Polymarket achieved significant growth during the 2024 U.S. presidential election but experienced a sharp decline in metrics after the election. To overcome this, it needs to enhance its services by diversifying blockchain networks, minimizing oracle risks, and adopting the concept of Info Finance to increase the value of prediction markets.
Info Finance is an approach that evolves prediction markets from mere betting platforms into systems that efficiently provide information. By leveraging AI and collective intelligence, it offers high-quality information and has great potential to improve decision-making frameworks through applications like DAOs.
With Polymarket leading the way, new projects like Wintermute and Drift are entering the market, expanding the scale of prediction markets. Info Finance has the potential to drive greater growth and innovation in this space.
Source: Presidential Election Winner 2024 | Polymarket
On November 6, 2024 (U.S. time), the U.S. presidential election concluded with Trump’s victory, bringing an end to the bets on the election hosted on Polymarket. This major event drew unprecedented attention, setting new records for user numbers, transactions, and TVL (Total Value Locked), marking remarkable growth for the platform. It was a prime opportunity for Polymarket and the prediction market to gain recognition across both Web2 and Web3 audiences.
However, after the big event ended, Polymarket’s overall metrics showed a significant decline. For instance, its TVL, which peaked at $512 million on November 6, dropped sharply to a low of $96 million on November 17. As of December 3, it had recovered slightly to $107 million.
This trend was also evident in key activity metrics within Polymarket. The platform’s daily trading volume, which began climbing from approximately $22 million in early October, peaked at $367 million on November 6. However, it has since stabilized at an average of $50 million.
Furthermore, the total value of open interest—a commonly used indicator in futures and options trading to assess market sentiment or the sustainability of a trend—peaked at $500 million on November 5 but has since fallen by 80% to hover around $100 million.
While Polymarket continues to offer predictions on events like the 2025 Super Bowl champion, Premier League winner, and other sports, political, and societal topics, these betting volumes are notably weaker than those seen during the U.S. presidential election. Data shows that the top betting volume during the election was $3.6 billion, whereas the top betting volume post-election has dropped to $900 million, highlighting the stark difference.
Given the scale of the U.S. presidential election, a major event held only once every four years, some decline in metrics following the event was expected. However, as shown in the data, the extent of this decline exceeded common expectations, making it a surprising outcome.
The process of this decline is straightforward:
The absence of a major, buzz-generating event.
A natural drop in public interest and attention.
Decreased betting participation and volume.
Repetition of steps [2] and [3].
A cumulative decline in Polymarket's overall metrics.
From Polymarket's perspective, the disappointment lies in the missed opportunity to capitalize on the explosive interest. If they had incorporated more proactive feedback gathering and added growth-driving factors during this peak period, the downturn might not have been as steep. As the saying goes, "Strike while the iron is hot." Greater efforts in service enhancements and marketing during this time could have mitigated the decline.
While Polymarket has faced a slight slowdown, the potential of prediction markets has attracted a wave of new projects. Notable among them are Wintermute’s OutcomeMarket and Drift’s BET.
Wintermute, a cryptocurrency trading firm and liquidity provider, is developing an on-chain prediction market platform called OutcomeMarket, which is set to launch soon. The platform leverages Chaos Labs' Edge Proof oracle technology to provide tamper-proof data feeds, enhancing the accuracy and reliability of information.
Additionally, OutcomeMarket is designed for deployment on major blockchain networks like Ethereum, Coinbase’s Base, and the L2 chain Arbitrum, enabling token utilization across diverse DeFi ecosystems and exchanges. The platform incorporates LayerZero technology for a multi-chain approach, allowing users to participate directly within their native blockchain ecosystems without the need for complex asset bridging.
Another noteworthy project is BET, a new prediction market platform introduced by Drift, a Solana-based perpetual futures trading platform. BET allows traders to earn interest on their positions and supports over 30 cryptocurrencies as collateral assets. By leveraging Solana’s fast transaction speeds and low fees, Drift provides users with a cost-effective and efficient trading environment.
The emergence of these competitors is expanding the stage for prediction markets, transforming it into a highly competitive battlefield. Each project must craft sophisticated strategies to highlight its unique features and attract users in this growing space.
As the prediction market expands and new competitors emerge, how can Polymarket reclaim its position at the forefront and revive its growth trajectory?
2.1.1 Improving Existing Services
A key strategy is to solidify its foundation by enhancing its current services.
On-Chain Diversification: Currently, Polymarket operates on the Polygon network. Expanding support to other popular blockchain networks like Ethereum or Solana could provide a more user-friendly experience and reduce friction. On-chain diversification would allow users to avoid complex bridging processes, decreasing the risk of user drop-off during onboarding. For instance, OutcomeMarket employs LayerZero technology to implement multi-chain functionality, while BET has leveraged Solana’s well-established ecosystem from the outset.
