Big news all around the world at the moment is the imminent US Presidential Election and one of the references I’ve seen pop up a few times now in alt-media reporting is the Prediction Market called Polymarket which appears to be getting some serious traction. Last week I decided to check it out.
The first thing I noticed on Polymarket is that there are a LOT of political markets and the big one (as you can see from the screenshot above) currently has over $2 Billion US Dollars worth of Volume Traded. To put this into context, my favorite Betting Exchange (Betfair) currently shows a volume of just $185 Million US Dollars on the US Presidential Election market so Polymarket is blowing it away by a factor of x10!
Obviously people like to bet on elections for all sorts of different reasons, but what’s interesting is that US citizens are NOT supposed to make US Election bets on Polymarket...so this volume it entirely international. Whether you believe that or not is up to you but my point is that this market on Polymarket IS restricted in the country it's focused on and it’s still blowing the competition away.
I did a bit of a deep dive because Polymarket is supposed to be decentralized and run on the Polygon Blockchain. I signed up by linking my Metamask Wallet and I deposited some USDC (Polygon) Stablecoin to have a bet on one of the NFL games. I wanted to see how liquid the markets were “In Play” and whether I could potentially use it for my regular betting. The results were good. The market stayed liquid with a minimal spread and I was able to trade a few times while the game was on. So Polymarket does pass the “Usability Test” for me as a Betting Exchange.
Having a deeper look it does appear like there is some Decentralized Oracle Technology underneath that is used to effectively result markets. It uses a UMA Optimistic Oracle Protocol which basically involves someone posting a Bond when attempting to resolve a market and then if they are challenged by someone else posting a bond then the loser sacrifices their bond. That’s obviously an over-simplification but the incentive appears to be there to get resolutions correct and quick.
To quote the Polymarket Documentation in a nutshell it describes itself as :-
"hybrid-decentralized wherein there is an operator that provides off-chain matching/ordering services while settlement/execution happens on-chain, non-custodially according to instructions provided by users in the form of signed order messages."
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So it’s not fully decentralized but I do think it’s a big step in the right direction. The markets aren’t yet able to be created by users but I can see a lot of the building blocks are there and the technology is definitely advancing. For now I won’t be able to take a punt on my favourite sports (rugby league and cricket) using Polymarket but it might not be too long now until these markets can be user created and I can play the role of Market Maker. Watch this space...
