would be really, really questioning this thing
because comparing to what we have in other markets, this number seems even
better than we have out there. Yeah, so 3 to 5%
of sports bettors are profitable long-term. So that's the basis we're
comparing against. And these metrics come from call-chi and
polymarket which have pre- you know pre- the models that are prohibitive
to most users winning. You know, like call-chi, I think the average
fee is like 4.3% percent per side on on a major sports
trade for a fairly liquid market versus the average on either side for
a sports book is 5%. So we've you know rebuilt the sports book fee model
and that's why many users lose today. Go ahead and grow a
fuck call-chi out there. Those guys are not playing by the ethos of
like certainly crypto but but really what predictions were
meant to achieve and you know excited to help
other entrants with competitive fee models, drive users to their application
and trades to their application. Right now the average
big on ag is about negative close to 1% it's like negative 0.8% right now
and the average fee charged on top of that like we very rarely route to call-chi
or polymarket because of their fee model. The average fee on top of that is
in the like 1 to 2% range so all end users are paying somewhere in the like
half percent per trade. And I think you know like smart users who are
starting with what is the event, what is the market I want to trade and then
finding the best fee or out for that event really can be profitable. So I see
you know a problem with the amount of money raised by these two major
entrants and the e-slifed revenue models that they need to achieve to
justify those valuations and really excited to help
you know newer entrants compete and create better opportunities for users.
Yeah and I mean we can talk about a lot of things like sports books, many startups
fail, many often traders lose their money, a lot of perks traders lose their
money right. I think it's a zogess and outcome of having an open market with
a relatively low barrier to entry. When you have when you allow people to
compete against one another you will have a bunch of people that lose right so
it's really about people's risk tolerances and when they choose to
participate they may just do it for fun or they may just give it a shot,
lose their money and then leave right so this this happens throughout all
industries and really throughout most open markets. So I don't think this is an
issue of prediction markets in particular I think we're just
kind of discussing the choose in a way on on how life kind of works in that sense
like it's it's just it's just how it is and then from a relative perspective as
well like yeah I think it's correct like prediction markets
compared to the alternatives aren't that extracted. You know you got meme coins
that are like 99% or whatever that crazy percentage is right so
you know it's really just about empowering people to act on their risk tolerances and
be able to allocate funds wherever they see fit and you know when you open that up then
you know some people will lose some people will win and that's just the way it is.
I agree. Sorry you good. Yeah okay so I basically agree what
August said it's more of on my part from what I have been able to do and basically our research.
I found that that it's more of not just Vick's tolerance but also the efficacy in terms of
resolution types resolution compatibility and the issues between products and teams that
are trying to build on prediction markets not being able to provide the best outcome for the
users so basically traders can be right and still lose and that also is one of the biggest
models that I feel like should be solved in terms of allowing traders to actually back their beliefs
and not be stagnated by what a venue thinks or what a particular group of people think about
market and that also in terms of resolution incompatibility also reduces the amount of people that
are actually able to make a profit on prediction markets because you can still be right as I said
before and still lose and it's more of even if a product or a prediction market is able to give
the right events and the right things people would still be willing to just gamble it out and at
the end of the day they don't read what is in tune or what is put on that venue in terms of rules
and the resolutions and the other stuff like liquidity the sleep age a lot of things to take into
account and that's why we see a lot of people in terms of traders basically lose so much and at the
end of the day there is no way to get that edge that you're looking for without having to spend so
much on your own path so there is still a lot of things that complicate the matter with prediction
markets even market makers are losing so much right now because of adverse selection and stuff so
yeah it's there is still a lot of contribute into the fact that makes people lose a lot of money and
I feel like it's something that would slowly do into down when when the right infrastructures or the
white products have put to on code on this this issues to wrap it up I would comment at the risk of
sounding like a broken record of times I would also comment on the value of information aggregation
once again I think there's plenty of instruments people can play with as someone was saying before
depending on their risk tolerance in order to try and turn a profit but many of these don't
generate useful information that people who don't want to bet can act upon right.
