This year is the year of the US election. Many eye-catching events have taken place in the past period of time. Trump has actively sought the support of crypto voters, and the Democratic government has loosened up on key policies. All of this has brought hype topics to the crypto market, making the prediction market an increasingly important crypto force that cannot be ignored. On August 30, Bloomberg, a financial data and news service company, is introducing data from prediction markets, which means that prediction markets are becoming increasingly important in analyzing political trends and election odds, and also highlights that traditional financial institutions are increasingly adopting Web3 data. As the TVL of the prediction market has grown against the trend to a record high, how to maintain this growth in the post-election era and combine AI to bring a wider impact, we have therefore focused on the AI+Web3 prediction market rising star PredX and the AI infrastructure behind it Aimelia Network.
Why do we need prediction markets?
According to a report by Grand View Research, the global sports betting market, including cryptocurrency betting and prediction markets, is valued at $83.65 billion by 2022 and is expected to grow at a compound annual growth rate (CAGR) of 10.3% by 2030, reaching $182.12 billion in 2024. Prediction markets are derivative markets where participants can bet or speculate on the outcomes of various future events, ranging from political elections and sporting events to financial market trends and even more niche predictions. Essentially, prediction markets allow bets to be made on anything, which also provides a more convenient tool for risk management, decision making, and insight into future trends.
Since the problems in the prediction market are all based on observations of the objective world, it is difficult for meme coin issuance platforms such as pump.fun to manipulate the price of coins. However, unlike the futures market, the crypto prediction market is not limited to guessing the price of assets, but can also guess the results of events. For example, a user buys a contract that "will pay $1 if the Ethereum spot ETF is approved by July" or sells a contract that "will pay $1 if the ETF is not approved in 2024." As more people buy and sell, the price of the contract will change to reflect the collective beliefs of market participants. If a contract that an Ethereum spot ETF will be approved by July is trading at $0.80, it means that the market believes that the probability of this event occurring is 80%. This is a common trading pattern in the current prediction market.
In fact, prediction markets have been around for a long time in the cryptocurrency space. Augur, founded by Joey Krug and Jack Peterson in 2014, became the first prediction market on Ethereum. Its native token is $REP, which stands for "Reputation". The token is used to stake and report on event outcomes, and users can create and trade prediction markets on a variety of topics. A year later, Gnosis, founded by Martin Köppelmann and Stefan George, launched another Ethereum-based prediction market platform. Unlike staking, Gnosis relies on a unique Dutch auction mechanism to determine event outcomes. In 2020, Polymarket entered the market and became popular for its focus on political and current event prediction markets. Most notably, users can trade in $USDC, making it more attractive to mainstream users.
On September 17 this year, the prediction market Limitless Network completed a $3 million Pre-Seed round of financing, led by 1confirmation. In May, Polymarket announced that it had completed two rounds of financing totaling $70 million, with investors including Founders Fund, Vitalik Buterin, etc. In Vitalik's public speeches and articles, he has repeatedly expressed his optimism about Polymarket. It can be said that the prediction market is one of the few products in the current encryption field that has found PMF. Polymarket's transaction volume so far this year has exceeded $450 million, with more than 60,000 active users. With the climax of the US election and other events, the prediction market platform will gain higher transaction volume and users. Such a niche market has achieved such results, which is enough to prove that there is still a lot of room for development in the prediction market track.
Polymarket monthly trading volume may hit a new high in September
With the end of the US presidential election, the prediction market will lack an important traffic code. Many venture capital companies have made bold predictions about the post-election era of the prediction market: Multicoin emphasizes that the prediction market needs some continuous event targets in the future so as to better gather user consensus, rather than a group of events that are easy to end briefly. Founder Karl commented on the user retention issue, saying that users need a series of highly repeated events to increase the repurchase rate. 1k(x) borrowed from sports betting and analyzed how the prediction market can increase event leverage to allow event participants to get more generous returns. Parafi confirmed the strong growth of the prediction market in non-election events through data. The partners of 1confirmation expect that the prediction market will usher in a 100-fold growth in the future and become a truly mainstream exchange.
