<p dir="ltr">The capacity to precisely anticipate the future has attracted market participants since the birth of markets itself, whether it is sports results, election outcomes, or future asset prices. As the future of finance shifts to a more decentralized model, it's no surprise that crypto prediction markets have grown in prominence in recent years, with new and intriguing participants entering the fray. Discover more about this market with <a href="https://www.builder.news/" alt="Builder news website" title="Builder news website" target="_blank" rel="" class=""><u>builder.news</u></a> through the following article.</p><h2>What is decentralized prediction markets</h2><p class="prosemirror-p-center"><img src="https://lh6.googleusercontent.com/3wNQC3oShRan7ID3AiC7TMTum6dF6LvmOcG_I6JY3aZBt-pNep1uP0Dt-fcd95Pi8lEPsoenD3q-_PCw96lA5de3ddaGLiKErV5wgHmS5KZLQpFjfJ7UQ6LlzzOkLxDdXBQ40uF1YtkFjVBLpg" alt="What is decentralized prediction markets" title="What is decentralized prediction markets" width="624" height="375"></p><p dir="ltr">Since the debut of Augur, the first such platform, in 2014, prediction markets have been praised as one of the best blockchain use cases. Since then, most early platforms have vanished for one of the following reasons:poor functionality/ user experience; excessive Ethereum gas fees or inadequate liquidity.</p><p dir="ltr">However, with the introduction of Ethereum scaling solutions and diverse incentive structures in 2020, a new generation of decentralized prediction markets arose. Unlike in the past, some companies have established early product-market fit. We feel that, given the way these platforms are expanding, this category could emerge as a new type of social media and be a leader in the next wave of popular acceptance.</p><h2>How decentralized prediction works</h2><p class="prosemirror-p-center"><img src="https://lh3.googleusercontent.com/VsK-UTpRGXK5REgTU8xEyljhbPCHB4EVm9RQGRNn3qpjpiaZvLXc_yxghGZJEyKWGoM3zkDBoZxmThlmryw2acDxHa2Np1-1irNn5NWbC36TraMmrFiGeySSaCM3j2dEdQURWP2tKQrvvPqspQ" alt="How decentralized prediction works" title="How decentralized prediction works" width="512" height="313"></p><p dir="ltr">Prediction markets, in a nutshell, allow users to wager on the outcome of binary events. Users can purchase either a 'Y-token' or a 'N-token' in decentralized prediction markets, which represent two sides of a binary outcome event and are priced between $0-$1 depending on demand and supply. If the probabilities of either event are equal, for example, both tokens will be priced at $0.5. On the date of the event, the value of the winning token increases to $1, while the value of the losing token decreases to $0, and the value is transmitted from the losing cohort to the winning cohort.</p><p dir="ltr">The outcome of events in a decentralized prediction market can be reported in one of two ways:</p><ul><li><p dir="ltr">Oracle incentives based on tokens: The platform offers a native token that can be staked by Oracle service providers. In exchange, they receive a portion of the fees.</p></li><li><p dir="ltr">Centralized oracle: In the early phases, the platform operates as an oracle and does not issue a token. This increases the risk of platform manipulation while decreasing the danger of early volatility until the initiative achieves product-market fit.</p></li></ul><p dir="ltr">The advantages of prediction market:</p><ul><li><p dir="ltr">Global: For the first time, consumers can place bets on global events without the need for infrastructure or currency exchange (most platforms operate on USDC)</p></li><li><p dir="ltr">Fewer Restrictions: Each centralized platform imposes its own set of user constraints. Users who consistently win, for example, may be barred from betting in the future.</p></li><li><p dir="ltr">Limited Derivatives Risk: Several centralized prediction markets, including Intrade, have had to close down abruptly.</p></li></ul><h2>Top decentralized prediction markets</h2><p dir="ltr">As cryptocurrencies become more popular, the underlying blockchain technology delivers solutions and promotes a decentralized world. Decentralized prediction markets have evolved steadily over time. Prediction markets appear to have huge promise and can generate more accurate forecasts than general polls. Hereafter, let’s take a look at some of the top crypto prediction markets.