Decentralized Prediction Markets – Why It’s More Than Just Speculative Gambling

The expansion of cryptocurrencies and the principles of decentralization that they represent have been criticized in some corners for attracting speculators looking to make a quick buck.

While there is an extent to which this is true, it's important to look at the other elements involved, and the transformative impact that they're having on traditional financial concepts.

Decentralized prediction markets are a good example of this, creating a surface impression of being akin to gambling, while actually representing something much more meaningful and innovative underneath. The sooner you understand this niche, the sooner you can appreciate the promising potential that's waiting to be tapped.

The different types of decentralized decision-making

There are lots of cryptocurrencies out there, some of which are seen as suited to investment, while others are designed for their utility.

Underpinning them all is blockchain technology, and while the behemoth of Bitcoin is based on proof-of-work, others like Cardano take the proof-of-stake approach to validate transactions. This is basically a way of letting people who hold a given crypto asset to vote on aspects of how the chain evolves, and is an example of decentralized decision-making in action.

If you are getting into crypto to gamble, this is also entirely achievable. You can head over to casinoscrypto.com to find sites that accept many major currencies and also rely on the blockchain to run games.

The point here is that in either case, there is room for genuine investors and people who believe in the projects they back, as well as for fans of games of chance looking for a quick win. That brings us neatly to decentralized prediction markets.

The importance of being ownerless

With traditional prediction markets, participants can come from far and wide, but there's typically an organization that effectively owns and oversees the ins and outs of how it functions.

In a decentralized context, there's no single point of control, and proponents argue that this makes prediction markets more transparent, democratic, and ultimately fair for people who buy into them.

There are positives and negatives to this. For example, it flings open the door to allowing anyone who has the compulsion and the capital, whereas there may have been barriers preventing them from joining in with established, centrally controlled markets. On the flip side, the types of predictions being debated can be morally ambiguous, creating controversy in the process.

Regardless, the idea of having prediction markets that are free and open, rather than gated communities, is undoubtedly a plus point. Decentralization in this area is essentially a further expression of the frustrations that plenty of people felt in the wake of the 2008 financial crisis, and one which has proven momentum.

The wider ramifications

At the heart of decentralized prediction markets is the use of binary betting, which is nothing new. What is a revelation is the extent to which these markets have influenced the wider crypto space, and shaped trends beyond their borders in unexpected ways.

A good example of this is how stablecoins became the de facto choice for prediction markets, which in turn helped to bolster their popularity and viability elsewhere. It's very similar to how stablecoins are preferred by crypto casino site operators since they avoid the volatility that afflicts other tokens.

There's also the prospect of giving holders voting power and collective will being adopted elsewhere or at least transformed from the current proof-of-stake setup which is relatively rigid by comparison.

The path forwards

In comparison with incumbent prediction markets, decentralized equivalents are still comparatively under the radar. No doubt their rapid growth in the past couple of years has helped raise their profile, but they still remain little known in the mainstream.

If that changes, as well it might to the increased public interest in crypto assets, decentralized prediction markets will face greater scrutiny. This should be a good thing, so long as it pushes them into a more respectable direction, and does away with the misconceptions of raw speculation.

The bottom line

Like many aspects of crypto, it's wrong to dismiss decentralized prediction markets as half-baked. In years to come, we'll be able to appreciate the true scope of their impact.