The Ethereum prediction market still lacks samples and its accuracy is doubtful, but it provides a simple and fast way.
Original Title: ” A Look at the Shocking Reversal of the US Election from the Ethereum Forecast Market “
Written by: James Beck
Compilation: Porridge Overnight
The original text comes from James Beck of ConsenSys. The translator has updated the data involved in the article to reflect some changes in the current market. Up to now, the results of forecast markets including Augur, Polymarket, Omen, etc. are shown as: Pu has a higher chance of winning the 2020 US presidential election.
In the book “The Wisdom of the Crowd” written by James Surowiecki, a story about the British scientist Francis Galton was the beginning. On a bright and refreshing day in the autumn of 1906, Gao Dunn went to an interesting fair where the crowd could guess the weight of a bull. At that time, Galton believed that the average estimate of the crowd should be far from the actual weight of the cattle. He believed that the answers of farmers and butchers would be more accurate. But the result left a deep impression on him: in the right circumstances, groups are often smarter than the smartest among them. In fact, the average result of 787 guesses made by all the masses is 1,197 pounds, and the actual weight of the cow is 1,198 pounds. In other words, the masses’ guesses are almost perfect.
What made the average guess of the masses of a county fair to accurately guess the weight of a bull? According to Surowiecki, intelligent people have four characteristics:
- Diversity of opinions: everyone should have some private information, even if this is just a weird explanation of known facts;
- Independence: People’s opinions are not determined by the opinions of those around them;
- Decentralization: people can specialize and use local knowledge;
- Aggregation: There are some mechanisms for transforming private judgments into collective decisions;
Surowitzki’s idea is based on a statistical principle: if you let a sufficient number of different and independent people make a prediction, or estimate a probability, and then average these estimates, then each of them Mistakes made in reaching the answer will automatically be offset. Sorowitzki speculated:
“Everyone’s guess has two components-information and error, and after subtracting the error, you get the information.”
The characteristics of Ethereum have laid the foundation for inspiring the wisdom of the general public. One of the first applications proposed by Vitalik Buterin in the Ethereum white paper is the prediction market, and Augur and Gnosis are the two most well-known prediction market applications.
And nearly 5 years after the launch of Ethereum, how did these prediction market applications perform?
Can prediction markets be more accurate than polls?
First of all, it must be pointed out that the prediction market was not invented recently. In the long history of the political betting market, Paul Rhode and Koleman Strumpf describe Wall Street betting markets during the Civil War, and in 15 presidential elections between 1884 and 1940, only one of these betting markets was wrong. According to a study by the University of Iowa, the Iowa State Electoral Market (IEM) performed better than major national polls.
Although the prediction market works well, it is not always the case. PredictIt, another popular election market, did not predict Brexit or Trump’s victory in 2016. On the eve of the 2016 election, the prediction market aggregator PredictWise gave the result: Hillary Clinton has an 89% chance of being elected president, while Republican Trump has only an 11% chance of winning.
Obviously, the wisdom of the masses is not necessarily accurate.
Today, people around the world have reached a record level of interest in forecasting the US election. On the Ethereum forecasting platform, the forecasted transaction volume on the Augur platform alone has exceeded 6.8 million US dollars.
So, do these Ethereum-based prediction markets meet the conditions of the intelligent people described by Surovitzki, that is, the diversity, independence, decentralization and aggregation of opinions?
The performance of the three major Ethereum prediction markets
I tried three new Ethereum-based prediction markets-Polymarket, Omen, and Catnip to see how smart they are in the end.
Disclaimer: Regarding the prediction market, different jurisdictions have different laws, so you need to further research to ensure that participation in the market is legal.
Omen
Market: “Will Biden win the 2020 US presidential election?”
Yes: 44.52% No: 55.48%
The first prediction market I checked was Gnosis’s Omen market. The user interface of the prediction market is very intuitive. After connecting to the MetaMask wallet, only one transaction needs to be approved, which costs about $2.
If a user thinks that Biden will win, he can choose the “Yes” option, otherwise he can choose “No”.
“Trading History” shows the total number of vote changes during the entire market life cycle. On August 23, a significant change was that 59% of people predicted that Biden would lose, but on September 8, the collective result turned to Biden, which showed that Biden had a 64% chance of winning. Since then, the market has maintained a certain degree of stability, with 60% thinking that Biden will win, and 40% thinking Trump will win. Today, the situation has undergone a sudden change. The current market forecast is: Trump has a greater chance of winning.
Polymarket
Market: “Will Trump win the 2020 US presidential election?”
Yes: $0.7 No: $0.3
Polymarket’s user interface is also very intuitive, it guides users through a tutorial to show how to make predictions. However, I am a bit dissatisfied with this application. To join a prediction market, users must purchase or deposit USDC in Polymarket, rather than simply connect to your MetaMask wallet.
Like Omen’s prediction market, Polymarket’s prediction results are also undergoing a 180-degree change today. The current prediction result is: Trump has a greater chance of winning.
Catnip
Market: “Will Trump win the 2020 US presidential election?”
Yes: $0.691 No: $0.309
Catnip is a prediction market based on Augur and Balancer, which promises to charge ultra-low fees, and is 100% non-custodial and decentralized. The only market available for the application is “Will Trump win the 2020 US presidential election?” It should be noted that this market will not be settled until January 22.
You can easily access this application through the MetaMask wallet, and then select the supported result, either yTrump or nTrump, which stands for “Yes” and “No” respectively. Unlike Omen and Polymarket, these yTrump or nTrump tokens will be sent directly to your MetaMask wallet.
Similarly, the current forecast given by the Catnip market is: Trump has a greater chance of winning.
Is the prediction result of the Ethereum prediction market credible?
Among the four considerations for gathering useful crowd wisdom, the Ethereum prediction market has advantages in gathering decentralized inputs and reliably determining wins and losses.
What is particularly interesting about the Iowa Electoral Market (IEM) that we mentioned earlier is that its typical sample size does not exceed a few thousand traders, and it cannot reflect the composition of the entire electorate. In addition, most traders are White males from Iowa (obviously, the proportion of male users in the Ethereum prediction market is too high). However, market participants do not necessarily have to predict their own behavior, but what they think American voters will do—this has proven to be at least as accurate as polls.
Although some Ethereum prediction markets are more liquid than IEM, they lack sample size and cannot be compared with BetFair. Obviously, there are still some doubts whether the accuracy of these prediction results is high enough.
But one thing is clear: Ethereum-based prediction markets represent a simple and quick way to turn opinions into a single collective judgment, and it may improve the way we understand the results.
Source link: thedefiant.substack.com