Unlicensed Prediction + AI: A New Broad Avenue in the Cryptocurrency Field

Yesterday, a friend shared this news with me: "Polymarket considers raising funds at a valuation of $9-10 billion, while Kalshi plans to complete fundraising at a valuation of $5 billion."

Recently, aside from focusing on RWA centered around #BTCFi and on-chain brokers (#DeBroker), I have mainly been looking at the unlicensed + AI prediction market. This direction can be said to be the largest practical and implementable application of cryptocurrency outside of DeFi and RWA, and the ceiling for this market is very high.

In certain scenarios, prediction markets are very similar to Binary Options, as both are fundamentally based on binary outcomes. For example, an event either occurs or does not occur (yes or no). In prediction markets, users can bet on the probability of an event occurring, while in binary options, they bet on whether an asset's price will reach a certain target. Even in terms of settlement systems, the two are the same.

Therefore, the essence of prediction markets is very much like exchanges, providing users with trading options. Of course, the core of prediction markets is based on event probability predictions, but this probability, under the "capital base" enhancement, can even potentially influence the actual state of the real world.

For example, many friends know about match-fixing; one reason for match-fixing could be that the stakes are high enough, but when the opposing side has a large enough capital, they may use various real-world means to influence the normal course of the game.

Currently, while Polymarket and Kalshi are both leading prediction markets, they are both licensed prediction markets, meaning that the content of the predictions needs to be provided by Kalshi and Kalshi, and outsiders cannot directly engage in the bets they need. This is more like a "centralized exchange." As the market develops, there will inevitably be many "decentralized exchange" applications emerging, which is what I referred to earlier as unlicensed.

The essence of unlicensed is that anyone can publish their own prediction bets on the blockchain. For example, predicting whether my flight back to Singapore tomorrow will be delayed, as this information can be viewed on public platforms and is relatively difficult to be influenced by subjective human factors, thus it has a certain degree of gamification, and I believe the capital volume won't be large enough to affect the flight routes. 🤣🤣

Of course, anyone can publish predictions without technical barriers, but not all predictions will be seen or be of interest to others. This is very similar to exchanges; each prediction is like a trading pair. For instance, the Federal Reserve's interest rate cut in September might be a mainstream coin, while whether my flight will be delayed might be a meme. The gap between mainstream coins and memes largely comes down to liquidity and depth.

So how do we determine which prediction is a mainstream coin and which is a meme? This is where AI comes into play!

This is also why unlicensed prediction markets' best partner is AI. On one hand, AI can help organize and even review unlicensed predictions. For example, content with strong political bias or violence, etc., can be chosen to be filtered out. On the other hand, AI can score the published predictions (similar to this), and this model is quite similar to Pumpfun. Although many projects occur daily, the ones that are pinned (advertised) at the top are likely the mainstream coins identified by AI.

Of course, pinning is not the main job of AI; the main tasks of AI should be in liquidity distribution, market pricing, and risk management, especially regarding the risk of predictions being manipulated. AI can play a significant role in this regard. Thanks to AA boss @ayongaBTC for providing me with a lot of information on this aspect. The most crucial part of unlicensed prediction platforms should be liquidity allocation.

How to allocate the "market maker" funds to various valuable, meaningful predictions with more participants is the role of AI. Of course, humans can do this too, but for the vast unlicensed prediction market, the cost of human labor is too high. An AI specifically designed to feed data to the unlicensed prediction market would be more professional.

Additionally, we can train specialized user AIs to help users find the most suitable betting predictions within their knowledge profiles. Moreover, AI can search the entire network for information related to the prediction content to improve the accuracy of the predictions.

The ideal model in my mind should be a decentralized platform that allows users to log in with their wallets and publish their predictions without restrictions (within the legal framework). AI would then score the predictions based on the influence of the publisher, the impact of the event, the order of publication, and response time, etc. Predictions with higher scores would receive more liquidity support.

On the user side, in addition to participating in prediction publishing, users can also act as LPs for the platform. By depositing funds into the platform, they would enter a "liquidity pool," where AI would distribute these funds to various prediction projects. Based on user preferences, they could bet on certain early predictions, and users could modify their strategies at any time or hedge to lock in profits.

Just thinking about it is very interesting; I would definitely use such a product. Moreover, the audience would be broader than DeFi and RWA, or we could say that the unlicensed + AI prediction market is a collective expression of DeFi + RWA + AI in the decentralized field.

Just thinking about it excites me; I will likely focus on participating in this market moving forward. After all, whether it's RWA, BTCFi, or on-chain brokers, they all require a long time, but unlicensed prediction + AI can completely ignore compliance issues at this stage. I also believe this is the best application of AI in the cryptocurrency field, at least currently, there is no second.

Recently, I will increase my research and investment efforts in this unlicensed prediction market. Friends who are interested in this track or have layouts in this area are welcome to communicate together.

This article is sponsored by #Bitget ｜ @Bitget_zh

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