Attitudes toward cryptocurrencies have become an important topic in the U.S. election this November. Interestingly, users have seen not only traditional polling agencies continue to provide data, but also the growing popularity of the cryptocurrency-based prediction market platform Polymarket. As of May 16, nearly $127 million has been bet on the topic of "the winner of the 2024 presidential election", of which $15 million is bet on Trump, with a 50% chance of winning, $14.55 million is bet on Biden, with a 42% chance of winning, and the other three candidates have a chance of winning no more than 3%.
Just a few days ago, on May 14, Polymarket announced that it had raised $70 million in two rounds of financing. The latest round of financing was led by Peter Thiel's venture capital company Founders Fund. Polymarket's investors also include Ethereum co-founder Vitalik Buterin.
The establishment of Polymarket is related to the widespread spread of misinformation during the COVID-19 pandemic. The project was established in May 2020 and the platform was launched in mid-June of that year. It also caught up with the 2020 and 2024 US elections. The interweaving of major events gradually brought this cryptocurrency-based prediction market platform into people's sight and market hotspots.
Dropped out of NYU's computer science department to start a business, admires Hayek
Polymarket founder Shayne Coplan is 26 years old this year. His LinkedIn page shows that he once studied computer science at New York University. According to public reports, in many ways, Coplan has the temperament of a new generation of entrepreneurs. He is an artist who was fascinated by P2P file sharing in an era when people liked to share music. From then on, he came into contact with Bitcoin and easily understood the intrinsic value of the global peer-to-peer asset network.
When Ethereum was announced in 2014, Coplan became an early follower and is believed to be the youngest participant in the pre-sale. Two years later, at the age of 18, Coplan began to participate in blockchain projects. In June 2016, he interned at Chronicled in the San Francisco Bay Area, where his responsibilities were to "shadow the chief product officer and help decide how the product interacts with the Ethereum blockchain."
Since then, Coplan has also been obsessed with cryptocurrency, launched a series of startups, and founded a DeFi startup called Union.market, which is the direct predecessor of Polymarket. Although he later dropped out of school, he has been thinking about it for a long time and understands some specific problems faced by the creation of prediction markets and decentralized markets in the past few years. He called Hayek's famous paper "The Use of Knowledge in Society" as an early entrepreneurial inspiration, and Coplan also referred to years of academic research on prediction markets. Hayek's related idea is that when economic incentives are in effect, people are more likely to accurately understand uncertain possibilities. People read more and better sources of information, think more deeply, and try to invest their money in actual results that are more likely to occur.
"When the coronavirus hit, there was so much uncertainty and so many different opinions, (I thought) if only there were a free market on these topics, people would put money on their opinions," Coplan once told the media.
On June 16, 2020, the beta version of crypto prediction market Polymarket was released, but at the time there was high friction for users, only supporting Metamask login, high Ethereum transaction fees, and limited liquidity. Three months later, with the release of Polymarket Phase 2, Coplan's approach to building Polymarket became clearer. The platform was ported to Ethereum's second layer Matic (now Polygon) to reduce gas fees for betting. He also designed the system for users who don't have Ethereum wallets. All bets are made in USDC, a stablecoin pegged to the US dollar, and can be purchased with a debit or credit card.
Just a few months after its initial launch, Polymarket has attracted attention and completed a massive $4 million seed round led by well-known investors Polychain Capital and Naval Ravikant.
The 2020 US election became a catalyst for Polymarket. On November 3 of that year, affected by the US election, Polymarket's trading volume suddenly surged to 1.297 million US dollars, and it went from being unknown to emerging.
Polymarket’s trading volume and monthly active users since its launch in 2020
With more positive feedback from the community and market recognition, Polymarket later attracted a Series A round of financing. General Catalyst helped the company raise $25 million in the Series A round, with participation from Airbnb's Joe Gebbia and Polychain.
In its most recent round, Polymarket raised $45 million in Series B funding, led by Peter Thiel’s Founders Fund and existing investors 1confirmation and ParaFi, with participation from Ethereum co-founder Vitalik Buterin, Dragonfly and Eventbrite co-founder Kevin Hartz.