The interesting example was you know a few months ago with a workup and you would go to
pull the market and get a much get an interesting understanding of from people who actually know these
who are experts in this in this subject give you like a calibrated odds for what's going to happen
or it's not what's not going to happen right so being able to let's say challenge channel
this desire to make a profit while taking risk into an aggregated and readable
information stream for let's say society as a whole is also something I think is worth building
yeah kind of want to fall open that's that's a great point that you made in a lot of different markets
when we have capital markets we have equity markets you know even sports betting markets when
when money moves around from you know the un informed to the informed or whatever that happens
there's not a lot of value that comes out to society to it right and I think the difference with
prediction markets is exactly that difference right ask people use prediction markets we actually
create value for society for example like if I wanted to buy a house and I was curious whether I
should wait for the interest rate announcements or not wait for the interest rate announcement
I don't have to go and participate in the prediction market and I don't have to allocate my own
funds into a prediction market to actually gain value from looking at the percentage chance of the
the feds have to raise interest rates so it's this it's a stability to socialize the benefit that
is I think very unique to prediction markets and I think that's a really core contribution that
prediction market builders and the prediction than the prediction market space in general can make
two society we're generating good information useful information for people and the people that
can use this information don't actually have to participate in these prediction markets so I think
that's that's a pretty cool concept thank you guys so we're all agree to reset and even get back to
that original 78% of traders losing money I can tell you the truth when I for the first time can see
statistics about these numbers I should indicate it's pretty much so as the market maker it's
definitely a way how to make this figure lower and not because of me maybe you've heard a lot of
cases when some significant biggest players in the space like SAG group I believe still losing money
so it's just a matter of how young is industry not how bad is it or why it is so dangerous for new
users and still I agree that the real value is not only in this figure but outside okay so let's
move on we have next question about the big players so when a broker or a sportsbook that already
it has 20 million users adds event contracts what's genuinely left for a standalone platform maybe
you all saw this advertisement with Sydney Sweeney and you understand that all the budgets could come
and they could try to push the market for themselves and one more point give me the answer you
would give a team launching this month not the one you would do on a bad gas. All right let me start
I think that actually big sportsbook they are not going into that space that way like they probably
will have some you know most popular events but like for them they're earning their money on
you know standardized things so because they know exactly how to price them they know like a lot of
things and they put their like they put a big on it and stuff and for them it doesn't make that
much sense to you know give markets like what will be the best AI model like why would they
that's two even even though it's big on point market that's two niche for them so I think they're not
not going to go there and that's I think that's the one big advantage of point market is because
like point market they can they can they can experiment with different types of markets and some of
them can be like really low volume but some of them can can can explode and attract millions of
all and then we're all going to discuss them so I think that's how it's going to be yeah
yeah and I know what else I agree with Phil it's a business model thing right when you have a
user base let's say you're a sportsbook and you have a hundred users and each user has $10
you want to extract the math if you're a sportsbook you don't want them to spend their money
on prediction markets where you as a sportsbook have less edge right so you want to maximize the
amount of money that you're getting from your users so you don't really want to launch another
business model that's going to cannibalize your own business model which is potentially more
profitable than the one you're launching so that's I don't really think sportsbooks are going
to enter the market I think to do be pretty dumb for them to do so in my personal opinion
in terms of brokers to see exact same thing you know it really comes down to distribution it comes
down to building a mold for your user base and kind of squeezing out your users because these guys
are very extractive and they have business models that are essentially tailor made to do that
prediction market is different prediction market is an open order book you know anybody can
participate you're not going to get banned from a prediction market like you would from a sports
book if you're doing well so it's completely different and I think these big players these big sports
books and these big brokers are actually scared of prediction markets and they're taking a lot of
efforts to try and kind of undermine the space specifically because we're going to take their lunch
and I think that's kind of inevitable and I'm really looking forward to that but yeah it's just
it's just a question of opportunity caused for these bigger players then I don't think it makes
sense for them yeah let me just add one one less thing is actually someone who worked on a sports
book side I will tell you that like the risk management is the one of the most important things
and doing risk management for all these kind of markets that are on the power market is just
it's just like very very complicated so that's why I don't think they gonna insert
themself into this so my take on this question would be that this is one of the reasons why
innovating on the mechanism itself is important there's something to be said about trying to become
let's say the polymarket for a specific niche or you know trying to nail these channels on let's say
distribution or what specific use case you're serving but if you're able to truly innovate on
how the platform works and unlock use cases that are not able to be built in the incumbent then
you have you really have something right obviously it's much harder to do this
and obviously something that we are trying to prove with our own venture but yeah that would be my
answer and and I think it's something that gives you gives you a much more unique mode we can call
it like that okay guys thank you for your thoughts and the next question cold start everybody has
the same day one liquidity problem what actually worked for you pain market makers points and incentives
or pick an initial nobody bigger cared about and I mean the things that worked not the things that
