Prediction markets—that is, a group of people who place bets on whether a certain statement will prove to be true in the future—have frequently proven more accurate than standard polls. Why? Because the participants have something to lose. Or gain. And the fancy name for a bet? - “Futures contract.”
Take, for example, a prediction market created at George Mason University, which ranked an impressive 0.2 on its “geopolitical” predictions (where zero is 100% accuracy, 0.5 is tantamount to chance and 2 is 0% accuracy).
Charles Twardy, contributor at GMU’s prediction markets, explains their impressive results:
“Each forecaster starts with a finite number of points, and therefore they have to choose a little more carefully where to spend them. I might have opinions on a lot of things, maybe only a tenth of which I’d be willing to invest my limited points in.”
In other words, increased accuracy can be achieved when people are asked to put their money where their mouth is.
While GMU forecasters bet with “points,” Bitcoiners use bits. And while in classic betting rings losses are paid to the “bookie” himself, Bitcoin’s peer-to-peer betting world instead features losses paid straight to other bettors. BitBet, Fairlay and BetMoose have come forth as the most popular peer-to-peer prediction sites that operate in Bitcoin. How do they compare?
“Got milk?” is the motto at BitBet, and I don’t know why (enlightenment in the comment section is most welcome). No account is needed to bet on the site—“Sorry to disappoint” the admins joke. Currently the site’s most high-sum bets are about Bitcoin itself:
“Bitcoin to surpass Berkshire as an investment” by mid-February 2015 (3,827 bitcoins)
“1 BTC >= USD$10,000” in two weeks (830 bitcoins)
Other categories include politics, sports and entertainment. BitBet keeps 1% of all bets placed as their fee, and won’t post bets they consider to be “bad,” dubbed BadBets. “A crowd of at least five hundred protestors will not throw tomatoes at Nicole Kidman during the Cannes" is provided as an example of a BadBet.
Accepted bets will post as soon as your initial bet amount (which must be a minimum of 0.01 BTC/10,000 bits) receives one confirmation in the blockchain.
“Snowden will leave Russia before the end of December,” “Bitcoin difficulty will be >100B by the end of the year,” and scads of political predictions make up the Fairlay front page. The site doesn’t list any restrictions on the content of bets placed.
Users can choose to create an account or not. The site gives you a leg-up in the case that you submit a bet whose counter has already been submitted by another—Fairlay will ask if you’d like “covered” odds (an immediate match of your funds) or “open” odds (you’ll need to wait for a user to offer a match).
Fairlay automatically deducts 2% of bets placed for its service fee, and their categories are listed as Bitcoin, sports, news, and miscellaneous. They also published an interesting blog that covers everything from the hidden implications of recent events in Bitcoin to advice on why betting is more profitable than mining.
With the motto “Peer-to-peer bets and predictions. Created by anyone, about anything,” BetMoose features the most colorful and eclectic page of the three sites. The word “anything” may be misleading, however, as the sites bars bets about “a person’s death.”
Today’s front page predictions include the stock price of Tesla by the end of this month, Ebola infection rates and the release date of the Ethereum genesis block.
BetMoose requires an account to bet, but the annoyance of such might be offset if you can land yourself in their Hall of Fame, updated daily to reflect users’ total profits and accuracy. Accounts can, of course, be anonymous, and bet setters are rated by reputation and earn commissions for accurate bet resolutions.
They offer fixed-odd bets or “parimutuel” ones (where your odds can change). BetMoose keeps 2-3% of all bets placed and splits the fees with the bet hosts themselves.
A Sophisticated (and Useful) Way to Gamble
Prediction markets are nothing new, but the low fees and ease of peer-to-peer transactions that cryptocurrency has brought to them is. Whether you bet for fun, for knowledge or for both, Bitcoin has made futures contracts more accessible than ever.
Did you enjoy this article? You may also be interested in reading these ones:
- MIT Computer Scientists Can Predict the Price of Bitcoin
- Did the Simpsons predict Cryptocurrency back in 1997?
- Investing 101: How to Predict Bitcoin’s Price