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Prediction Markets: Tales from the Election

vitalik.ca

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Re: Prediction Markets: Tales from the Election

#131

Post by casi »

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.

Pretty much all the crypto betting protocols use stablecoins (mostly pegged to the $), people arent betting in eth/btc. Vitalik placed bets on https://catnip.exchange/ so would have been in dai.

Also on the topic of stability, Rai launched this week so we now have non-pegged stable assets backed by eth -> https://www.reflexer.finance/

Re: Prediction Markets: Tales from the Election

#132

Post by rspeele »

f430 wrote: post #125
rspeele wrote: post #114

Earlier quoted context omitted.

> If wisdom of the crowd worked then casinos would be out of business. That does not follow. In prediction markets or sports betting, the gamblers aren't betting against the casino. They're betting against each other, and the casino (PredictIt, BetFair, etc) is skimming off the top, just like Duke & Duke in Trading Places. Most forms of gambling where players do bet directly against the house are games of pure chance…

> In prediction markets or sports betting, the gamblers aren't betting against the casino. Are you saying the crowd has an edge over the house? Sports betting platforms, poker sites, they are in the business of profiting off people who think they have an edge (aka ppl believe in the non-zero sum nature of these markets)

I'm saying the house doesn't even have skin in the game. At least in the prediction markets, the house is just pairing one person who'll bet "Trump wins" against another person who'll bet "Trump loses".

Even when the "wisdom of crowds" holds true, the crowd is made up of thousands of individual winners and losers. The house just extracts a cut (fee, commission, vig, juice, take) from the winners' profits. They stay profitable no matter how "wise" the odds settled on by the crowd ended up being.

Edit: concrete example. If you want to bet on Andrew Yang winning election for NYC Mayor, right now you'd pay 47c for a share on PredictIt. If he does win the election, you get a dollar. Where does the dollar come from? Well, you didn't really buy your "Yes" share from PredictIt. You bought it from somebody else on PredictIt, who's placed a standing offer to pay 53c for a "No" share. You accepted their offer when you bought your share taking the opposite end of their bet. Your 47c plus their 53c makes the dollar, and whoever wins gets the whole dollar. Except not quite, because PredictIt takes 10% of profits, so if you're right, you actually get your .47 back + (0.9 * .53) = $0.95, PredictIt gets the $0.05, and the loser gets zero.

It's good to be the bookie.

Re: Prediction Markets: Tales from the Election

#133

Post by throwsaways212a »

Kranar wrote: post #126
Tenoke wrote: post #118

Earlier quoted context omitted.

It took me just under 5 minutes to go from debit card to Poly.market in the summer the first time I bet on it, though I later did it with my bank account via Coinbase for slightly lower fees.

I decided to just go for it, I mean if there's free money like this article suggests, why not take it? I can throw the minimum 250 bucks at this and expense it on the company card for research purposes. There's literally a market for whether Donald Trump will be president on March 31st of 2021 with offers available at 98 cents, so presumably I can make a 2% return in a month right? Okay well I signed up, I had to buy…

Ensure you take into account fiat deposit fees, trading fees for USDC and withdrawal/transaction fees from the wallet you deposit with along with counter-party risk.

Re: Prediction Markets: Tales from the Election

#134

Post by jtxxwl2 »

drdeca wrote: post #122
jtxxwl2 wrote: post #106

Earlier quoted context omitted.

One theory I've heard is that the magical soil in the US would compel the riggers to confess and/or provide evidence of their guilt to the courts and to the general public, rather than lying and/or concealing that evidence. In the rest of the world, courts often are not provided with relevant evidence or confessions, and therefore rigging remains possible.

If you remove the putting of stupid words in others’ mouths from this (great going there, btw), the only thing that remains is “but the courts could have not gotten the evidence”. But if the evidence is not available, then there is no good reason to believe it. You have to explain why people claiming it have enough evidence to believe it, but the courts don’t have enough evidence for it to be even claimed in the cour…

>But if the evidence is not available, then there is no good reason to believe it.

Based on this statement, I am guessing you are an American, and are therefore accustomed to all relevant hard evidence always being available. What you may not know is that in the rest of the world, sometimes some hard evidence is not available, so those people have adapted other mechanisms for forming beliefs about what is true. One such mechanism is the use of reason to draw inferences from other relevant facts.

For instance, in those countries, if a man who has professed a strong desire for wealth is tasked with guarding a large pile of money, and the money disappears, people in those countries will infer that the man likely took the money, even if no one saw him take it and the money is not later found in his possession.

Re: Prediction Markets: Tales from the Election

#135

Post by dragonwriter »

f430 wrote: post #125
rspeele wrote: post #114

Earlier quoted context omitted.