“Polymarket has frequently encountered issues regarding the reliability of verdicts on controversial topics, such as the outcome of the Venezuelan presidential election, whether Trump will launch a coin, and the recent speculation on Israeli military action against Iraq.”
Minimizing Oracle Risk:Polymarket currently uses the UMA oracle, where data outcomes are determined via token holder votes. This model is susceptible to manipulation, as UMA’s market capitalization is smaller than Polymarket’s trading volume, leaving it vulnerable to capital-based exploits. To address this, Polymarket must diversify its oracle solutions or strengthen decentralized adjudication mechanisms to enhance reliability. OutcomeMarket, for instance, leverages Chaos Labs’ Edge Proof oracle technology to tackle this issue effectively.
2.1.2 Embracing a New Narrative – Info Finance
Another pathway for Polymarket to rise to the next level is by reinforcing its narrative as the leading project in the prediction market space. This strategy goes beyond Polymarket itself and is a concept that all players in the prediction market should consider.
“These ideas have been theorized about for a long time: the earliest writings about prediction markets and even decision markets are decades old, and theory of finance saying similar things is even older. However, I would argue that the current decade presents a unique opportunity.”
Vitalik Buterin, in his blog, argues that platforms like Polymarket should evolve beyond being mere betting platforms for entertainment and take on the role of driving the dynamics of Info Finance within the financial system.
Info Finance refers to a structure where predictors supply predictions, readers consume these predictions, and the market itself acts as a public good by delivering insights about the future. In essence, it utilizes financial incentives to align market participants and provides readers with more valuable predictive information.
This differs from traditional finance by starting with the information readers want to know and intentionally designing the market to optimally extract that information from participants. By doing so, prediction markets should now aim to strike a balance between market and non-market elements, moving towards information financialization.
To simplify, Info Finance involves bringing non-market factors into the market to generate quick and accessible results for those factors. Ultimately, the value everyone seeks is information as a resource, which serves as a motivator for human actions. By managing this resource via blockchain technology, platforms can create an environment where participants are incentivized to provide valuable insights.
An example of this concept in action is the current prediction market setup: participants are motivated by the potential to earn betting profits, which leads them to aggregate vast amounts of information and apply collective intelligence to forecast future events. This system demonstrates how Info Finance leverages financial incentives to achieve efficient, actionable insights.
The integration of AI is also a viable option here. By utilizing AI, even in cases with low stakes, such as items valued at only $10, where human interest is typically minimal, higher-quality predictions can still be achieved. When operating with AI, the profit margin required for generating predictive information is low, meaning that even if profit is necessary, the cost per question becomes significantly reduced.
AI can also extract information in situations with limited human participation, enabling it to provide more efficient and accurate data for numerous small-scale queries compared to traditional methods. This capability positions AI as a critical tool in accelerating the expansion of Info Finance.
While still in the research phase, the application of the Info Finance concept to prediction markets could result in many practical use cases if the narrative is developed into specific features or services.
For example, this could be applied to Decentralized Autonomous Organizations (DAOs). One major issue with DAOs is that there are often too many decisions to make, and most people are unwilling to participate in the majority of them. This frequently leads to extensive use of delegated authority, resulting in centralization and proxy issues similar to those seen in representative democracy, or exposing the DAO to vulnerabilities from attacks.
However, if DAO voting were based on prediction values generated within a prediction market, the DAO could potentially function more effectively. In an environment where actual voting occurs infrequently, using prediction values from a market driven by both humans and AI for decision-making could lead to more accurate outcomes.
If Polymarket were to adopt and apply this new narrative, evolving into a platform centered on Info Finance, it could achieve not only a recovery in growth but also aim for greater heights. To accomplish this, substantial research into Info Finance and the development of a decision-support system leveraging collective intelligence would be essential.
While this discussion has focused on strategies for Polymarket to regain its growth trajectory as the leading prediction market platform, new projects like Wintermute’s OutcomeMarket and Drift’s BET are also making their presence felt with unique strengths.
The overall growth of the prediction market sector, including these new entrants, appears to be an unstoppable trend. Beyond this, it is also crucial for a more advanced narrative to underpin the prediction market as a whole.
In a previous article by this author, I expressed hope for Polymarket to establish itself as a proud and representative use case for the blockchain industry. After witnessing the potential demonstrated during the recent U.S. presidential election, this belief has only grown stronger. The possibilities of prediction markets have been well-validated.
Now, it is time to focus on factors that can propel the industry forward. By increasing participation incentives for different user roles and refining mechanisms to filter accurate information, collective intelligence can become even more valuable in predicting future events. Surprisingly, the intersection of blockchain mass adoption and the realization of human collective intelligence (including AI) might find its clearest expression in Info Finance, as embodied by prediction markets.
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