Author: Four Pillars, Crypto VC, Translator: Golden Finance xiaozou

There are high expectations for consumer applications, which is believed to drive the commercialization of crypto in the near future. Farcaster has demonstrated its potential as a social application optimized for crypto infrastructure, and the consumer application ecosystem is expanding around Solana and Base.

This suggests that most market participants recognize that consumer applications play a key role in evolving Crypto from a 24/7 casino to financial infrastructure supporting practical value.

As the crypto industry moves into the consumer application phase, Polymarket’s success in temporarily replacing existing prediction markets is significant.

1. Background: Collective wisdom is a way to illuminate the future

The US presidential election is one of the most watched events in the world, and as the public's attention is focused on the US presidential election, a large number of users have emerged in the prediction market to bet on the election results. As a result, as of June, the leading prediction market platform Polymarket showed impressive data: monthly trading volume exceeded US$110 million, and about 3,000 traders made more than 10,000 transactions per day. Just on the first day of the US presidential election, about 4,000 traders participated in Polymarket's prediction market. With the recent intensification of public interest surrounding the election, the platform's daily trading volume has soared to nearly US$30 million.

Polymarket is known for its accurate predictions, such as Kamala Harris being nominated as the Democratic candidate and JD Vance being Trump's vice presidential candidate, which are highly likely, consistent with the official announcements later. As a result, Polymarket's forecast consensus is increasingly seen as a more accurate signal than traditional media. Even major mainstream media, including the Wall Street Journal, see Polymarket as a reliable barometer of public sentiment. This attention has translated into a market-leading role, with Polymarket accounting for an astonishing 80% of all US election-related bets, even surpassing Web2 prediction market platforms.

Polymarket plays two important market roles. First, it provides a diverse range of speculative avenues. Second, it forms predictive opinions from the results of these speculative activities. The current state of betting on future events is a major indicator of predictive public opinion. Therefore, Polymarket transforms the speculative needs of market participants into an opinion gathering tool, using the wisdom of the crowd to make clear future possibilities.

Polymarket can speculate on almost any event with a clear outcome, providing market participants with a meaningful way to speculate. Notably, it allows direct investment in the event itself, rather than indirect investment in assets related to certain events or information. For example, users can directly bet on whether an ETF will be approved, rather than betting on ETH spot or ETH-related assets based on Ethereum ETF approval. This approach does not need to consider the complexity and variables of the market, greatly improves information utilization, and simplifies the decision-making process.

In addition, Polymarket is a key forecasting tool for effectively managing the future risks of information-overloaded crypto markets. Crypto markets are characterized by specific narratives having a significant impact on asset prices, as there is still a lack of clear consensus on fundamental values. As the number of emerging projects continues to increase, the scale of information that market participants need to absorb and its diversity are also increasing. Polymarket solves this problem by aggregating decentralized forecasts into a unified view through economic incentives, potentially providing a more objective perspective that is not interfered with by personal biases or misunderstandings.

2. Conclusion: Polymarket’s Equilibrium Design

What is particularly fascinating about Polymarket’s recent performance is that it is a very rare on-chain application that has successfully competed and outperformed its Web2 peers. So, what are the unique factors that contribute to Polymarket’s unique market position?

By studying the history of consumer applications in the crypto industry, we can see that in many cases, failure is likely due to two conflicting factors. For example, applications that only focus on speculative demand do not consider what problems they solve or provide real value to users. Although these applications may experience short-term hype, they lack durability. They may attract attention when the market is overheated, but of course they will disappear when they can no longer meet speculative demand.

The other type of application is overly focused on value that has nothing to do with speculative demand. While the problem definitions and solutions proposed by most projects have their own merits, these are usually only important to the developers, which is their vision and mission, but fail to resonate with users. As a result, these applications do not gain large-scale user adoption and have to face the question of who should use them and why.

Betting is the core function of Polymarket. This design inherently caters to the demand for speculation very well. On the other hand, the predictions formed in such betting also serve as a public opinion collection tool, reflecting objective public opinion based on economic incentives. In other words, it shows the potential for widespread adoption as an application that can generate real value in addition to speculation. Therefore, Polymarket has established a unique market position by simultaneously meeting the demand for speculation and the demand for predictive information, providing users with a meaningful way to speculate, while targeting a wide user base through its application design.

3. Resources

For related articles, news, tweets, etc., please refer to:

Integrated Kyle（Tweet）：x.com/KyleSamani/status/1816712513817350425

Uma Roy（Tweet）：x.com/pumatheuma/status/1815100818514956467

Nick Tomaino（Tweet）：x.com/NTmoney/status/1815880657790460027

Domer（Tweet）：x.com/Domahhhh/status/1808523179809239418

Polymarket：polymarket.com/

The Wall Street Journal：www.wsj.com/finance/meet-the-traders-making-money-off-the-trump-shooting-and-bidens-stumbles-1332ec3e

Dune(@rchen8)：dune.com/rchen8/polymarket

The relevant personnel and projects are as follows:

@Polymarket @shayne_coplan @HugoMartingale @UMAprotocol @gnosischain @azuroprotocol @NTmoney @KyleSamani @pumatheuma @G_Gyeomm @FourPillarsFP @FourPillarsKR