Author: OKG Research
A few days ago, a researcher from OKG Research published a signed article on FT Chinese (After successfully predicting the election, can Polymarket continue the "success of Web3"?). The article believes that Polymarket fully demonstrated the power of "rational consensus" of Web3 applications in the prediction of the US presidential election. This is a "victory" for Web3 applications: before this, there has never been an on-chain application that can break through the "barriers" of the Internet without relying on tokens or other external incentives, take the initiative in the competition with Web2 platforms and obtain the highest market share. As one of the few on-chain innovations that can "reverse output" to the real world today, Polymarket not only allows us to see Web3 applications replace existing Web2 services, but also hopes to discover more successful experiences that can be replicated.
The following is the original text:
The dust has settled on the US election, and Republican presidential candidate Trump will return to the White House in January next year. Looking back at the entire election cycle, Polymarket has been frequently mentioned as a prediction market, not only accounting for more than 80% of the total bets in this election, but also showing the power of "rational consensus" in the prediction of "who will be the next president": traditional polling agencies generally believed that Trump and Harris had similar chances of winning, while Polymarket, which "uses real money" to vote, has long shown that Trump's chances of winning are much higher than Harris.
More importantly, as one of the few on-chain applications that can "reverse output" to the real world, Polymarket not only allows us to see Web3 applications replacing existing Web2 services, but also hopes to explore more replicable "successful" experiences from it.
1. "Restrained" Polymarket builds a rational consensus
Unlike the "wealth-making myths" that may be created by crypto innovations such as gambling speculation and Meme coins, Polymarket cannot bring rich returns. Compared with traditional prediction platforms, although Polymarket does not limit the size of bets, in order to avoid the possibility of a large deviation in the results, the odds are controlled within a reasonable range. This makes it difficult for users to obtain high returns through betting. With the announcement of the election results, accounts such as Theo4, Fredi9999 and zxgngl have currently obtained more than 10 million in profits, and there are more than 78 addresses with profits of more than one million, but the overall return on investment is not particularly "exaggerated", and only about 15% of the addresses have achieved positive profits.
This "restrained" return on investment has caused some speculative users to lose interest, but it has also invisibly completed user screening, which has helped Polymarket to gather more "rational consensus". For Polymarket, the important thing is always to give full play to the efficiency of the free market and thus improve the accuracy of predictions, rather than to bring in excess returns and increase trading volume. The relatively restrained "economic incentives" enable most users to make more rational and objective analysis of events, rather than making "profitable" choices out of speculative needs: this also makes Polymarket's predictions of future events have higher information value than guesses and polls.
When analyzing election trends, authoritative media such as Bloomberg and the Financial Times will cite Polymarket's forecast data alongside traditional poll results; Elon Musk even bluntly stated that Polymarket "is more reliable than polls. After all, it involves real money betting."
Polymarket, as its founder Coplan often claims, may become "the future of media." Although it currently only demonstrates its advantages on a few political topics such as elections and interest rate cuts, through integration and connection with media platforms such as Substack and Bloomberg, Polymarket is becoming a "reverse oracle", delivering the most authentic data and opinions from the Web3 chain world to the traditional world.
During this election cycle, Polymarket won a great victory in the competition with traditional prediction platforms and almost became synonymous with "prediction market". According to incomplete statistics from OKG Research, as of November 6, 2024, Polymarket's cumulative trading volume has exceeded US$4.8 billion, of which the monthly trading volume in October exceeded US$2.3 billion, an astonishing 4.5-fold increase from September.
Since May 2024, Polymarket's daily active users (DAU) have continued to rise, and on November 6th, it set a new record of 53,000 per day, an increase of more than 100 times compared with six months ago. However, we also noticed that although the trading volume and the number of active trading users are increasing, the average betting amount is continuing to decline. The proportion of users betting less than US$500 currently exceeds 85%, and more than 40% of users bet less than US$50.
This may indicate to some extent that Polymarket is attracting more users with lower financial ability or risk tolerance to enter the market, rather than just a "rich man's game". Therefore, although this seems to be a "negative" indicator, it is positive for Polymarket in the long run. The origin of the prediction market and its past failures all emphasize the importance of a wide range of participants. Their rational analysis and continuous re-evaluation of new information are the cornerstones of the "accuracy" of the prediction market: only when more users participate in event prediction can the trends shown by the data more accurately reflect the market consensus.
