When people think of prediction markets, they usually imagine betting on election outcomes. To many, prediction markets might seem no different from any other form of gambling. According to Ethereum’s co-founder Vitalik Buterin, prediction markets offer great value and could be helpful in fields other than voting processes.
In this article, we’ll explore Vitalik’s obsession with prediction markets and his vision of “info finance,” where these markets could shape social media, science, governance, and more. Let’s dive in!
What Exactly Are Prediction Markets?
A prediction market is like betting on an occurrence yet to happen in a future calendar, such as the outcome of a game, election, or trial. The odds or prices on these markets show what people think are the probabilities of a specific event occurring. If most people believe a candidate will win an election, the “price” or odds of winning will be higher than the odds for the opposing candidate.
VITALIK BUTERIN ENVISIONS ETHEREUM PREDICTION MARKETS IN GOVERNANCE AND SCIENCE
Ethereum co-founder Vitalik Buterin proposed the concept of “info finance,” a model where prediction markets could drive reliable information creation for governance, science, and social media.… pic.twitter.com/CpzBi0OYTd
Prediction markets have something at stake, unlike regular news or opinion polls. People staking money on their forecasts make the resulting odds significantly more credible, as they are under the condition of ‘put your money where your mouth is.’
Vitalik’s Interest in Prediction Markets
Vitalik Buterin has been in prediction markets for years. In 2014, he wrote about “futarchy.” In futarchy, people vote on values (like economic growth, health, etc.). They then let prediction markets decide which policies will best achieve those values. It is a new type of governance, so Vitalik remains interested in prediction markets.
To Vitalik, prediction markets are not bets or some kind of gambling at all. He preferred to classify them as an “information tool.” They can simultaneously perform like news platforms and bookmakers, indicating more than mere noise and media bias.
Love this post on “info finance”. Prediction markets are an early special case of info finance – the use of markets to create distillations of more expensive mechanisms (eg predictions of voting outcomes). Multiple generalizations. At scale a possible revenue stream for AIs. https://t.co/vwdil0O0MS
Polymarket is among the platforms that have caught the attention of Ethereum co-founder Vitalik. In a live election, Polymarket allowed people to bet on who would triumph and updated probabilities based on the time that an election was ongoing. Compared to regular news that sometimes tends to exaggerate, Polymarket provided a less distorted image of the odds. It also offered an instant idea of what the market believed was true.
Such information can be valuable to those who want to separate the signal from the noise. Comparing the news and the odds in a prediction market helps one gain a broader perspective. Relative to news, prediction markets offer a more balanced view of the story in cases when news is either overemphasized or underemphasized.
Vitalik only considers prediction markets as one component of something far more significant, which he calls info finance. This is the notion that ‘you could pay for good information in the interest of all those who benefited.’ Here’s how it works:
Prediction markets are already a form of info finance. They gather opinions about future events and turn them into public predictions based on where people are willing to place their bets.
Decision markets go one step further. For example, they compare two business strategies: A and B. In a decision market, betting on which option is likely to produce optimal outcomes becomes possible. The market could inform leaders which wisdom people believe is more profitable and steer them this way.
In short, info finance uses market mechanisms to get people to share helpful information, helping others make better decisions.
if you’re a regulator and trying to figure out where – why not create a prediction market around “is X committing fraud?” and see how people are placing their bets
in Vitalik’s recent post on “information finance” – he has a version of this for scientific peer review. But I also… pic.twitter.com/0jt0Oebwi2
In the future, AI could play a huge role in information finance. Prediction markets need more participants and money at stake to attract meaningful bets. But imagine using AI models that can analyze tons of data, providing predictions even for more minor, niche questions.
How Info Finance Could Impact Our Lives
Prediction markets are only the beginning. Here are a few ways info finance could evolve to influence other fields:
Social Media and Content Moderation: Instead of relying on social media companies to flag false information, a prediction market could predict the likelihood of a story being true or false, incentivizing participants to weigh in.
DAO (Decentralized Autonomous Organization) Governance: DAOs often need help getting enough votes from members. Info finance could help by allowing prediction markets to suggest likely outcomes.
Scientific Research: Prediction markets could help by allowing people to bet on whether a study’s findings will hold up in future research, offering a quick insight into credibility.
Public Goods Funding: Some funding systems reward only the most popular projects, which may only sometimes be the most impactful. Info finance could help identify projects that contribute the most to a larger goal, ensuring fairer distribution.
Conclusion
Prediction markets are creating a new way to source credible information and make decisions. We can better navigate our complex world by looking beyond traditional news sources. Vitalik’s vision is clear: It’s time to go beyond elections and explore what information finance can bring to science, governance, and public trust.
Vitalik believes the time is ripe for information finance. The world faces a growing challenge of figuring out whom to trust, especially in news, science, and politics. Information finance could address this by creating incentives to reveal helpful information.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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Love this post on “info finance”. Prediction markets are an early special case of info finance – the use of markets to create distillations of more expensive mechanisms (eg predictions of voting outcomes). Multiple generalizations. At scale a possible revenue stream for AIs. https://t.co/vwdil0O0MS
