Analysis of the Development Trends and Emerging Projects in Prediction Markets

Prediction markets can be broadly divided into two major camps: non-sports and sports. The non-sports markets have not yet been fully developed, mainly involving areas such as cryptocurrencies, political events, and cultural events. A well-known prediction platform occupies a leading position in the non-sports market, primarily focusing on political event predictions.

In terms of overall trading volume from the beginning of the year to now, if we take the sports market into consideration, the trading volume of certain sports prediction platforms can rival that of leading non-sports prediction platforms.

Currently, multiple competing projects have been launched, including a new platform that provides an ETH market running on EVM, as well as a platform that sets odds after betting on the SOL chain. In addition, several projects are under development.

The hot topics of interest for the new project team include:

1. Permissionless markets: Open market creation and incentive mechanisms
2. Settlement Plan: Utilize artificial intelligence for market settlement or create a more efficient system

The sports market has built a solid user base in the Web2 environment, thanks to the regular hosting of popular events. However, guiding users to cryptocurrency platforms is not an easy task, as most users value brand image and user experience. Traditional sports betting platforms typically have ample marketing budgets, with some companies spending over 100 million dollars on marketing each year.

It is worth noting that the betting amount for a single Super Bowl in the United States (approximately $23 billion) is already ten times the total transaction volume of the crypto prediction market to date (approximately $2 billion). With the increase in on-chain funds, on-chain sports betting is expected to grow accordingly, which is similar to the trend of internet gambling companies dominating the betting market through mobile devices.

In terms of leveraged trading, a major limitation faced by prediction markets is the lack of a leverage mechanism. Some emerging platforms are developing features that allow perpetual trading on specific events, similar to the practices of a certain exchange in 2020. The counterparties in these projects are usually liquidity pools, but issues of liquidation and bad debts remain to be addressed.

For leading prediction platforms, exploring the "parlay betting market" could be an interesting direction. For example, predicting "both candidates winning the nomination simultaneously" is actually a type of leveraged bet, as it requires predicting two independent events. In the future, more complex multi-event prediction markets may emerge.

In sports markets, several protocols already support leveraged operations through the "parlay betting market," requiring users to accurately predict multiple unrelated events to win.

The prediction market mechanism can be roughly divided into two categories: Web2.5 and Web3. Web2.5 uses cryptocurrency as a payment method, but the counterpart is the platform team, with no direct interaction with the blockchain. Web3, on the other hand, leaves footprints on-chain, such as NFT holdings or bets executed through smart contracts.

Memecoins have evolved into a form of prediction market within the Web3 ecosystem. Holders can profit by choosing the right direction and focus. Certain new protocols are attempting to combine the advantageous features of prediction markets and memecoins.

The profit model of prediction market protocols mainly includes collecting transaction fees, sharing trader bonuses, or accumulating counterparty earnings. Most protocols adopt the first or third method.

Looking to the future, artificial intelligence agents could become key players in this field, as they are able to quickly respond to news, manage orders and inventory, execute betting strategies, and calculate expected outcomes while assuming corresponding risks. Teams are already quietly advancing in this direction.

It is expected that within the next few years, at least one protocol's trading volume will reach a level that can compete directly with leading platforms. Considering the strong incentives that mainstream platforms currently offer for their markets, other protocols may also need to adopt incentives such as points, tokens, or stablecoins.

It is noteworthy that, year-to-date, the trading volume of non-election-related markets on a leading platform has shown a continuous growth trend, which provides a positive signal for market vitality after the elections.