Gamblers, pollsters and the blockchain — a match made in heaven

You know those people who are always convinced that they’re right, including perhaps some of our nearest and dearest? Trump will fire Vance by the end of September, trust me. Chelsea is going to win the next European Cup, no question. There is no chance of peace in the Middle East this year, none whatsoever. The coalition government will collapse by Christmas, for sure. Interest rates will be cut at the next Fed meeting, I’ve done my research. AI will cure cancer this year, obviously.

Big opinions, confidently expressed, garlanded with the certainty of special or secret knowledge, especially after a few drinks. 

Well, there is a corner of the cryptoworld where prognostications are writ large and big money is at stake. If you’re that certain, you can put your money where your mouth is. 

They are called prediction markets. They have been around for a long time, well before blockchain came into being. In 1503 the first betting market was recorded – on the papal succession. Then, in the 17th and 18th centuries, markets were established to bet on political matters in Italian city states, expanding to other regions and areas of prediction (notably sport) right up to today, including areas where gambling is illegal. 

There are really two stories here. The first one is about gambling. The second is about the wisdom of crowds and the accuracy of polls. We’ll get to that. 

Traditional betting venues have many drawbacks, both small and large. Let me count the ways. 

The first belongs to the old-style broker, more colloquially known as the bookie. Ladbrokes of London charges approximately 5% commission on a bet. That’s 5%. Also known as daylight robbery. 

Then there is the fact that the traditional broker sets the odds and does not change them in real time in response to new information. I assume most brokers are honest but, even so, one can assume that the man in the middle is looking out for himself ahead of the punters. (It is, of course, true that online betting has increasingly reduced the opportunities for unfair rent extraction.) 

Betting is often a discreet business, even shameful or otherwise problematic for some. Many people would prefer to stake their predictions quietly and in the strictest confidence, which means no names, no credit cards and no public spaces in which to be named and shamed. 

Finally, punters in a betting shop, virtual or otherwise, cannot simply bet on whatever they want. They are offered a menu of options decided by the market operators, the casinos, the brokerages, the apps. You cannot simply say – I will put a hundred down that my cousin Vinnie will be divorced this year. There may not be any other bets placed (besides Vinnie’s), but you never know. People are very sure about all sorts of curious and unusual future events, but they can’t always find a venue in which to offer up their certainties. 

Blockchain fixes this.

Completely confidential, with negligible fees, it offers real-time mathematically transparent odds. There are thousands of events to bet on, even situations you can define yourself, such as cousin Vinnie’s unfolding marital problems. 

The graphic below is just part of a single page from the biggest blockchain-based prediction market, called Polymarket, which includes subject areas like local politics, sports, economy, geopolitics, science, business, pop culture, movies and many more. 

(Image: Polymarket.com)

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