It's said that prediction markets are sure to be a hot topic next year, and everyone is waiting for the big airdrop from the prediction market.
A little shallow insight, please correct me, big shots.
Core Logic
In simple terms, a prediction market is a platform that allows us to bet on any future events, such as the results of the US government elections, the World Cup, or various token prices.
Its core logic is 'price is probability'; the higher the 'share' price corresponding to a result, the greater the market believes the probability of it occurring.
This process is like buying and selling 'opinions' on the chain, ultimately settled automatically by smart contracts based on real outcomes, with the winners taking all the prizes.
Settlement mechanism
When an event occurs and is verified:
The token for the winning outcome will be settled at a fixed price, generally $1 or 1U. The value of the tokens for the losing outcome goes to zero.
Outcome prediction
The price ratio of 'yes/no' tokens in the market is everyone's prediction of the probability of this event occurring.
If the 'yes' token price is $0.70, it means the market believes there is a 70% probability of this happening.
Major platforms
1. Polymarket: is currently undoubtedly the top leader, focusing on political, cryptocurrency, sports, and other real-world events. Cumulative trading volume has exceeded $9.8 billion, making it the largest crypto-native prediction market. It is clear that there will be an airdrop with token issuance.
2. Kalshi: Long Two, the compliance path representative, the first fully regulated prediction market exchange in the U.S. by the Commodity Futures Trading Commission, with high compliance. Monthly trading volume exceeds $1 billion, valued at $5 billion. Mainly serves U.S. users, dominating the compliance market. Currently, there is no clear token issuance plan.
3. Opinion: The leader of the BN prediction ecosystem, launched on the BNB Chain in October. Completed seed round in March. In November, it briefly surpassed Long One and Long Two, and has recently seen a slight decline.
4. Limitless: The leader of the Base chain, has issued tokens, LMTS, and is currently in the second season of airdrops, which will allocate 2% of the total token supply, ending on January 2 next year.
5. Predictdotfun: Started trading yesterday, also part of the BN ecosystem, currently in the start-up phase.
6. Probable: Similar to the BN series, currently not yet launched, with no transaction fees.
It can be anticipated that the two little brothers of the BN series will certainly exert some pressure on the big brother.
Arbitrage space
Airdrop arbitrage
Platforms will use airdrops to attract early participants during their initial launch.
Polymarket: As the absolute leader, and with clear plans for issuing tokens and airdrops, it is definitely worth interacting.
Opinion: Participants who have been interacting and have been involved for some time can continue to participate and see if they can obtain airdrop points while controlling costs.
Predictdotfun: It just started trading yesterday, definitely belongs to the early phase, it is recommended to allocate a portion of funds and managers for interaction. The initial difficulty in obtaining points will not be too high, and the rewards are relatively good.
Probable: The idea is similar to Predictdotfun, getting in early to collect a wave of airdrops is fine.
Prediction market arbitrage
Such opportunities mainly arise when there is a deviation between market pricing and real probabilities or between pricing in different markets.
Cross-platform arbitrage
When an event is traded on two different prediction markets, for example, Polymarket and Omen, their probability pricing may differ.
Buy on platforms with lower prices, for example, if you believe the probability of a certain event occurring is 60%, while selling on platforms with higher prices or making opposite trades in another market to lock in risk-free profits.
However, timing is hard to grasp, fleeting, and we need to consider transaction fees and slippage.
Market and odds arbitrage
If an event is being traded simultaneously on decentralized prediction markets and traditional centralized websites, then the pricing of the event outcome, or the odds, may differ.
We buy in the market with lower pricing and hedge or sell in places with higher odds.
Traditional platforms usually have KYC or geographical restrictions and involve cross-platform risks, for example, one party's settlement delay.
Event uncertainty arbitrage
When the outcome of an event has been determined but the market has not settled, or when two markets have different definitions or understandings of the event or oracle source, arbitrage may occur.
At this point, we can leverage our informational advantage to buy the tokens for the winning outcome when the market price does not fully reflect the final result.
But it is essential to ensure that the interpretation of the events is consistent with the final oracle arbitration results.
✅ Summary and next steps
Web3's prediction markets combine the decentralization of blockchain with traditional financial derivatives concepts.
Besides being a speculative tool, it is also an effective mechanism for aggregating collective wisdom.
Due to the popularity of Opinion, I didn't catch the wave, so I'm preparing to invest funds and energy in Predict.
Subsequent updates will provide specific gameplay for interaction and earning points.
Welcome to follow up.