The future of prediction markets combined with AI
The prediction market shows the true situation of the market, not someone's opinion. Users use funds to support their opinions, and the market price forms a consensus. If someone thinks the pricing is unreasonable, they can express their opinions and make a profit by buying or selling. This is the ultimate way of verification. Users can express their opinions at will, but they can only truly prove their position when they bet. This transparency and market-driven mechanism make the prediction market stand out in this round of bull market.
PredX is an AI-driven prediction market project founded by two North American AI PhDs, aiming to bring about a personalized revolution in the financial field through AI and prediction markets. In essence, PredX believes that prediction markets redefine attention-centered assets and increase the value of asset-related information, allowing financial information to better serve some asset subclasses that were once unpriced. Prediction markets provide additional degrees of freedom for assets and information, bringing endless possibilities to the industry.
From a micro perspective, PredX has found that there are three main types of users in the prediction market: spectators, believers, and traders. Spectators increase their unbiased understanding of the world by predicting the probability changes in the prediction market in order to better understand information. Believers are people who have strong judgments on an event and use the prediction market to realize their own opinions. Believers are transformed from spectators, and they constantly track an event to form their own understanding. Once they decide to bet, most of them will wait until the event is over. There are also some traders who find opportunities by tracking events and arbitrage by buying and selling event contracts. The future of the prediction market depends on how to meet the needs of these three types of users.
Based on the experience gained in the past six months, PredX believes that the prediction market is essentially an intention market. Whether it is a spectator, a believer or a trader, they all need to have an intention to arbitrage on an event. Therefore, better satisfying the arbitrage intention of users has become PredX's top priority. PredX has designed a winning Parlay reward and a first-come, first-served preferential policy similar to Friend.tech, so that users can better realize their beliefs and knowledge in their familiar fields. Another thing is to enhance user cognition. Specifically, on the one hand, it helps users to continuously collect and integrate asset-related information, and on the other hand, it assists users in conducting comprehensive event reasoning to draw judgments about the future. Since most intentions and information are expressed in natural language, it is of great significance to use the current AI technology of large language models to build PredX.
First, AI can ensure the relevance of prediction market topics by dynamically selecting and arranging events that can resonate with users emotionally, providing highly engaging and controversial topics. By implementing AI-based web crawlers and personalized recommendation systems, the platform can provide content based on personal preferences, creating a more interactive and emotionally engaging trading environment. AI can also help the prediction market maintain the continuity of content by incentivizing event creators to provide the latest and most attractive content, while filtering out topics that may arouse political or humanitarian bias, ensuring the quality of event information while providing a safe and enjoyable trading experience.
In terms of profits, PredX's AI architecture enhances the integration of information available to users, making the platform a rich source of event-related insights, thereby attracting high-quality subscribers. PredX works with multiple data suppliers and projects to generate different news every day to find the most attractive topics and track them continuously. From a trading perspective, PredX can show the reasoning process of AI events, reduce the time required for users to place bets, drive trading robots to simplify the trading process, and increase trading volume. By ensuring the fairness and reliability of data, PredX supports a commission-sharing model with top data providers to maintain a sustainable data ecosystem.
At the same time, PredX also collects user feedback on AI models to help evaluate and train AI models. AI models can improve their reasoning ability for special events based on user feedback and provide users with better auxiliary trading services. In terms of multi-party intention alignment, PredX can help align the intentions of data creators, spectators, believers, and traders, focus on user intentions, reduce interference, and provide a seamless event trading experience, thus ensuring an accurate and coherent financial ecosystem.
Win-win cooperation: PredX’s AI business philosophy
PredX has currently launched Base, Sei, Bitlayer, ZKLink, Ton and other networks, and has reached strategic cooperation with many well-known Web3+AI projects (0G, GenLayer, Flock, 0xScope, Space & Time, Nesa, etc.). After connecting the wallet, users can enjoy the AI services provided by PredX, including AI-based event creation, news integration, personalized event recommendations, and multi-model event reasoning. PredX continues to collect user feedback on AI reasoning and use it in the new round of AI reasoning. Users can better track event information through PredX and make judgments with the assistance of AI. The more times users use the platform, the more AI understands the user's intentions and feedback, and the more likely the user is to win with expertise and get more rewards.
