How Zeitgeist is Changing the Game for Prediction Markets and Governance Models
There’s a really interesting project running on the Polkadot network — Zeitgeist. It brings prediction markets to the Polkadot ecosystem, so people can bet on various events that will happen in the future, and also has an interesting governance model called futarchy that was finally made possible by blockchain technology.
Zeitgeist means “spirit of the age” so let’s have a look at how can this invisible force shape the future of the Polkadot ecosystem!
Prediction markets
The prediction market is a collection of people speculating on a variety of events — exchange averages, election results, commodity prices, quarterly sales results or even such things as gross movie receipts.
Source: en-academic.com
What this means is that the prediction market is basically giving people the opportunity to bet on events happening in the future and make a profit out of their predictions if they were right. The price of the asset is then derived from the number of people betting for or against the future outcome.
Let’s look at the most common example — political elections. People in the prediction market can bet on various political parties, resulting in something similar to sports betting. An interesting fact here is that if you believe that a winning politician would harm your business, you can actually bet on his win as well and make money that can cover your losses in case his party really wins (by winning the bet) — so you can use prediction markets as a hedge against the negative impact of future events.
The biggest game-changer here is that there are a lot of events you can bid only indirectly on in the real world. There’s no asset tied to the US presidential election or to the probability of a revolution in some Arab countries. While you could go short on the oil prices if you believe revolution is imminent, it’s definitely not the best way to represent your bet.
But prediction markets will allow you to precisely do that! Anyone can create an event that he wants to speculate on and people can start betting on different outcomes and therefore shaping the price of the underlying asset.
And here comes the Zeitgeist, the first prediction market, formerly on Kusama, which moved to the Polkadot network!
Predictions on Zeitgeist
Zeitgeist allows for different kinds of betting, namely
- categorical market — just a list of options, can be just binary with yes and no
- scalar market — the market question is always a range and people are taking long or short positions that represent their belief on what the actual outcome will be. An example could be What will be the price of Bitcoin in a month? with range set to $30,000 to $50,000.
- combinatorial market — allows for the composition of different events where for example company can present multiple strategies for the next growth and people actually choose the best one by betting on which would make the company’s stock growth the most
- LS-LMSR — basically an automated market maker (AMM) based on the prediction markets. It allows to change the price of the underlying asset based on the people’s bets — if a lot of people will vote yes for a candidate during elections, the underlying asset will rise in price and attract more voters supporting this bet.
Governance
Zeitgeist introduces a very interesting governance body called futarchy. Futarchy is a system that governs itself based on the signals coming from the predictions markets.
Let’s say the Zeitgeist council will propose an increase in the max supply of ZTG tokens by 20%. Then, a prediction market is created on whether this action will have a positive or negative impact on the token price. People are betting real money, thus they are incentivized to use their best knowledge to predict the outcome of such a proposal and if most people believe in a positive effect, then the proposal will pass.
As you can see, this is a very interesting concept of how can the open-market drive the governance of the project itself. One of the biggest advantages of such a system is that people are betting real money on what they think and therefore the project (or maybe some government in the future 🙂 is shaped only by people who really stand behind their qualified opinion.
Very interesting is actually the synergy between futarchy and blockchain — for the first time in human history, we can try to create a system that can govern itself by market decisions of incentivized participants. It will be a fun ride and we are personally looking for it!
The Kusama Parachain Derby
Kusama Parachain Derby was the first prediction market happening on the Zeitgeist testnet. The goal of this event was to predict the first 3 winners of the parachain auctions on Kusama, where the winners were rewarded with ZTG tokens for their successful bets.
The Kusama Derby took a form of a horse race where each is represented by a horse racing to win a parachain slot.
Zeitgeist App
Zeitgeist App is the way how you can use the best from prediction markets and bet on popular or any interesting topics.
You can search for your favorite prediction market or pick from popular topics such as sports, governance, politics, or crypto.
Let's check some examples of what you can bet on. Pick the winner of the UEFA Champions League Cup in 2022/ 23, or whether ZTG will be available for trading on a DEX by the end of May?
As you can see, there could be anything to bet on! You can also create a prediction market yourself as you wish.
Team
The team behind the Zeitgeist project is actually really skilled and well-recognized in the Polkadot ecosystem. Just to name a few
- Logan Saether, CEO — Was a part of Web3 Foundation where he worked on the launch of Kusama and Polkadot networks
- Chris Hutchinson, CMO — creator of the Polkadot ambassador program with a huge experience creating and driving crypto communities forward
- Dave Perry, CIO — Founder of Consensus Point which brought prediction markets to numerous organizations, including General Electric, Qualcomm, Best Buy, and the U.S. Government
Conclusion
We believe Zeitgeist is already playing a very important role in shaping the Polkadot network. We already have prediction market platforms like Augur or Gnosis, but we have never seen a rising platform that might be able to apply prediction markets to the entire ecosystem (be it Kusama or Polkadot).
We definitely recommend you try out Zeitgeist app and follow the project closely because it's one of its kind in the Polkadot ecosystem, and the usecase is something totally other than just a new DEX or NFT parachain. Just go and check it out yourself!
Polkadotters has its own Zeitgeist collator, so if you like this article, consider supporting us by the nomination of your ZTG tokens to our validator going by the POLKADOTTERS name. The validation is simple by using the website StakeZTG.com.
