Trump boosts the heat, is Polymarket becoming the new platform for election polls?

Author: Kaori

The decentralized prediction market Polymarket is gaining popularity again, with new account numbers on the platform reaching an all-time high. According to Dune data, Polymarket's trading volume in January 2024 reached $51.34 million, setting a new monthly record.

Betting on Who Will Be Elected President of the United States on Polymarket

The recent surge in traffic on Polymarket is attributed not only to predictions about whether the Bitcoin ETF will pass at the beginning of January but also to the upcoming U.S. presidential election.

With nearly ten months until the U.S. presidential election, Trump, as one of the candidates and a political figure skilled in social media, has repeatedly shared his odds on Polymarket via his media platform Truth Social, bringing significant exposure to Polymarket. Currently, political bets on Polymarket are seeing very high traffic.

The left image shows Polymarket's internal traffic rankings; the right image is a screenshot of Trump's shared odds on Polymarket.

The hottest prediction market on Polymarket is "Winner of the 2024 Presidential Election," with each outcome starting at a trading price of $0.50. The price fluctuates based on the amount users bet on either side, and the price (odds) represents the current probability of the event occurring. For instance, a current price of $0.50 means Trump has a 50% chance of being elected president. If the price rises to $0.70, it indicates a 70% chance of Trump winning the nomination. As of the time of writing, the betting volume in this market has reached $33.67 million.

Polymarket operates in a unique way, allowing users to turn their predictions about future events into actual investment portfolios. These investment choices are essentially a concrete representation of users' deep interpretations of various information and future outlooks. Successful predictions not only yield potential economic benefits but also demonstrate traders' profound insights into specific topics. For example, regarding the Bitcoin ETF.

Since its debut in 2020, Polymarket has been the go-to destination for crypto degens to place bets. Users can buy and sell shares using USDC through their crypto wallets, and market makers can provide liquidity in each market to earn weekly rewards. Political election predictions are one of the biggest drivers of widespread popularity in prediction markets. When these two elements combine, Polymarket attracts significant attention once again. In the election month of 2020, Polymarket's monthly revenue even surpassed SushiSwap, becoming the fourth highest project in terms of fees generated on the blockchain.

Even Ethereum's founder places bets on political elections on Polymarket. A month ago, Vitalik mentioned on Warpcast, "My very conservative bets on a boring but potentially winning diversified market political portfolio seem to be performing well."

Beyond Crypto, Polymarket's PMF

Although Polymarket is a genuinely decentralized market project deployed on Polygon, it has successfully transformed to achieve PMF beyond crypto. On the Polymarket homepage navigation bar, Crypto is just one of the sections; there are also themes like politics, Middle East situations, sports, and pop culture. Mass adoption has always been a coveted goal for some crypto projects, and Polymarket seems to demonstrate its potential once again.

Last week, Richard Chen, GP of 1confirmation, mentioned in his article "Computers vs. Casinos: The Cultural War in the Crypto Industry" how casino legend Steve Wynn transformed Las Vegas from a single gambling hub into a comprehensive entertainment destination. Wynn opened The Mirage in 1989, pioneering the provision of rich entertainment experiences outside the casino, such as concerts and shopping malls. This successful strategy prompted other casinos to follow suit, significantly increasing the number of visitors to Las Vegas.

Therefore, Richard believes the crypto industry should also reduce zero-sum games and shift towards providing positive-sum experiences. Prediction markets are one of the best options to fulfill this mission, serving both as betting platforms and sources of information.

Market predictions have long been regarded as the holy grail in the field of cognitive technology. As early as 2014, Vitalik expressed interest in using prediction markets as a governance mechanism (i.e., futarchy). However, to date, prediction markets have not made significant progress in practical applications and often face a series of common issues: most participants tend to be irrational, and those with "correct knowledge" are often unwilling to invest time and risk in betting unless they can involve large sums of money, leading to insufficient market liquidity.

In a blog post published yesterday, Vitalik mentioned, "If people are willing to bet hundreds of billions of dollars on sports events, then why wouldn't they invest enough in U.S. elections or other major events to attract serious participants?" However, this argument must confront the fact that previous versions have not reached such a scale. Nevertheless, Vitalik remains optimistic about prediction markets because he believes that artificial intelligence will have the potential for widespread participation in prediction markets.

But before we widely integrate AI, we still need to consider the current challenges facing Polymarket: one is what other events, besides politics (which are often controversial and cyclical), can bring stable users and traffic to the platform; on the other hand, if Polymarket succeeds, what benefits will it bring to the crypto market, and what kinds of derivatives can be built around it to keep this market vibrant?

On Twitter, a Taylor Swift fan shared the prediction market on Polymarket regarding the Best Song at the 2024 Grammy Awards, comparing Taylor's odds with another pop singer, Billie Eilish. As more traditional market players get involved, Polymarket's prospects may become even clearer.