PredX has also launched two Telegram Bots to facilitate mobile users to connect to TON or EVM wallets for transactions or AI-generated event evaluation. The predicted events on the homepage are made into cards, and the interface is very smooth, allowing users to browse the trading market like watching TikTok.
The PredX team won first place in the 2023 Silicon Valley AI+Web3 competition and second place in the Agent group in the 2024 BeWater AI+Crypto hackathon. Its founder, Rein Wu, a former Visa Research researcher, holds multiple AI technology invention patents. The reason why PredX can support so many AI technologies is that the underlying driver support of PredX comes from Aimelia Network, which is the AI infrastructure built by Rein Wu's team to predict the future of the market.
Unlike Bittensor's use of validation datasets, prediction markets allow each player to trade based on their judgment of future outcomes, which are not determined by any black box power because it is something that will happen in the future. Many AI agents are created in closed environments, and their answers are predefined before the training process begins. PredX builds an open world where questions, inputs, outputs, feedback, and rewards are dynamically generated based on the latest hot events on the Internet, which also brings more application scenarios to the security assessment and performance improvement of AI models.
What is Aimelia Network?
The reason why PredX can generate and recommend events that meet user interests based on AI algorithms is inseparable from the support of Aimelia Network. Aimelia Network was developed by the founding team of PredX and is an AI underlying infrastructure that integrates information acquisition, aggregation, and reasoning.
Most current prediction markets are actually based on platform-generated events, not AI-generated or community-generated. PredX uses Aimelia Network's technology to enable community members and managers to create their own assets and list them as events on the platform as tradable assets. This solves the problems faced by most prediction markets - relevance and liquidity. In terms of relevance, most users see the same screen and the same events and news, lacking personalization, whether they are interested in political events, technical events, or cryptocurrency trading. In terms of liquidity, most markets either have difficulty finding counterparties when users place orders, or there is a large bid-ask spread between orders, resulting in poor liquidity and a poor user experience.
To solve these problems, Aimelia Network improves the relevance and liquidity of the market through information recommendation systems and liquidity aggregation engines. The information recommendation system can automatically recommend the most interesting events and news based on user preferences, and even provide different AI algorithms and reasoning processes for corresponding events to each person. The liquidity aggregation engine aggregates the liquidity of different prediction markets and provides users with a one-stop prediction market aggregation service. Most of the AI products in the current cryptocurrency circle are criticized for only issuing coins to attract money and having no actual landing scenarios, but for Aimelia Network, the prediction market is the best application field it has found to combine AI and Web3.
Community-first incentives and token economics
PredX has raised $500,000 in start-up funds and now has 200,000 active users after the mainnet was launched in May. The founding team said that 50% of the governance tokens will be airdropped to community users. A points system has been launched, which will be an important criterion for future airdrops.
According to PredX’s official introduction, users can get 100 points after completing registration, 2 points for the first login, 50 points for the first use of USDC deposit, and a higher proportion of points for betting transactions, creating prediction events, etc. The specific points reward details can be viewed on the project’s official website. At the user usage level, event creators will receive 60% of the transaction income as commission and 5% of the loser pool, thus creating a sustainable incentive structure consistent with the overall structure of the platform.
Final Thoughts
When you want to buy a lottery ticket or bet on a sporting event, there is only one way to participate, which is to go to a sports lottery store to buy a lottery ticket or place a bet, which is a black-and-white result for players. But in a decentralized market, participation is two-way, and users can not only trade the results of an event, but also create events and provide liquidity. Web3 and AI technology have redefined the prediction market, allowing anyone to create, understand and trade almost any event in a transparent and open environment. This flexibility is very attractive to the younger generation of users. The growth data of the prediction market in the past six months shows that there is still great potential in the future, and PredX and Aimelia combined with AI technology will provide a more intelligent information experience for the entire prediction market track, and will also bring more possibilities.
