SuperUMAns #44 - The Optimistic Oracle & Prediction Markets
The evolution never stops at Risk Labs, where Across Protocol and the Optimistic Oracle are powering a modern Cryptoverse. UMA 2.0 will soon be launched, allowing the token holders to stake, vote and earn continuous rewards.
The prediction markets are another strong sector that is powered by UMA's optimistic oracle, and it is clear that the tool revolutionized the landscape. Polymarket used UMA's support to decentralize prediction markets and solve problems associated with traditional venues.
Prediction markets have long held a place at the heart of the Cryptoverse and the Polymarket success story was built on UMA's Optimistic Oracle. The Web3 platform helps users bet on current events in sports, politics and more. The OO uses game theoretical principles to find a Schelling Point for any outcome, which makes it a powerful tool for resolving Polymarket disputes.
Online bookies are bullies, charging high fees and even blocking successful players from betting. Online betting companies will enforce low maximum limits to customers and play any card in their sleeves to make profit. The synergy created by the Optimistic Oracle and Polymarket created an open and trustless alternative. Any user with a web3 wallet can bet on events and receive fair rewards if the bet is correct.
Major sporting and political events will always trend on Polymarket, because macroeconomic and political topics tend to attract higher liquidity. “Who will win the U.S. 2024 Republican presidential nomination?” has the most liquidity, with $1,500,000 committed up to date. The prediction will expire on the 10th of September 2024 and it already had $2,700,000 in volume
The Polymarket design and UI is simple and efficient, with the option of buying and selling shares then redeem their winning ones for $1. If I predict that Donald Trump will win and use $100 for this market, I will get approximately 189 shares and a potential return of $189 in 2024. However, going against Trump brings a higher profit! Using $100 for "NO" will give me 208 shares and a potential return of $208 when the prediction will settle.
How it works? The funds are locked in smart contracts, so traders who predict correctly receive instant payouts. Decentralized prediction markets don’t ask for KYC details, as the users will only need a Web3 wallet to participate. Everything is transparent as all data gets recorded on-chain and the participants can see where the funds are going.
The Optimistic Oracle helped prediction markets because it can determine any truth. The OO will verify any smart contract data, offering versatility to power markets predicting absolutely everything ... from the next US President, the SuperBowl winner, Oscar awards to and any other outcome.
The Optimistic Oracle differs from Chainlink and other traditional oracles because it has the ability to find the truth for ANY outcome, easily solving "gray area" disputes when there is no categorical right or wrong case.
A prime example was solved in December 2022, when TIME selected “Volodymyr Zelensky & the Spirit of Ukraine” as the Person of the Year. The dispute was whether Volodymyr Zelensky had won TIME’s Person of the Year award, and the UMA token holders resolved the market to "YES"
UMA and the Optimistic Oracle will have a key role in the future of decentralized prediction markets, making them more liquid. The decentralized prediction markets sector is niche but with a huge potential of growth. We may soon see more events, more options and markets for any type of event. UMA's Optimistic oracle can and will support the prediction market space to bloom!
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