Prediction markets and betting on a person’s believes about the future is not a phenomenon linked to the rise of the internet, but an activity dating back hundreds of years. The first confirmed accounts of such activities date back to 1503 when Italian merchants wagered on the papal succession. Already then, the value of crowd predictions was recognized by Venetian ambassador Matteo Dandolo who stated that the “(…) merchants are well informed about the state of the poll (…)”. The tradition continued and in 1988 the first internet prediction market, the Iowa Political Stock Market, was launched by the University of Iowa. After starting out as a tool to predict political events, the spectrum of predictions was widened in the 90s and early 2000s by several new market makers to include all kinds of future events. GJopen.com has become a prominent predication tournament platform that expanded the range of forecast questions from politic to economics and business.
Parallel to that, blockchain technology was developed in the 90s and and saw a rise in popularity in the 2010s as Bitcoin prices started to rally from cents to thousands of dollars. Amidst the Bitcoin hype, other more versatile technologies like Ethereum and Cardano were introduced, giving the users the chance to created all kinds of smart, mutually secured, contracts. The first blockchain based prediction market, Augur, was launched on the Ethereum blockchain in 2018. On the platform, users could trade binary contracts based on a predefined question (e.g. Will Donald Trump be abolished before his term ends). In the end an “oracle” would resolve the question, but would be fined if the blockchain (gros of users) disagreed with its verdict. Unfortunately, the resonance back then was not very positive, because the interface was difficult and buying crypto was still uncommon/difficult. After Augur’s launch, other crypto prediction markets were set up, based on all kinds of crypto currencies. Some of them use stable coins like USDT or USDC to incentivize less crypto affine users to participate without having a currency risk. The currently largest crypto prediction market is Polymarket with a peak daily trading volume of USD 5mn (Jan. 2024). Also venture capital seems to be interested in the technology with multi-million dollar funding rounds being closed for platforms like Polymarket, PlotX, Hedgehog, and TradeX.
Below you find an overview of the currently active blockchain prediction markets we could identify:
