Prediction Market: An Integrated Platform of Collective Wisdom

Prediction markets are an open trading platform that predicts specific outcomes through financial incentive mechanisms. These markets allow people to bet on the outcomes of various events, and the market prices reflect the public's overall judgment of the probability of the event occurring.

Typical prediction market contract trading ranges from 0% to 100%, with the most common being the binary options market, where the price at expiration is either 0% or 100%. Users can sell options at market price to exit before the event outcome is revealed.

Through the prediction market, we can extract the public's expectations of the future outcomes of an event from the betting behavior of participants. Traders with different viewpoints express their confidence in possible outcomes by buying and selling contracts, and the market price of the contracts is seen as a consolidated collective judgment.

The history of prediction markets is long, as old as human gambling activities. Since ancient times, prediction markets have been closely related to politics; for example, in the Middle Ages, people were keen on betting on the outcomes of papal elections.

As the U.S. presidential election approaches, interest in political betting reached a new peak in July, and some prediction market platforms have thus garnered widespread attention.

Polymarket: Order Book Tradable Prediction Market

Polymarket is a decentralized prediction market project established in 2020, founded by Shayne Coplan, and has received support from several well-known institutions and investors.

The platform allows users to trade on some of the most controversial topics in the world ( such as politics, sports, popular culture, etc. ) Users can build their portfolios based on their predictions.

Unlike traditional sports betting, Polymarket allows users to freely trade shares on market topics that have not yet reached a conclusion, enabling speculators to flexibly engage in probabilistic betting.

Polymarket uses a Gnosis-based conditional token framework. For every 1 dollar of ERC20 token ( such as USDC) staked, two conditional tokens will be generated, representing the two sides of the event outcome, whether it occurs or not (. A multi-outcome market is a comprehensive statistic of multiple binary outcome markets.

Conditional tokens fluctuate in the market due to trading demand, and users can buy and sell at any time through the order book; they can also wait for the event results to be revealed, and those holding the correct token receive the entire $1 profit.

Since the two tokens trade independently in a market similar to a centralized exchange, it is possible for the sum of the prices of the two tokens to not equal 1 dollar, which requires market makers to participate in balancing the price difference. Before the event ends, users can use one of each token to redeem 1 dollar worth of collateral in the contract at any time.

The prediction market of Polymarket mainly includes the following parts:

• Market Theme: Each prediction focuses on a specific theme or event. Users can submit proposals for new market creation through Discord, but the platform has the final say on market creation.

• Oracle: Event outcome determination usually requires manual input from an oracle. Polymarket uses UMA optimistic oracles, allowing anyone to submit a resolution. If no one disputes the proposal, it will be considered accepted as fact. In very rare cases of dispute, it is decided collectively by UMA token holders.

• Conditional tokens: Lock 1 dollar to obtain two conditional tokens "Yes" and "No". At market settlement, the person holding the correct result receives the entire 1 dollar. The two types of tokens trade freely in the market, with prices reflecting the probability of the event occurring.

• Order Book Market: Adopts a hybrid on-chain order book trading mechanism, where users authorize via signature, and operators match off-chain, ultimately interacting with the contract on-chain. The contract performs non-custodial settlement, with atomic swaps between binary outcome tokens and collateral assets.

• Liquidity providers: Because trading condition tokens freely before the results are announced is allowed, token prices may deviate. Anyone can profit from the price difference by placing limit orders, and the platform also offers additional USDC incentives.

Currently, Polymarket does not have a clear token issuance plan or user incentive program. However, since the beginning of this year, it has distributed over $3 million USDC through a liquidity reward program to incentivize market-making activities and improve the overall liquidity depth of the platform. The market with the highest trading volume pays liquidity providers approximately $600 USDC in rewards each day.

![Crypto Magic: In-Depth Analysis of Polymarket, SX Bet, Pred X, and Azuro prediction markets])https://img-cdn.gateio.im/webp-social/moments-e7688b05d263a23aa5e392ece5b2ea39.webp(

SX Bet: Single Bet Prediction Market

SX Bet is a prediction market platform established in 2019, currently running on the SX Chain built on Arbitrum Orbit Rollup.

The platform mainly supports betting on sports topics, including wins and losses in major events such as tennis, football, baseball, and basketball. Recently, it has added cryptocurrency and political-related sections, allowing bets on mainstream crypto assets and the price trends of popular on-chain coins, as well as the results of the U.S. presidential election.

Unlike Polymarket, SX Bet follows a traditional sports betting model, only supporting single bets, and wagers cannot be freely traded until the outcome of the event is determined.

The innovation of SX Bet lies in the realization of a combination betting system for the first time. Users can make predictions on a series of events, and only by getting them all correct can they receive the prize. The bonus earnings from combination betting are usually quite substantial and can be seen as leverage in the prediction market. The platform's market makers will become the counterparties.

This type of combination betting is more like a lottery, potentially bringing huge returns of up to ten thousand times, and its successful cases can easily go viral, making it one of the most attractive aspects of traditional sports prediction markets.

It is clear that prediction markets like Polymarket, which are based on a "dual-token" conditional framework, cannot achieve combinatorial betting. This is because it is impossible for the contracts to mint a conditional token for every combination of outcomes while ensuring free trading under sufficient liquidity. The odds in a prediction market with only two outcomes are limited, which may not be attractive enough for users.

