Decentralized prediction market Polymarket is gaining popularity again, with a record high number of new accounts on the platform. According to Dune data, Polymarket's trading volume in January 2024 reached $51.34 million, setting a new monthly record high.

On Polymarket, betting on who will be elected as the US President

Polymarket's recent significant increase in traffic is due to both the Bitcoin ETF prediction in early January and the US election.

With nearly ten months to go until the US presidential election, Trump, as one of the candidates and a political figure adept at manipulating social media, has repeatedly shared the odds on Polymarket on his media platform Truth Social, bringing great exposure to Polymarket. Nowadays, political betting on Polymarket is very popular.

The left image shows the traffic ranking of Polymarket; the right image shows a screenshot of the odds on Polymarket that was retweeted by Trump.

The most popular prediction market on Polymarket is "Winner of the 2024 Presidential Election", with a starting trading price of 0.5 USD for each outcome. The price will change based on the amount of money users bet on both sides of the win or loss. The price (odds) represents the probability of the current event happening, which means that the current price of 0.5 USD implies that Trump has a 50% chance of being elected president. If the price rises to 0.7 USD, it means that Trump has a 70% chance of winning the nomination. As of the time of writing, the market has reached a total bet of 33.67 million USD.

Polymarket's operating model is quite unique. Users can transform their predictions about future events into actual investment portfolios. These investment choices are actually concrete representations of users' deep interpretations and future prospects of various information. Successful predictions can not only bring potential economic benefits but also prove traders' profound insights into specific topics. For example, for Bitcoin ETF-related...

Since its debut in 2020, Polymarket has been the preferred destination for crypto Degen betting. Users can buy and sell shares using USDC through their crypto wallets, while market makers can provide liquidity in each market and receive weekly rewards. Political election predictions are one of the biggest driving forces for markets to spread and become popular. When these two are combined, Polymarket once again attracts countless attention. In the previous election month of 2020, Polymarket's monthly revenue even surpassed SushiSwap, becoming the fourth highest fee-generating project in the blockchain industry.

Even Ethereum founder will bet on political elections on Polymarket. A month ago, Vitalik said on Warpcast, "My bets on boring but potentially winning diversified market political investment portfolios seem to be doing well."

Crypto Beyond, Polymarket's PMF

Although Polymarket is a truly decentralized market project deployed on Polygon, it has completed the transformation of obtaining PMF beyond encryption. On the Polymarket homepage navigation bar, you can see that Crypto is just one of the sections, in addition to politics, the Middle East situation, sports, popular culture and other topics. Mass adoption has always been a dream goal for some encryption projects, and Polymarket seems to once again demonstrate its potential.

Last week, Richard Chen, GP of 1confirmation, mentioned in his article "Computers vs Casinos: The Cultural War of the Cryptocurrency Industry" how Steve Wynn, a legendary figure in the casino industry, transformed Las Vegas from a single gambling center into a comprehensive entertainment destination. In 1989, Wynn opened The Mirage, which pioneered offering rich entertainment experiences outside of the casino, such as music performances and shopping malls. The success of this strategy prompted other casinos to follow suit, greatly increasing the number of visitors to Las Vegas.

Therefore, Richard believes that the encryption industry should also reduce zero-sum games and shift towards providing positive experiences. Predictive markets are one of the best choices to accomplish this mission, serving as both a betting platform and a source of information.

Market prediction has long been seen as the holy grail of the cognitive technology field. As early as 2014, Vitalik expressed interest in using prediction markets as a governance mechanism (i.e. futarchy). However, prediction markets have not made much progress in practical applications so far, and there are usually a number of common problems: most participants are often irrational, people with "correct knowledge" are unwilling to invest time and risk to place bets unless they involve large amounts of money, and market liquidity is usually insufficient.

Vitalik mentioned in his blog post yesterday that "if people are willing to bet billions of dollars on sports events, why wouldn't they invest enough money in US elections or other major events to attract serious participants?" However, this argument must face the fact that previous versions did not reach such a scale. Nevertheless, Vitalik remains optimistic about prediction markets because he believes that artificial intelligence will have the potential to participate widely in prediction markets.

But before extensively integrating with AI, we still need to consider the issues that Polymarket currently faces. One is what events, aside from politics (which are highly controversial and cyclical), can bring stable users and traffic to the platform. On the other hand, if Polymarket succeeds, what benefits will it bring to the cryptocurrency market, and what kind of derivative products can be built around it to keep the market vibrant?

On Twitter, fans of Taylor Swift shared a prediction market on Polymarket about the 2024 Grammy Award for Best Song, and compared Taylor's odds with another popular singer, Billie Eilish. With more and more players from traditional markets joining in, the future of Polymarket may become even brighter.

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