DeFi refers to decentralized finance. In a macro sense, prediction markets bring out the meaning for users to guess the outcome no matter the segment. However, DeFi Prediction Markets, together, form a union for people to assume the outcome of the movement of a digital asset. The answer has to be binary – yes/no, up/down – for them to finally fetch decent rewards.
The main focus of this article is to understand the concept of the DeFi Prediction Market more deeply, explore its advantages, and under its challenges. It also attempts to analyze the popularity of the segment. DeFi Prediction Market has served as a nice space for experts and traders alike. It is time to delve deeper to know why.
What are DeFi Prediction Markets?
DeFi Prediction Markets are based on smart contracts and decentralization. Their activities are not controlled by a single person or entity. Plus, all the aspects are predefined to the happening of an event. Experts gain access to insights into the markets. Traders get to test their knowledge and understanding of the market movement. It has often been referred to as Web3 wagering activity.
It differs from Web3 wagering activities or traditional prediction markets in two core aspects – decentralization and binary outcome.
The DeFi Prediction Market is decentralized, and its outcomes are always binary. On the other hand, the Traditional Prediction Market is centralized – that is, someone controls it – and the outcomes can be multiple. Users must pick the most preferred one to test their fortunes. Liquidity is an important term that one will come across. It pertains to making available a vast pool of knowledge and funds to meet the requirements of a successful outcome. Tokens and Outcomes are self-explanatory, with tokens referring to digital assets and Outcomes, meaning what happens after a particular incident.
Current state and popularity of DeFi Prediction Markets
The DeFi Prediction Market is an approximately $242 billion market. The only factor restricting its popularity is global reach. This comes at a moment when DeFi has already marked the milestone of reaching a large number of people all over the world. However, Prediction Markets, no matter their association, suffer a drawback of resistance. People naturally assume the segment to be a hardcore betting segment where they have chances of losing their funds more than winning something in return.
The popularity of the DeFi Prediction Market, as of now, is gaining traction via Augur. It is an Ethereum-based Oracle and DeFi Prediction Market. It is legal in most of the states of the US. Thereby making it a core part of the market.
Such services are helping to break the norm of how prediction markets are viewed. For instance, they are often associated with online sportsbooks where players indulge in sports betting with crypto. However, the perception is changing as more and more people participate on Augur-like platforms. They share a common sentiment about cryptocurrency, which is good since enthusiasts feel safe talking about it and dealing with it daily.
Advantages and Challenges of DeFi Prediction Market
DeFi Prediction Market has its set of advantages and challenges. Neither comes as a surprise, considering everything eventually develops with progress. To start with the advantages of the DeFi Prediction Market:
- It is important to note that the market is based on transparency. This initiates when a person places a wager on an outcome, sees the result, and receives the reward. It is ideally rolled out in the Wev3 wallet that is connected to the platform with no intermediary involved.
- The market is not yet accessible to a large number of people, but the current reach is pretty significant in itself. Most regions of the US have adopted the DeFi Prediction Market to make it a billion-dollar sphere.
- There is a scope of global reach provided how people accept the mechanisms based on blockchain and crypto movements.
Moving on, the market needs to resolve a set of challenges to leverage all the potential benefits. These are:
- Regulatory concerns are imposed by relevant authorities all over the world. It does start with the US and extends to other developed and developing countries. The focus is on protecting people and their funds.
- Scalability issues relate to how well the operations can be expanded. Assuming it is solely based on the crypto movement, there is a chance that the competition will be fierce and the reach of a particular player will be limited.
Nevertheless, the market at a macro level is destined to reach its goals by onboarding as many customers as possible. There is a scope for the acquisition and development of internal mechanics that is strengthening the blockchain network.
DeFi Prediction Markets are not precisely on the verge of a breakthrough. Rather, They are on the edge of coming out of the restricted space, after which the world will decide how well it is accepted. Mainstream success is hard to define and harder to achieve. It depends on cryptocurrencies and then the acceptance of the market. Until then, it will flourish in the spaces where it operates.