> If wisdom of the crowd worked then casinos would be out of business. That does not follow. In prediction markets or sports betting, the gamblers aren't betting against the casino. They're betting against each other, and the casino (PredictIt, BetFair, etc) is skimming off the top, just like Duke & Duke in Trading Places. Most forms of gambling where players do bet directly against the house are games of pure chance…

> In prediction markets or sports betting, the gamblers aren't betting against the casino. Are you saying the crowd has an edge over the house? Sports betting platforms, poker sites, they are in the business of profiting off people who think they have an edge (aka ppl believe in the non-zero sum nature of these markets)

> Are you saying the crowd has an edge over the house?

No, the crowd is paying the house to bet against each other.

> Sports betting platforms, poker sites, they are in the business of profiting off people who think they have an edge

In that that's a big part of what motivates people to gamble, yes, but parimutuel gambling—which, in effect, includes prediction markets—the house isn't taking a side against the gambler, it's taking a cut off the top from all the gamblers on all sides, then the winners split the remainder. (Or splitting among winners first and charging a fee to the winners, which amounts to the same thing.)

Re: Prediction Markets: Tales from the Election

#136

Post by dragonwriter »

jtxxwl2 wrote: post #88
Imnimo wrote: post #25

Earlier quoted context omitted.

>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.

> In the US vote rigging conspiracies are impossible

No, they aren't, which is why our most recent ex-President (who also was notorious for inventing fantastical vote-rigging conspiracies out of no evidence in the same election) is currently at the center of a criminal investigation for one based on fairly hard evidence, and his political party is trying to change the Georgia State Constitution to derail the investigation.

There's a difference between “That vote-rigging conspiracy is an unsubstantiated fantasy” and “Vote-rigging conspiracies are impossible.” Pretty much no one in the US has ever argued the latter.

Re: Prediction Markets: Tales from the Election

#137

Post by xalava »

crazygringo wrote: post #104
xalava wrote: post #37

"Prediction markets" is a fancy word for gambling. It is a highly regulated activity almost everywhere, mainly has it can have terrible consequences at the individual levels and major side-effects such as corrupt games in sports. Let's not even talk about politics where it is generally forbidden for obvious reasons. The conclusion is disheartening "It shows a lot about how market efficiency actually works in practice…

> "Prediction markets" is a fancy word for gambling. Hard disagree. Gambling is set up with the principal aims of a) making money off the spread and b) getting participants as "gamified" as possible with exciting events and the ability to bet lots of money. Prediction markets are set up with the principal aim of crowdsourcing intelligence from a diverse set of minds. They can be set up by academia, think tanks, resea…

Theoretically, that might exist.

I recommend that you open each platform mentioned in the article and apply your definition.

Re: Prediction Markets: Tales from the Election

#138

Post by jtxxwl2 »

dragonwriter wrote: post #136
jtxxwl2 wrote: post #88

Earlier quoted context omitted.

>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.

> In the US vote rigging conspiracies are impossible No, they aren't, which is why our most recent ex-President (who also was notorious for inventing fantastical vote-rigging conspiracies out of no evidence in the same election) is currently at the center of a criminal investigation for one based on fairly hard evidence, and his political party is trying to change the Georgia State Constitution to derail the investig…

>No, they aren't

Have I been mislead? If it is possible to carry out election rigging conspiracies in the US, then how can we be so confident that no such conspiracies were carried out by people that viciously hate the former president? Surely if it is possible for conspirators to get away with it in other countries, and there is no magical means of preventing it here, then it's possible for them to get away with it here as well. They have courts and investigations and evidence in other countries as well, and that has seemingly not prevented election rigging there.

Re: Prediction Markets: Tales from the Election

#139

Post by mywittyname »

> There was also another problem: I did not have any DAI. I had ETH, and I could have sold my ETH to get DAI, but I did not want to sacrifice my ETH exposure; it would have been a shame if I earned $50,000 betting against Trump but simultaneously lost $500,000 missing out on ETH price changes.

Doesn't this fact pervert the underlying market? Now there are two components at play: the actual underlying odds of the election result, and the price fluctuation inherent in DAI/ETH.

Another way to frame this bet is as a high interest loan with some probability of not needing to be paid back. They are borrowing $0.85 worth of DAI/ETH now and may need to repay it in the future.

That being said, I could be misunderstanding how this all is working. The system seems complicated.

Re: Prediction Markets: Tales from the Election

#140

Post by vbuterin »

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…

> Doesn't this explain crypto-user's pro-Trump bias?

It does. But I was never surprised that there were people willing to bet for Trump. I was surprised by the lack of people taking the opportunity that was sitting there for over a month to bet against them.

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