</p><h3>Augur</h3><p class="prosemirror-p-center"><img src="https://lh6.googleusercontent.com/uEZFvKoC40873UtMppSGpdEpYQ7Zw_-8MIZ1CYdzbwg6fI-r-qm7csJJul408Gi0Tzuswhn89nCsjTMYzgdjebJOBKswC32SbLhvTJ0IYKn60lGh0Z2nr4fbWRsnKLrKr_EnR-51bRLWe-DZSg" alt="Popular decentralized prediction markets" title="Popular decentralized prediction markets" width="624" height="403"></p><p dir="ltr"><a href="https://augur.net/" alt="Popular decentralized prediction markets" title="Popular decentralized prediction markets" target="_blank" rel="nofollow" class=""><u>Augur</u></a> is a decentralized prediction market built on the ERC-20 protocol of Ethereum (ETH). Augur, which began development in 2014, is one of the pioneers of crypto prediction markets, with the goal of "democratizing" and decentralizing finance. The initial version of Augur was made available to the public in July 2018. Key features of Augur are as below:</p><ul><li><p dir="ltr">Completely decentralized: Traditional prediction markets include everyone trading shares of a forecast. For a nominal charge, any Augur user can build a market for any real-world event. The creator sets the price of the event between 0% and 50% and gets money from trading fees.</p></li><li><p dir="ltr">Currency exchange: Augur only permitted users to sell events with ether when it first launched in 2018. However, Augur now supports MarkerDAO's stablecoin, allowing interested users to avoid turbulent markets.</p></li><li><p dir="ltr">Trading fees and a limited supply of tokens: Trading fees on Augur are quite low (1%), in comparison to centralized prediction markets. The reporting tokens (REP) are also limited in supply, with 80 percent sold during the 2017 initial coin offering (ICO).</p></li><li><p dir="ltr">System of incentivized communal resolution: Augur provides proper resolution of completed events by utilizing the platform's native REP currency. REP token holders can spend their tokens to report completed events listed on the marketplace. They lose tokens if they report an event incorrectly or fail to report an occurrence. These tokens are subsequently allocated to trustworthy reporters.</p></li></ul><p dir="ltr">Augur is the market leader in crypto prediction after a successful ICO launch in 2018 that raised over $5 million. Augur debuted its V2 on the mainnet in July 2020, supporting the DAI stablecoin and effectively resolving volatility issues.</p><h3>Omen</h3><p class="prosemirror-p-center"><img src="https://lh5.googleusercontent.com/tcFjLMwWd1afJG3agvxuT3fksr3wC30BW91x8XP0vna-pWLHyMRAXtgM1p0HAnFgPpfiDlzvCFyC1CQQojjWPYQbVrNNwE0boehuf-8ra71K6G0Qmb45WMz5WuiS7LAXFQ5UYz0Sf36m4AAkbQ" alt="Popular decentralized prediction markets" title="Popular decentralized prediction markets" width="624" height="375"></p><p dir="ltr"><a href="https://omen.eth.link/" alt="Popular decentralized prediction markets" title="Popular decentralized prediction markets" target="_blank" rel="nofollow" class=""><u>Omen</u></a> is a prediction market platform that is decentralized at its heart and is built on an open framework developed by Gnosis. Omen, which was launched by DXdao, is an open platform that allows any user to create a prediction market on any topic. The following are the essential characteristics of Omen:</p><ul><li><p dir="ltr">Personalization: Market builders can personalize numerous components of their markets, such as the outcomes, resolution date, and category.</p></li><li><p dir="ltr">Allow multiple options: Users can use a variety of collateral tokens, including Gnosis' own OWL token, which was created particularly for this reason. Finally, users might choose an oracle as the final arbiter to determine the outcome. An oracle is a connection that permits data from the actual world to be transferred to a platform. This enables smart contracts to make decisions based on real-world data.</p></li><li><p dir="ltr">Diverse Forecast Sources: Unlike other systems that have a fixed list of sources, Omen's platform is entirely oracle agnostic. This means that forecasters can utilize any data source they like.</p></li></ul><p dir="ltr">During the 2017 ICO boom, the Gnosis team sold around 5% of their total supply in ten minutes, raising over $12.5 million in hard cap. The contentious ICO is still one of the fastest ever.</p><h3>Stox</h3><p class="prosemirror-p-center"><img src="https://lh3.googleusercontent.com/JNSiHMi4kaLOxuKy4QedddTEATPftlGt1hYB1qbaP--VceudbpzG8dRz0VEye7iKYNt15okDjy69pSx1q5l4bk1cgiH-gz5mBBIJPpMtOTozJjP6CM-QyCGHC5kIVAaiLF3tTWVvSiwCpbnwDw" alt="Popular decentralized prediction markets" title="Popular decentralized prediction markets" width="624" height="311"></p><p dir="ltr"><a href="https://app.stox.com/predictions/markets" alt="Popular decentralized prediction markets" title="Popular decentralized prediction markets" target="_blank" rel="nofollow" class=""><u>Stox</u></a> is another transparent blockchain prediction market built on the ERC-20 protocol of Ethereum. Stox, like other crypto prediction markets, aims for decentralization. It essentially serves as a decentralized practical basis for mainstream prediction markets. Stox, which was founded in the third quarter of 2018, has expanded rapidly in recent years. At the time of writing, the platform's native token, STX, has a market cap of $1.18 million. Stox provides optimal features as:</p><ul><li><p dir="ltr">Create an open market: Stox, like Augur, is a fully decentralized prediction market in which anybody can make market predictions based on real-world occurrences.