Ethereum co-founder Vitalik Buterin said he was becoming “worried” about the direction of prediction markets and suggested they evolve into markets to protect consumers from the risk of price exposure.
Prediction markets are “over-converged” with “unhealthy” products that focus on short-term price bets and speculative behavior rather than long-term building, Buterin said in X post.
Instead, onchain prediction markets combined with big-language AI models (LLM) should become general hedging mechanisms to ensure price stability for consumers for goods and services, Buterin said. He explained how this system would work:
“You have price indexes for all the major categories of goods and services that people buy, treating physical goods and services in different regions as different categories and forecasting markets for each category.
“Each user, individual or company, has a local LLM that understands that user’s spend and offers them a personalized basket of projected market shares, representing ‘N’ days of expected future spend for that user,” he continued.
Individuals and companies can hold a combination of assets to grow wealth and “personalized market share projections” to offset rising costs of living caused by fiat currency inflation, Buterin concluded.
Related: CFTC withdraws Biden-era proposal banning sports and political prediction markets
Prediction markets are useful market analysis tools, advocates say
Prediction markets are crowdsourced intelligence platforms that can provide insight into global events and financial markets while enabling individuals and companies to hedge against a wide range of risks, proponents of prediction markets say.
According to Harry Crane, a professor of statistics at Rutgers University, forecast markets are more right than polls and should be treated as a public good.
Crane told Cointelegraph that opponents of prediction markets within the U.S. government want to restrict these platforms because they offer insights that cannot be easily ignored or manipulated by centralized entities.
Prediction marketplaces such as Polymarket or Kalshi provide an alternative to information presented in official sources or media reports that can be controlled or manipulated to fuel specific narratives by distorting public opinion, Crane said.
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