The Development and Future Outlook of the Prediction Market Polymarket

Prediction markets provide a way for people to supplement search engines, allowing users to obtain "conclusions" rather than just "analysis." All the analysis is hidden behind the winning probabilities.

The prediction market is essentially a binary options market where users can buy and sell "contracts" on the outcomes of future events. Winners profit from the losers' bets based on a proportion, while losers lose their entire principal. By buying and selling contracts, users are essentially "betting" on the likelihood of a certain event occurring, and therefore the contract prices reflect the market's judgment on the probability of the event happening.

Polymarket is currently one of the hottest prediction markets, built on the Polygon network. It allows users to place bets directly using traditional payment methods to purchase USDC, without the need for complex operations like wallet binding, making it very user-friendly for non-Web3 users. Currently, Polymarket's data performance is good, with a betting volume of 387 million dollars in July and daily trading volume reaching millions of dollars. There are over 550 million dollars in unsettled contracts for the event of the U.S. presidential candidates alone.

The rise of Polymarket can be attributed to several factors:

1. The hot events of 2024 are constant, such as Bitcoin ETF, the US presidential election, etc.

2. The crypto market is more closely linked to macro factors, attracting more users to pay attention to prediction markets.

3. The infrastructure is more complete, addressing the technical issues faced by early prediction markets.

At the product level, Polymarket has optimized the pain points of traditional prediction markets:

1. Optimize UI/UX to lower the usage threshold.

2. Provide liquidity through incentive mechanisms.

3. Increase content supply and achieve decentralized settlement.

Nonetheless, Polymarket still faces some challenges:

1. Insufficient liquidity may be a long-term issue.

2. Difficulty in designing token utility.

3. User conversion rate is low, and customer acquisition is difficult.

4. There is still room for improvement in decentralization and fairness.

5. The participation rate in non-election-related events is relatively low.

Although the enthusiasm may decline after the U.S. election, the prediction market still has long-term development potential:

1. The prediction market has a solid user base and history.

2. Political topics will not end, and the supply of events will not become a problem.

3. User stickiness is increasing, with 15-25% of users converting to long-term users.

In the future, there are three major potentials of prediction markets based on cryptography that are yet to be explored:

1. Enable everyone to create events and obtain sufficient liquidity.

2. Develop into a media platform where "everything can be predicted".

3. As a supplement to search engines, provide the "conclusions" most needed in the era of information explosion.

The development of Polymarket provides insights for market participants:

1. Attention should be paid to application development, as the infrastructure is already sufficient to support excellent products.

2. The infrastructure that lowers the user threshold is basically sufficient and can start attracting non-crypto users.

3. You can first focus on validating product demand in a specific market rather than aiming for the global market right from the start.

4. Reasonably grasp the timing of financing news disclosure, and maintain a low profile before the product is fully prepared.