Vitalik Buterin on the US election: Crypto prediction market performs better than expected

Vitalik Buterin, one of the co-founders of Ethereum, said on Twitter that crypto prediction markets have proven to be more reliable than traditional polls in this US election.

He believes that prediction markets are a better reflection of the election than traditional polls this year, in part because they take election interference into account.

Traditional polls that use statistical models to predict election results have predicted a landslide victory for Biden in this year's presidential race. But crypto prediction markets tend to favor close races. As the election results come in, Buterin believes prediction markets have an edge.

“Regardless of who wins now, I certainly think prediction markets have proven themselves to be more accurate than polling models,” he wrote.

Prediction markets use Ethereum-based tokens to allow people to bet on the outcome of major events, such as elections. These tokens are sold between $0 and $1, and when the election results are announced, the winning party's token is worth $1, while the losing party's token is worth $0. Therefore, only those who bet correctly can get paid, and those who guessed wrong will get nothing.

The pricing of tokens before an election is used to estimate who will win the election. If everyone thinks a certain candidate will win, the resulting demand will make his tokens more expensive, making it less profitable to buy them, similar to betting on a candidate with shorter odds.

Before the election, tokens representing Biden and Trump were priced at the same level on multiple crypto prediction platforms, meaning that, unlike traditional polls that predicted a likely Biden win, the market saw the two parties as being tied.

Buterin suggested that the “huge difference” between prediction markets and traditional statistical models may come down to the idea that the potential for election interference, among other adverse influences, should be factored in when betting on prediction markets.

“Bet-taking on prediction markets takes into account the possibility that factors such as increased election interference and voter suppression could affect the outcome, but statistical models simply assume that the voting process is fair,” he wrote.

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AuthorLiang Che

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