What Is Polymarket?: Learn About the Popular Decentralized Prediction Market Site

Thanks to DeFi, there are exciting new ways for you to bet on world events, besides using the best crypto gambling sites. Today, we take a look at a platform that’s making big news by itself.

Will Michelle Obama become the next President of the United States? It may sound far-fetched as we go to press, but there’s at least $3.7 million riding on the outcome. That’s how much money Polymarket had taken on the former First Lady by the time of this writing.

What is Polymarket?

In case you haven’t heard, Polymarket is a prediction market, not unlike PredictIt or the Iowa Electronics Markets, but with a twist: It’s decentralized. You use cryptocurrency to buy and sell your shares.

As with PredictIt, Polymarket has had some issues when it comes to running afoul of regulators. But those issues appear to have been resolved, so let’s take a closer look at what makes Polymarket the most popular DeFi betting platform on the planet.

What Are Prediction Markets?

Imagine a world where you can simply bet Yes or No on whether certain newsworthy events will take place. We’ve been living in that world since time immemorial, but with prediction markets, you don’t just bet on political props – you buy shares.

The price of these shares will go up or down depending on market interest, and the development of the news story in question. According to a 2012 paper by Paul W. Rhode and Koleman Strumpf, some of the first prediction markets we know about were in the early 1500s, when people would buy and sell shares in certain cardinals becoming the Pope.

These markets weren’t just set up for pure betting purposes, either. They were often established by companies to harness the “wisdom of crowds” to get a better sense of how likely certain outcomes were; the Iowa Electronics Market (IEM), for example, was started in 1988 as a non-profit by the Tippie College of Business at the University of Iowa.

What Is A DeFi Prediction Market?

Take your standard prediction market, but use crypto to buy and sell your shares, and voila – you’ve got a DeFi prediction market. This was all made possible by the introduction of Ethereum; the first of these markets to hit the scene was Augur in July 2018.

The initial versions of these DeFi prediction markets didn’t fare too well. Augur, for example, saw a steep decline in daily users not long after its launch and some major changes went into the release of Augur v2 in July 2020. Using a stablecoin (DAI in their case) for faster trading and payouts was one of the biggest innovations.

Polymarket went through similar changes between the release of their first beta on June 16, 2020, and their second version two years later. They made USDC their stablecoin of choice for buying and selling shares – “smart contracts” to be precise. Polymarket also scaled down their offerings after paying a $1.4-million fine to the CFTC, who had placed a “cease and desist” order on these contracts.

What Can You Bet On At Polymarket?

Just about anything you can bet at the top sportsbooks. For example, Super Bowl LVIII was a hot commodity, although it looks like the lion’s share of the action was on San Francisco, who lost 25-22 to Kansas City in overtime. Betting on the number of times Taylor Swift would appear on the CBS broadcast was high as well; Swift was shown 12 times during the Big Game.

Politics is the big seller with prediction markets, though. The 2024 U.S. presidential election is understandably the No. 1 concern for most investors, and yes, Michelle Obama is one of the people you can bet on. Not that she’s the favorite; the odds at press time give her a 7% chance of winning, up from 4% at the end of January.

He’s ahead in the polls, so Donald Trump is the current favorite at Polymarket, with a 54% chance of winning the election. Incumbent president Joe Biden is next at 31%. While these are the presumptive candidates for the Republican and Democratic parties, both are elderly men with poor approval ratings, leading to speculation that someone like Michelle Obama will step in. The betting handle on Obama has skyrocketed from $2.3 million at the end of January.

If elections aren’t your thing, you can bet on things like Ethereum hitting $3,000 sometime in February (33% chance), or whether Israel will invade Lebanon before the month is out (5% chance). This being DeFi, there seems to be a lot of “dead money” in the market from conspiracy theorists; you can even bet on whether the Super Bowl was rigged (1% chance).

If you pick and choose your spots, you’ll definitely find some betting value at Polymarket – if you’re willing to fade the public.