was in the deck or still you think it should work I would jump in here to see my personal observations
and what I would say that most of the successful projects which are running right now they're not
standalone prediction markets but they just basically some sort of layer for polymarket so since day
one there's no problem with liquidity at all but looking at standalone prediction markets I would
consider it as the like you're going to have liquidity if you're going to really attract your users
with something outstanding because if you're just making the copy paste of polymarket you're not
going to attract users at all so it's either a permissionless prediction market or you just have very
very interesting markets that are being listed there or you have super cool point program that
is being built in the way how hyperliquid program was built so people are just really excited about
it and you know the entire Twitter supports you but still my personal vision for now that
it's better not to make standalone prediction market as far as the industry doesn't need it at
the current point of time you should only make a standalone prediction market if only you have
the idea that is actually groundbreaking yeah I want to comment on liquidity liquidity is probably
the biggest issue with prediction markets there's just no organic liquidity for pns unfortunately
as a market maker as a liquidity provider you know doing this for market for prediction markets is
usually a losing game the issue is the odds don't naturally fluctuate without any external
information being known and as you know you can believe in the efficient market hypothesis or not
that kind of doesn't matter the problem is like as a market maker you want to bank the spread you
want to buy low you want to sell high but with a prediction market it's like there's a point in
time where information gets revealed and then the odds just spike and if you're kind of if you get caught
as a market maker you're going to get caught buying very bad price because you're
ex-liquidity to people that are selling at a good price so that's why all these big major venues
they have to incentivize liquidity have to literally pay for market orders sorry they have to
literally pay for limit orders to be put into the book otherwise you're not going to have liquidity so
I think this is a problem that still needs to get solved I don't think it's been solved yet I don't
think throwing money at the problem is a solution because I think it's a it's a losing game you're
going to make less money in fees and you will in your liquidity provisioning incentives so
there's there needs to be an innovation on this front somehow from a liquidity side and there's
been a lot of good thoughts and research in this kind of direction already but yeah it's tough
liquidity is a huge deal because it's a chicken and egg problem if you don't have liquidity you're
not going to have traders and if you don't have traders you're not going to have liquidity because
there's just no money for market makers to give you the liquidity so it's like
how do you solve this right then we need a solution you agreed uh in this vein a few things have
been tried already for example like um AMMs or market score in rules as an example I think
most of the early experiments with prediction markets were of this form uh there's a few
structural limitations why that didn't uh pick up and so the market has converged pretty much
unanimously to our order books which have the liquidity uh cold start problem we have this cost
I would say um once again this is the moment to look into um alternative the signs uh things like
automated market makers I think can be tried again um they make the cold start problem for liquidity
a little bit easier to deal with in certain ways a little bit harder in others um but also to
the for example blockchain technology as a whole has uh improved enough or to the point that
some designs that may not have been viable 10 years ago uh might be viable now right and I guess
kind of like uh for Shadow and some of the ideas that that we have with function space itself
but yeah I think there's a few stones unturned still and what it comes to building prediction markets
using AMMs using markets corn rules um there are things to be tried here and I would just
urge builders to I continue to try and innovate in this front and uh that's all I would say that's
all I will say for now apart from like stay tuned to what function spaces build in because uh we
have our own views on on this problem I'm excited to find out where you're building and where you
got cooking up uh automated market makers liquidity providing for a prediction market is usually
just a game of donations um when uh yes you solve the liquidity problem for your users they can get good
bills they can get relatively low slippage but you still can't find organic liquidity providers
just like you can't really find organic market makers so usually what happens with a lot of projects
a lot of prediction market projects is they launch the automated market makers they
they fork the no-sus CTF contracts and they just have to add their own funds basically to cold start
this liquidity and then they try to figure out a profitable way to do it but it's just tough it's
the core of the issue is I don't think market making or liquidity providing for prediction
markets is a profitable venture and I and I don't know what the solution to that is because it's the
odds just swing way too fast because the odds are driven based off information so yeah hope
hope in printivation on this front and and yeah looking forward to see what you got cooking
yeah yeah okay um just to add about liquidity um provision in prediction markets um so it's
for me I feel like the apart from innovations to be made I feel like we can go back to the books
and look at what has worked in the past number one um with let's say good example is there a bit
programs there a bit um with our fq's we feel like a cold start isn't really necessary
but while the markets are actually moving um market makers should be able to
provide better codes in terms of um cross-venue um cross-venue liquidity aggregation and stuff
so it's more like if market makers are able to um cold better prizes and cold better wow
being able to edge that same risk. It reduces the issue about getting adversely selected on
this prediction market. And if that is not sufficient enough, there should be a last resort problem,
a last resort solution to the problem whereby even if a market is very thin in terms of the
liquidity debt and the market makers are not able to provide a better quote for that same
market. Traders should be able to access better liquidity options while being able to execute on
whatever venue that they choose. And that could be pointing towards the solution whereby last resort
liquidity might be the answer. I don't want to go too technically in debt at the moment, but I
feel like with last resort liquidity, we are not only able to solve the execution problem,
but also the liquidity problem that is underneath for traders exactly.