</p></li><li><p dir="ltr">Currency exchange: Stox's native token STX is used for trading forecasts of real-world events. STX is also used for syndicate and Oracle payments.</p></li><li><p dir="ltr">The Bancor token and the liquidity reserve: As the network grows, there is always the risk of volatility and a potential liquidity problem for any peer-to-peer protocol that uses a single currency. Stox employs bancor (BNT), an ERC-20-backed token template, to provide ongoing liquidity. Essentially, there is a fixed exchange rate between STX and BNT that ensures the BNT reserve stays at 4%.</p></li><li><p dir="ltr">Oracle and conflict resolution: Stox employs a centralized approach of dispute resolution in which the operator (maker of the event) must specify the address of the oracle as well as their private key required to sign the oracle.</p></li></ul><p dir="ltr">Stox has already been chastised for being a contentious token in the crypto news. In 2018, the US Securities and Exchange Commission (SEC) charged Floyd Mayweather and DJ Khaled for illegally marketing the ICO.</p><h3>Polymarket</h3><p class="prosemirror-p-center"><img src="https://lh6.googleusercontent.com/Sq1x-xYAOnYUnT4473IdjUXYlVmAnklYbe0UuOAYR-g-qgczr9J7q7vvHo5f87AuJKTBGtsrIPhHe0Uh7PVuyeBJ-oDn_7lwJ0jGk_3E-vvgZLv_tBNBgjCYNQ5DlsTDgntA7wbxfKd3slLnRw" alt="Popular decentralized prediction markets" title="Popular decentralized prediction markets" width="624" height="328"></p><p dir="ltr"><a href="https://polymarket.com/" alt="Popular decentralized prediction markets" title="Popular decentralized prediction markets" target="_blank" rel="nofollow" class=""><u>Polymarket</u></a> is a decentralized market in which users can trade the world's most contentious events. Polymarket debuted in 2020 on the Ethereum ERC-20 protocol. Polymarket's forecasts are mostly limited to current real-world events, with the ultimate goal of limiting the spread of disinformation. The salient features of this platform include:</p><ul><li><p dir="ltr">Currency exchange: Polymarket trades the result of events using the USDC stablecoin backed by the US dollar.</p></li><li><p dir="ltr">Straightforward user interface: The Polymarket website is straightforward and allows a wide spectrum of users to forecast events. The platform's website contains a step-by-step guidance to funding and trading global events.</p></li><li><p dir="ltr">Centralized resolution. The outcomes of events on the Polymarket platform are settled automatically and do not require a consensus method.</p></li></ul><p dir="ltr">Polymarket is still in its early phases of development, but it has already raised almost $4 million. We have seen a steady evolution of decentralized prediction markets throughout the years. Prediction markets appear to have huge promise and can generate more accurate forecasts than general polls.</p><h2>Limitations / Risks</h2><p dir="ltr">One significant restriction of decentralized prediction markets is that if a betting event is organized around people who can affect the outcome, they may be able to take advantage of the chance and act appropriately. In 2016, in particular, a prediction market arose around whether Vitalik Buterin would wear a hat in a particular week. He instantly acquired the 'Yes-token' and proceeded to wear a hat to his next televised public engagement, as one might expect.</p><p dir="ltr">However, it only accounts for a minor fraction of the market today; the outcome of most prediction market events is not controlled by a single person or group of people. Furthermore, we anticipate that such markets would fail to accumulate liquidity over time as consumers become more savvy about where they place their bets.</p><h2>Conclusion</h2><p dir="ltr">While it may not appear clear at the moment, decentralized prediction markets may finally be at the right place at the right time to acquire widespread adoption. Polymarket appears to have captured the ideal mix of participants in this space to capitalize on the tailwinds powering the sector. As it evolves and adds features like commenting and sharing, prediction markets may become a one-of-a-kind social media platform in the decentralized ecosystem. We wouldn't be shocked if a decentralized prediction market platform became as essential as Twitter over the next decade, given its extra value proposition as a source of public mood data / news and worldwide reach.</p><div class="pr-block-special"><strong>Disclaimer:</strong><br>"This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name."</div>

Prediction markets are not a new phenomenon. Since ancient times, people have placed wagers on the outcome of events. Let's take a look at the top five most popular decentralized prediction markets discussed in this post.