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Prediction Markets: Tales from the Election

vitalik.ca

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Re: Prediction Markets: Tales from the Election

#81

Post by notahacker »

whatshisface wrote: post #9
IAmEveryone wrote: post #5

I've always had the impression that the cryptocurrency community was trending rightwards. So it's good to see some quantifiable evidence of it. Which leaves the question: why? Technology as a whole is centre-left, so there's something else going on. One common theme seems to a loss of trust in any institutions, and democracy itself: "the FED is just a private bank" isn't far away from "the mainstream media is lying",…

That's not quantifiable evidence of a political bias. You win in a prediction market by guessing who will win, not by stating who you want to win.

Whilst your second sentence is true, belief that Trump would be declared the winner of the election even after he lost is something highly skewed towards people inclined to believe Trump and Trumpists' claims about electoral fraud,- Mike Pence having the casting vote etc.

And the most obvious reason why not enough unbiased cryptoenthusiasts were tempted to place massive bets on something already decided to correct the odds was suspicion that the oracles might be too biased in favour of Trump being the real president for them to be sure of the easy profit the odds implied

Re: Prediction Markets: Tales from the Election

#82

Post by bostik »

ahelwer wrote: post #6
ErikAugust wrote: post #3

"The best way to predict the future is to create it." I always thought the the problem with prediction markets is you have the incentive to make the prediction come true. And that gets ugly fast. But hell, I guess that's what all this is at the end of the day.

Yep, it clearly leads into assassination markets - for example, opening a large bet that person X will die on a specific date.

Reputable prediction markets don't offer contracts where they themselves, or someone in general, could profit from human misery.

Disclosure: I work for one.

Re: Prediction Markets: Tales from the Election

#84

Post by whatshisface »

notahacker wrote: post #81
whatshisface wrote: post #9

Earlier quoted context omitted.

That's not quantifiable evidence of a political bias. You win in a prediction market by guessing who will win, not by stating who you want to win.

Whilst your second sentence is true, belief that Trump would be declared the winner of the election even after he lost is something highly skewed towards people inclined to believe Trump and Trumpists' claims about electoral fraud,- Mike Pence having the casting vote etc. And the most obvious reason why not enough unbiased cryptoenthusiasts were tempted to place massive bets on something already decided to correct th…

There's another possibility, which is that "Crypto people," are another isolated pocket separate from any mainstream faction, that come up with their own weird beliefs for their own divergent reasons. An uncorrelated niche faction would be expected to go closer to one mainstream faction's beliefs over another's about half the time.

Re: Prediction Markets: Tales from the Election

#85

Post by PragmaticPulp »

ttul wrote: post #80

Say what you will about cryptocurrencies, it sounds like a damn interesting area in which to be spending your time as an engineer, even if 90% of the stuff ends up being total crap or a fraud.

> even if 90% of the stuff ends up being total crap or a fraud

Working on something that turns out to be total crap or a fraud is actually very demoralizing, not to mention not great for your resume.

In the distributed systems space, I've interviewed a lot of burnt out engineers who thought they were getting in on the next big blockchain company that turned out to be a couple founders use blockchain as a get rich quick scheme.

For every story we hear about people getting lucky by timing something blockchain-related just right, there are many more people who got the timing wrong and lost out when the hype collapsed.

Be careful out there.

Re: Prediction Markets: Tales from the Election

#86

Post by ttul »

woeirua wrote: post #77

This seems like an extremely risky way to make this bet. By trying to keep his exposure to ETH price changes, he set himself up for a scenario in which he could lose $1 million for a potential upside of $50k. Not sure I would make that bet. A lot of people recognized this for what it was, but chose not to play because of how finicky PredictIt and other prediction markets were around the rules of the game. In most pre…

Vitalik is worth hundreds of millions (if not more - I haven't checked in a while). He can afford to play games like this.

Re: Prediction Markets: Tales from the Election

#87

Post by gumby »

ErikAugust wrote: post #3

"The best way to predict the future is to create it." I always thought the the problem with prediction markets is you have the incentive to make the prediction come true. And that gets ugly fast. But hell, I guess that's what all this is at the end of the day.

That's similar to short sellers trying to manipulate a stock: pretty much only works in the shallows (small cap, thin coverage, moderate liquidity).

You could manipulate the dogcatcher election (or, more profitably, a bond initiative) but a presidential election is probably too hard, especially in this case (amount of money you'd need to spend is much larger than the amount you could make on these markets).

Re: Prediction Markets: Tales from the Election

#88

Post by jtxxwl2 »

Imnimo wrote: post #25
pdonis wrote: post #11

Earlier quoted context omitted.

> the problem with prediction markets is you have the incentive to make the prediction come true If players in the market have ways outside the market to significantly affect the outcome that the market is betting on, then it isn't a prediction market. The whole point of a prediction market is that there is no such feedback mechanism. For example, the article discusses prediction market bets on Trump winning the elec…

>The underlying assumption of such markets is that no player has more than one vote in the actual election, out of some 150 million or so votes, so each individual player's ability to affect the outcome is negligible. But this is not necessarily true. In the extreme case, a bettor could be one of nine Supreme Court justices. Or a participant in some sort of fantasy vote-rigging conspiracy. Or even a political insider…

>Or a participant in some sort of fantasy vote-rigging conspiracy.

This is even more relevant outside of the US. In the US vote rigging conspiracies are impossible for some inexplicable reason, perhaps related to magical soil, but outside of the US they are a real concern.

Re: Prediction Markets: Tales from the Election

#89

Post by Kranar »

fairity wrote: post #72
phpnode wrote: post #63

The problem with making this bet is that the value of the underlying crypto can move by far more than the possible 15% return while the result is pending. 2 months is more than enough for the price to double or halve and people want to be able to exit to fiat at a moment's notice when they think things are heading south.

There are cash-based markets like Predictit where you could've made a similar bet. Predictit charges 5% withdrawal fees + 10% of profits, but if you expect a 15% ROI, it's still profitable.

PredictIt didn't have this anomaly where Trump had a 15% chance of winning. After Georgia called the election the percentage went above 95%.

Re: Prediction Markets: Tales from the Election

#90

Post by pwinnski »

as300 wrote: post #46

I see quite a bit of disappointing talk that disregards the contents of the article, here. Namely, the author names one sort of bias that led 'Very Smart People' to give an outsized likelihood of Trump winning: >I remember thinking at the time that this particular opinion of his was over-confident, perhaps even a result of over-internalizing the heuristic that if a viewpoint seems clever and contrarian then it is lik…

Note that PredictIt offered similar options for all-cash users, and they were also still at 15% for Trump winning after he had clearly long lost.

This was not solely, or even primarily, a crypto thing.

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