Polymarket on-chain prediction and off-chain verification mechanism
Recently, U.S. Federal Reserve Chairman Powell’s remarks have continued to make waves in global financial markets. Interestingly, on the blockchain-based prediction market platform Polymarket, some people have already conducted prediction transactions based on the content of his conversation, and even accurately predicted whether he would mention specific words, such as a simple greeting of "Good afternoon."
Behind this seemingly joking prediction lies the unique on-chain prediction and off-chain verification mechanism of blockchain technology, which is also the key to building a decentralized, fair and transparent market.
Polymarket is a decentralized prediction market platform based on Ethereum that allows users to trade on the outcomes of various events. The biggest difference between it and traditional prediction markets or gaming platforms is that Polymarket uses blockchain technology to achieve openness and transparency of information, automated execution of transactions, and decentralization of result verification, significantly reducing the possibility of human intervention and cheating. sex.
The core of Polymarket: UMA optimistic oracle
In order to ensure the accuracy and fairness of market results, Polymarket cleverly uses the Optimistic Oracle of UMA (Universal Market Access).
The oracle is the bridge between the blockchain and the real world, responsible for safely and reliably transmitting off-chain data to the chain for use by smart contracts. UMA's optimistic oracle is a unique design. It assumes that all the data sent is correct ("optimistic"), and only when a dispute occurs, a more complex verification process will be initiated.
UMA has its own native token UMA, which plays an important role in the agreement:
- Governance: UMA token holders can participate in the governance of the agreement and vote on improvements to the agreement.
Economic Security: UMA tokens provide economic security for optimistic oracles, ensuring they operate in a decentralized and permissionless manner.
Incentive mechanism: In order to encourage token holders to participate in voting, during each voting process, a certain proportion of inflation rewards will be allocated to holders who vote for the correct option.
How does the UMA optimistic oracle work?
When creating a new prediction market on Polymarket, the system will issue a data request to the optimistic oracle through UMA's oracle adapter, explicitly specifying the type of data required (for example, "Did Powell mention "Good afternoon"" ) and sources (such as official press releases or live broadcast recordings). This request triggers the following process:
1. Data proposal: Proposers in the UMA system can send market results that they think are correct.
Dispute period: If no one objects to the proposed result, the result will be deemed correct and used for market settlement. This process is usually very quick and inexpensive.
Dispute handling: If someone raises a objection, the system will send the request to UMA’s Data Verification Mechanism (DVM), and UMA token holders will vote to determine the final result. This is a decentralized arbitration process where the community jointly determines the final outcome to ensure fairness and justice.
This "optimistic" mechanism greatly improves efficiency because cumbersome verification is not required in most cases. Only when a dispute occurs, the decentralized arbitration process will be initiated, and the community will jointly decide the final outcome to ensure fairness and justice. Take whether Powell said "good afternoon" as an example. If no one objects to the proposed result (for example, judging from the official live broadcast record), the result will be directly used for market settlement.
How does Polymarket achieve decentralization, fairness and transparency?
Polymarket achieves decentralization, fairness and transparency through the following mechanisms:
Smart contract automatic execution: All transactions and settlements on Polymarket are automatically executed through smart contracts without human intervention, avoiding the control of centralized institutions.
Blockchain is open and transparent: All transaction records and market data are recorded on the blockchain, and anyone can check it at any time, ensuring the openness and transparency of information.
Decentralized verification of UMA’s optimistic oracle: Through UMA’s DVM, the verification of market results is jointly participated by the community, avoiding bias or manipulation by a single institution.
Market building at Polymarket: focus on clear options
The focus of building a marketplace on Polymarket is to set clear and verifiable options to ensure smooth processing by UMA. Poorly defined options, unreliable data sources, options beyond the UMA's ability to handle, or challenges with dispute resolution mechanisms can result in markets not functioning properly. For example, if the predicted events are too vague or difficult to objectively verify, it may lead to frequent disputes and affect the efficiency and fairness of the market.
Summarize
Through cooperation with UMA, Polymarket has established a decentralized, fair and transparent prediction market. UMA's optimistic oracle mechanism effectively connects on-chain predictions and off-chain verification, while UMA tokens empower the community to participate in governance and maintain the security of the agreement.
This innovative model based on blockchain technology not only subverts the operation of traditional prediction markets, but also shows us the great potential of Web3 in establishing a fairer and more transparent information verification and market mechanism.
This is not only a prediction platform, but also an important practice of blockchain technology in the field of information verification. It depicts for us more possibilities for future applications of Web3, even predicting simple greetings like "Good afternoon". Efficient and fair verification can also be achieved through blockchain technology.
Opinion articles present diverse opinions and do not represent the position of (WEB3+)
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