![Cryptographic Magic: In-Depth Analysis of Polymarket, SX Bet, Pred X, and Azuro Prediction Markets])https://img-cdn.gateio.im/webp-social/moments-9a47be354d7bdace8cdec2923f3f12a2.webp(

Pred X: Prediction market based on AI recommended topics

Pred X is a prediction market initially based on the Sei blockchain, covering various topics such as politics, cryptocurrency price predictions, and hot events. Currently, it supports betting with USDC on multiple blockchains including Base, Linea, Sei, and Bitlayer, and has launched a corresponding Telegram mini program.

Unlike Polymarket, where prediction topics are primarily proposed by users in Discord, most of Pred X's prediction topics are automatically generated by Aimelia AI through crawling popular news and market sentiment indexes on the internet, and then pushed to the website, where users spontaneously form trading markets. Although it supports multiple chains, Pred X is not a completely decentralized application. The different results of various prediction topics and their corresponding prices are determined by a centralized order book of the platform, while the ordering process and the market for each prediction topic are implemented according to smart contract rules.

Objectively speaking, Pred X is still not as mature as other prediction markets. The order book depth and betting volume for predictable topics on the site are far lower than Polymarket and Sx Bet. As a prediction market, it should allow users to freely trade tokens for different outcomes before events are revealed. Unfortunately, the Pred X order book does not support users placing orders on their own. In the absence of market makers in most markets, users are essentially unable to freely trade outcome tokens.

In addition, the document does not provide detailed explanations on how to ensure the consistency of topic market contracts across different chains when implementing multi-chain betting support, as well as how to ensure that all probability outcome tokens have sufficient liquidity across each chain. When connecting wallet transactions in the "real mode" of the Telegram mini-program, there are discrepancies between the betting prices of the prediction market for the same topic and those on the official website.

The current situation raises doubts about the practicality and reliability of Pred X. Overall, this product seems more like a work in progress.

![Crypto Magic: In-depth Analysis of Polymarket, SX Bet, Pred X, and Azuro Prediction Markets])https://img-cdn.gateio.im/webp-social/moments-492769d7fe77c8b89ae39879d05131ad.webp(

Azuro: A betting protocol supported by liquidity pools

Azuro is not the prediction market itself, but a foundational protocol for creating on-chain prediction markets. This permissionless infrastructure includes on-chain smart contracts and web components that can be used to build multiple prediction market applications.

Azuro can only make a one-time bet and cannot freely trade between "yes" and "no" like Polymarket; it can only earn profits after the results are announced.

The Azuro system is centered around liquidity pools, allowing anyone to deploy their own liquidity pool by interacting with the Azuro factory contract. Multiple betting platforms can be created under a single liquidity pool, each of which can establish multiple potential events for different prediction topics, allowing for separate bets.

Azuro proposed the concept of "liquidity tree", which allows multiple events under a prediction topic, as well as multiple topics across different platforms, to share the same liquidity pool. The liquidity tree provides a hierarchical structure, defining the range of liquidity for various possible events.

These liquidity funds ensure that the platform can act as the counterparty for bettors under any circumstances, paying potential bonuses ) is a loss for LP (. If bettors generally incur losses, LP can profit. A liquidity tree provides liquidity for multiple prediction topics simultaneously and generates profits and losses as a counterparty.

The odds for each event in Azuro are calculated based on the ratio of the betting funds under that event to the total liquidity range of the entire prediction market. The initial odds are set by specific data providers, who also add initial liquidity accordingly. Data providers can also adjust the odds during the betting process, with the payout capability of these odds guaranteed by the initial liquidity.

Azuro also supports the implementation of multiple dapp platforms, where the betting platform can set its own fee sharing, and bettors can choose freely; liquidity pool creators can also set the sharing ratio of the pools. A certain percentage of the profits from all pools will enter Azuro's own DAO, and Azuro has also issued its native token $AZUR.

![Crypto Magic: In-Depth Analysis of Polymarket, SX Bet, Pred X, and Azuro Prediction Markets])https://img-cdn.gateio.im/webp-social/moments-44419cd1335b17b856e5df78be622824.webp(

Conclusion

The concept behind prediction markets is quite interesting. Participants aim for profit and view the free market as the most effective information-gathering system for humanity, thereby making predictions about real-world events. These outcomes are often surprisingly accurate. In today's society, where recommendation algorithms monopolize information, prediction markets seem to effectively restore the truth and reflect diverse perspectives, as evidenced by the predictions on Polymarket regarding political events.

Many cryptocurrency users may have first encountered prediction markets during the last presidential election when a certain platform launched an index for the two candidates. Although it is a centralized platform, with strong market-making capabilities, users can even open high leverage to participate, which is indeed a very interesting experience.

Cryptocurrencies have greatly reduced trading friction in prediction markets, providing better and more efficient market mechanisms. Based on the ideas of smart contracts and AMM, they have also brought non-access and better liquidity to prediction markets. Many AI AgentFi projects even see prediction markets as an arena to harness collective intelligence and hone capabilities.

Of course, the drawbacks are also obvious: some platforms, while allowing free trading of conditional tokens, struggle to implement flexible betting mechanisms, lack high return expectations, and have lost some of the fun for ordinary players; while other liquidity pool-based solutions are somewhat complicated and lack the ability to re-trade after betting.

Rather than being a matter of mechanisms and technological innovation, the current explosion of prediction markets should be viewed as another large-scale application of crypto culture, a victory of the free market culture behind it. This is particularly valuable in an era where algorithmic authoritarianism gradually monopolizes information. After all, nothing is smarter than the market, and no information system is more efficient than the free market.

![Cryptographic Magic: In-depth Analysis of Polymarket, SX Bet, Pred X, and Azuro prediction market])https://img-cdn.gateio.im/webp-social/moments-ee9e0f0dc0d7fffdd185fee77a832e57.webp(