So I guess one thing I'll chime in on here that I think is interesting is we previously helped
to keep bootstrap liquidity for their predictions product prior to internalizing that that were
flow into their own order book. I agree with everything that's been said about
market making and specifically paying market makers to provide liquidity is an inherently bad
use of funds. And we have seen success with folks bootstrapping both market selection
and providing competitive spreads as an input to consumer fees by leveraging external liquidity
represented synthetically within their own front end. We're actually going to be doing this
with our aggregated product offering with a sport specific, like a single sport specific niche
predictions platform that we're going to launch with in the next about week here where they're
going to be leveraging our call sheet, polymarket and debt equity for money lines, spreads, and kind
of core markets for that specific sport. And then they'll be pushing all of their market making
resources to niche markets, like the equivalent of no run first in-ing and player props, etc.
for that sport so that they can have competitive events selection while leveraging
you know other venues for core liquidity on more standard market. So excited to
hopefully better validate that playbook. Yeah and I'm definitely can agree about the innovation
we need here because so far we have some internal starts from the teams. Let's say they spend
up to 30 50k per month to manage all of the questions connected with liquidity, trying to build
something inside to make a very simple models of hedging through biggest venues, but still overall
now is just a hedging through call sheet or polymarket, not some kind of innovation. And so far
innovation is a MMS or something like that, just making same logic more expensive and more
complicated instead of making it more straightforward and simple. And I think that we definitely need
some kind of innovation or a new format because as for us we're just trying to solve that for
our clients with the same logic for finding the proper hedge on the market and make it
as fast and direct as possible. But still if it will be any kind of
more liquidity and more users and you know faster growth it could help not in a efficient way I think.
But still you all know all the problems with slippage on imams and for typical
outgoing season even just a small one like we have now in crypto with
Robinhood and Salana with the trenches full of people again we can see like 10 access during the
day for any random token and nobody cares about slippage and all of the losses during that.
So probably in that kind of flow of liquidity from users into predictions will help to create new
models and probably it will generate solutions based on you know bigger market not only
initially from the projects who want to do that because actually all of that should come
for the users and from the users and then business solutions will be on the market right after.
So let's move on we have just a few more questions.
One if you couldn't launch another venue what would you build in this space instead which part
of this stack is underbuilt and boring enough that nobody's touched at it.
I'm sure I can jump in. Well you know I'm already kind of doing that I guess we're not really
launching a venue we're launching the Oracle P so I think the resolution layer is a little bit
underdeveloped I think there's a couple of main players and a couple of solutions that
can use a lot of improvements so that's kind of where we're focused on how we're focused on
providing the most fair type of resolution mechanism that's available in a way that you know
is least is most resistant to manipulation has the highest cost of actually making the Oracle
so you know I think that's a core infrastructure component to having truly important like truly
effective prediction markets where people don't think that you know they're going to bet on something
and then maybe even if they win they're just going to get rubbed because of some like you know some
people trying to gain the resolution system and nitpick every word and silica three page document
for the resolution criteria I think that's a very ugly user experience and that's something that
we really need to improve if we want to kind of take prediction markets to the next level.
Okay so probably we have two more interesting questions if nobody wants to jump in let's
skip that and go to next beyond speculation is there a real demand for using these markets to
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