Prediction Market: The Wisdom Crystal of the Encryption World

A prediction market is an open market that predicts the outcomes of specific events through financial incentive mechanisms. These markets allow traders to bet on the outcomes of various events, and the market prices reflect the collective judgment of the public regarding the probability of the events occurring.

Typical prediction market contracts trade within a range of 0% to 100%. The most common form is the binary options market, where the price at expiration is either 0% or 100%. Users can also sell options at market price before the event occurs.

Through prediction markets, we can extract expectations about future event outcomes from the betting behaviors of participants. Traders with differing views express their confidence by buying and selling contracts, and the market price of the contracts is seen as the aggregated expectation.

The history of prediction markets dates back a long time, almost as long as the history of human gambling. Political predictions seem to have existed since ancient times, with people in the Middle Ages being keen on betting on the outcomes of papal elections.

As the U.S. elections approach, interest in political-related bets reached a new peak in July. Some prediction market platforms have garnered widespread attention.

Polymarket: Order Book Tradable Prediction Market

Polymarket is a decentralized prediction market project established in 2020. The platform allows users to trade on a variety of hot topics, including politics, sports, pop culture, and more.

Unlike traditional sports betting, Polymarket allows users to freely trade shares before the outcome of events is revealed, enabling speculators to flexibly participate in probability games.

Polymarket adopts a mechanism based on a conditional token framework. By staking 1 dollar, users can obtain two conditional tokens representing the two possible outcomes. These tokens can be freely traded in the market, and their prices reflect the market's expectations of the event's outcomes.

The prediction market of Polymarket mainly includes the following parts:

• Market Theme: Each prediction focuses on a specific theme or event.
• Oracle: Uses UMA optimistic oracle to determine event outcomes.
• Conditional tokens: Tokens representing different outcomes can be freely traded.
• Order Book Market: Adopts a hybrid on-chain order book trading mechanism.
• Liquidity providers: Profit by market making and earning fees.

Currently, Polymarket has no plans to issue tokens, but it provides USDC incentives for market-making activities through a liquidity reward program.

SX Bet: Single Bet Prediction Market

SX Bet is a sports betting platform founded in 2019, currently operating on the SX Chain. It primarily supports betting related to sporting events, and recently has also added encryption currency and political topics.

Unlike Polymarket, SX Bet adopts a traditional sports betting model, supporting only single bets and not allowing free trading before the results are announced.

The innovation of SX Bet lies in its implementation of a combination betting system for the first time. Users can make predictions on a series of events, and only if all are correct can they win a prize. This high-risk, high-reward mechanism is more likely to lead to viral spread.

Pred X: Prediction Market Based on AI-Driven Topic Suggestions

Pred X is a multi-chain prediction market platform that supports various topics such as politics and cryptocurrency price predictions. Users can place bets using USDC on multiple public chains.

Unlike other platforms, the prediction topics on Pred X are mainly generated automatically by AI. However, the platform currently has some issues: low order book depth and trading volume, lack of support for users to freely place orders, and unclear implementation details for multi-chain support.

Overall, Pred X currently resembles a semi-finished product, and its practicality and reliability still need improvement.

Azuro: A Betting Protocol Supported by Liquidity Pools

Azuro is not the prediction market itself, but rather a foundational protocol for creating on-chain prediction markets. It offers a permissionless infrastructure that includes a set of smart contracts and web components.

Azuro only supports single bets and does not allow free trading of outcome tokens like Polymarket. Its system is centered around a liquidity pool and utilizes the concept of "liquidity trees" to enable multiple prediction topics and betting platforms to share the same liquidity pool.

In Azuro, event odds are calculated based on the ratio of the betting funds to the total liquidity. Data providers can set the initial odds and make adjustments. The system also supports multiple dApp platforms and has a dividend mechanism.

Azuro has issued its native token $AZUR, and a portion of the profits will go into its DAO.

Conclusion

Prediction markets are an interesting information aggregation system that can effectively reflect true opinions. Encryption technology reduces trading friction, and smart contracts and AMMs bring better mechanisms to prediction markets.

However, existing solutions still have some limitations. Polymarket struggles to achieve flexible betting, and Azuro's liquidity pool scheme is relatively complex. The popularity of prediction markets reflects more the popularization of encryption culture and the triumph of free market principles. In the current information environment, such decentralized prediction systems are particularly valuable.