Another key reason why Polymarket has grown so rapidly is that it uses the power of blockchain and cryptocurrency to build the broadest market consensus in a more realistic and effective way. The value of the technology is mainly reflected in the timeliness of economic incentives and the transparency of betting data. Polymarket uses USDC as a trading currency for betting. With its natural globalization and digital attributes, it greatly reduces transaction friction and allows users to participate in predictions more freely. Based on the idea of smart contracts and AMM, it also brings a better market mechanism to the prediction market - no access and better liquidity. More importantly, compared with the "black box operation" that may occur in traditional Web2 prediction platforms, Polymarket runs on the Ploygon blockchain network. All betting data is open and transparent, and users can query at any time and analyze and make decisions based on the current real-time situation.
2. How to find the next “Polymarket”?
In the total amount of bets on this year's US election, Polymarket showed an absolute advantage over traditional Web2 prediction platforms. This is a "victory" for Web3 applications: before this, there has never been an application created in an on-chain environment that can break through the "barriers" of the Internet without relying on tokens or other external incentives, and take the initiative in direct competition with Web2 platforms and obtain the highest market share.
Many people are worried that Polymarket's reliance on election "hot products" will make it weak in the future. However, judging from the situation on the chain, although Polymarket's data has declined after the election, it has increased significantly compared to before October. The average daily trading volume is currently stable at 30-40 million US dollars, and the number of daily active users remains above 20k, which is roughly the same as at the end of October. After the "election fever", sports topics officially took over, with the Super Bowl champion prediction transaction volume reaching 760 million US dollars, and the Champions League champion prediction also attracted more than 400 million US dollars in bets.
Of course, just as the betting results of the prediction platform cannot represent the "truth", we cannot evaluate whether Polymarket's "victory" can continue. But compared to this, we are more concerned about whether Polymarket's "victory" can be replicated in other fields.
In the past two years, Web3 infrastructure construction has gradually matured and even shown signs of "oversupply", and the industry has turned its attention to the application layer. However, as Web3 accelerates its mainstreaming process driven by internal and external forces, the application innovations that originally only satisfied the crypto user base are no longer successful. How to accelerate the penetration of the real world, attract more Web2 users, and optimize or even replace existing Web2 services with on-chain applications has become an important direction for Web3 application innovation. But before Polymarket, it was difficult to find cases where Web3 applications truly replaced existing services.
The reasons for the poor performance of these on-chain applications are well known: in addition to compliance issues, the blockchain environment and the resulting barriers to entry and usage have also kept most ordinary users out of the "chain". Most of the innovations that can truly achieve mass adoption are simple or even "brainless". If users have to "think" too much when using them, they will undoubtedly be afraid and stay away. Before Polymarket, Augur, as the first on-chain prediction market, also attracted much attention, but it failed to continue to attract users and operations due to its overly complex mechanism.
If you want more people to participate, the most direct way is to lower the threshold of use and simplify the interface with users to the extreme, preferably "one-click completion". Just like today's mobile payment, you only need to show the QR code and let others scan it to complete the transaction with a "beep". This will be accepted by more ordinary users. Polymarket obviously realized this and abandoned the complex protocol design at the product level in the early stage, minimizing the additional burden on users due to unnecessary complexity, and always committed to meeting core needs (such as betting) and abandoning other decentralized and permissionless technologies and concepts.
But Polymarket is still actively taking advantage of the advantages brought by blockchain and cryptocurrency, which makes Polymarket look more attractive. However, the value of on-chain applications does not lie in achieving decentralization, but in providing a more efficient, more reliable and accessible application environment for more real-world scenarios based on blockchain and encrypted assets. Therefore, Polymarket is not obsessed with making all activities take place on the chain, but adopts a hybrid model: only core transactions and settlement links are carried out on the chain, while the storage of some metadata and the matching of transaction orders are completed off-chain. This not only has higher flexibility and scalability, but also ensures that users can complete transactions at low cost and efficiently.
In the early stages of Web3 applications, a product model that is in line with existing user habits may be more helpful in achieving seamless migration for more users and replicating Polymarket’s “success” in different fields.