Fined $1.4 million by CFTC, submarine prediction sparks controversy
Polymarket’s development has not been smooth sailing. In January 2022, Polymarket was fined $1.4 million by the Commodity Futures Trading Commission for regulatory violations and received a cease and desist order, including for not registering as a Swap Execution Facility. As part of the settlement, Polymarket promised to reduce its services in the United States and continue to operate overseas.
However, Polymarket has also stepped up its compliance efforts. In May 2022, Polymarket appointed former U.S. Commodity Futures Trading Commission Commissioner J. Christopher Giancarlo as chairman of its advisory board.
In addition to the fine, in June 2023, a viral tweet about the Titan submersible results brought a lot of negative impact to Polymarket, as reported by Mother Jones. There was a bet on whether the submersible would be found by a certain date on Polymarket, and users bet more than $300,000 on whether the missing submarine would be "found before June 23rd." This sparked an online discussion about the ethics of profiting from a potentially deadly event.
"Where does betting on other people's deaths belong in capitalism," one Twitter user asked, posting a screenshot showing the odds on Polymarket. The sentiment struck a nerve, and the post quickly went viral, garnering more than 9,000 retweets and more than 150,000 likes. "This is insane. Imagine making money on whether someone is going to die," another user replied, in a response that was liked more than 1,000 times. Others began criticizing Polymarket directly for opening up the prediction.
Polymarket, which is in development, responded to ethical concerns, describing the submarine market as "not tied to any outcome for passengers." "We understand that some confusion has arisen due to the misconception that our prediction market is tied to the fate of passengers. We want to emphasize that this is not the case," Polymarket wrote. "Our goal is not to profit from such misfortunes. Nor do we do so. Our goal is to help people better understand the world around them."
When will it mature after breaking through in the crypto prediction market?
Prediction markets themselves have a long history, but in the crypto space, the first decentralized prediction market was Augur, which launched on Ethereum in July 2018. Augur was developed by the Forecast Foundation, which was founded in 2014 by Jack Peterson, Joey Krug, and Jeremy Gardner. The Forecast Foundation is advised by Ron Bernstein, founder of the defunct company Intrade, and Vitalik Buterin, the founder of Ethereum.
In addition to Augur, there are not only Polymarket in the market, but also Gnosis, Hedgehog, PlotX, Projection Finance, Sanr.app, Better.fan, Feel.market, etc. However, Gnosis turned to community management projects after failing to achieve its expected goals. Other crypto prediction markets, such as Veil, simply closed down.
Early cryptocurrency-based prediction market experiments, such as Augur and Gnosis, also suffered from Ethereum’s long-standing scaling issues. In addition, they initially used native tokens, adding friction to the user experience. Polymarket has learned from the mistakes of its predecessors.
After 4 years of development, Polymarke has now successfully "broken through" and is even cited in media reports and industry research as a reference for public opinion on some key issues.
As of May 14, there are many hot topics on the Polymarket website: Who will win the 2024 presidential election? Will the Ethereum ETF pass on May 31? Will $GME reach a new all-time high before Friday?
According to data from Token Terminal, Polymarket’s highest trading volume this year occurred on January 10, at $5.73 million. The platform experienced significant growth in monthly active users in January, rising from 1,600 on January 1 to 4,100 on February 1. The number of monthly active users slowed down after April. As of May 15, the forecast amount on Polymarket has reached $202.7 million.
Following the recent funding round, Coplan said on LinkedIn, "What’s most gratifying is seeing widespread adoption of Polymarket as an alternative news source. The trend is clear: people are better informed about what’s happening in the world because of Polymarket. Enough with pundits and algorithmically generated news. In an age of rampant misinformation, Polymarket offers a new form of information driven by financial incentives to tell the truth, rather than bait and switch for clicks. People want unbiased information. Polymarket is providing it."
As a firm believer in market theory, Coplan believes that prediction platforms are a real way to better understand reality.
Polymarket has attracted the attention of many industry insiders. Vitalik once used Polymarket to track Sam Altman's board exit. Packy McCormick, an advisor to a16z Crypto, also said that Polymarket's page may be the best place to start the day on the Internet.
Riding on the momentum of social hot spots and with the support of celebrity users, Polymarket has become the largest crypto prediction market. However, to realize its original intention, continuously optimizing product experience and avoiding risks and ethical dilemmas are crucial challenges for future development.
