Social epistemic tool, but is it safe?

Does Polymarket qualify as gambling? Ethereum co-founder Vitalik Buterin pushed his debate chips into the middle to settle the ongoing conversation. His comments tackle ongoing concerns over the nature of decentralized prediction markets, saying that prediction markets like Polymarket are often misunderstood.

lack of editorial bias means Polymarket offers a transparent view of what is likely to happen

Social media and news outlets don’t just offer editorial discretion, they promote that oversight as a feature, not a bug. But according to Buterin, Polymarket serves as a social epistemic tool, offering a view of important events unfiltered by editorial bias. The lack of editorial bias means Polymarket offers a transparent view of what is likely to happen regardless of what anyone thinks. As reported by The Crypto Basic, Buterin “emphasized that conditional prediction markets are already finding applications in governance.”

In a tweet from Aug 25, 2024, Buterin said: “Putting Polymarket into the category of ‘gambling’ is a massive misunderstanding of what prediction markets are or why people (incl economists and policy intellectuals) are excited about them. Prediction markets are interesting because they’re a social epistemic tool: the public gets a view of how important certain events are and what kinds of things are likely to happen, that is much less vulnerable to biased editorial opinion than either social media or news websites.”

Can Polymarket and DeFi coexist?

The debate rages on, as indicated by a conversation instigated by a user known as “strobie reeeee” who believes there would be less confusion if people understood decentralized finance (DeFi). Strobie argues that Buterin is skeptical of DeFi due to the public associating DeFi with unsustainable token issuance schemes. But strobie argues that while DeFi does play a part in issuance schemes, it also covers healthier applications like lending, borrowing, and synthetic assets.

Strobie said: “It seems that in your view, ‘DeFi’ means the 2021 farming craze ponzi schemes; but to a lot of other ppl (I would say the majority), ‘DeFi’ means lending/borrowing on money markets like Aave, CDP like RAI (you mentioned too!), synthetics, etc. Those are all healthy applications of decentralized finance – the yield comes from borrowers, trading fees, etc. This is perhaps why ppl are confused that why Vitalik would be seemingly against DeFi but for gambling/prediction markets like Polymarket and a centralized stablecoin like USDC.”

insists that applications like Polymarket fall into the category of useful and sustainable over time

Buterin acknowledged the concerns but redirected the conversation back to Polymarket. He insists that applications like Polymarket fall into the category of useful and sustainable over time, pointing out how prediction markets express a utility in information sharing and decision-making.

Polymarket enjoys surge in activity

According to Richard Chen, the previous General Partner of early-stage venture fund 1confirmation: “88% of [Polymarket’s] volume has been election related since the start of 2024.” That’s a remarkable surge of user engagement in both prediction markets and Polymarket specifically.

Indeed, as reported by VSO News, Polymarket was the top crypto market for bets on the Democratic National Convention and ongoing election for President. Trading volume and user accounts have shown consistent growth. Over the past four months, Polymarket has seen continued expansion in monthly trading users, with figures nearing 54,000.

If that weren’t enough to solidify Polymarket’s strength, the platform has seen an uptick in open interest and trading volume, with numbers spiking over $100m for the first time in the platform’s history. Perhaps motivated by the presidency as much as standard betting markets, Polymarket has seen a rise in the number of new Polymarket accounts, with numbers passing 60,000 new accounts over recent 2024 months.