Prediction market panel | Devcon SEA

[Music] hello everyone and uh can you all hear me awesome um I'm vaugh McKenzie landel I'm one of the co-founders of butter we've uh been working in the governance space for a very long time and um obviously very excited about fut talk in prediction markets and that's why we're all here we have this incredible panel full of lots of people who my love and admire um and I'm going to just hand over to each of them to give a very short introduction and and then we'll kick off yeah um I'm Martin um so in a previous live Ann nois we started with prediction markets and uh wanted to implement F fi and other things um so in in general yeah I I'm absolutely a super big fan of that uh but I think on this panel I will a little bit play the the skeptic here um because yeah I think as as Robin mentioned well you have the idea and then you have the all all the details that need to be uh figured out so I I think I can a little bit bring in that perspective I just talked so I'm Robin Hansen so uh I'm Calvin also ctif uh I'm the co-founder ofari um we are uh we just announced our project a few days ago uh our plan is to help um thousand and other organizations make great impactful uh uh positive DEC decisions um y hi everyone uh I'm CJ from from Limitless we're building uh like uh basically we're processing around million dollars in a day in bets right now for like zero day contracts on financial markets uh I believe that like with crypto we can build the the world's largest economy uh on chain uh outside the jurisdiction of any one particular nation state and I think that uh as well as that we need to build really efficient Global marketplaces on on top of the infrastructure and so that's what we are doing at Limitless Labs thanks guys really appreciate that so we're here at diak today and um so the first question is how do prediction markets tie to diak how do prediction markets and epistemic tech make the biggest impact in the vein of diak on differential progress defense and democracy over to any one of the panelists one ring to rule the mall if you could have reliable prediction markets on whatever policy question you have then you can just do better on all of your other areas of life you could have better know how to pursue longevity better know how to pursue decentralization whatever it is you're trying to do having better information on that can make you do that better so that could we do much better and how does that map directly to say for example defense yeah no I I can just replicate that so um so yeah I think the the the promise is is is very clear so the promise is whether we we talk about um yeah even simple things like this community node or uh so from from micro from micro decisions whether to show that Community node or not to show that to extremely large micro macro decisions should we raise the interest rate or should we make this huge uh um um well defense spending here or there uh in general the promises that um this is it tool for more more robust decision- making to bring in yeah to to have a better quality of of of of bringing information that actually um show shows the true true impact of a decision yeah so I'm going to make a comment here like so over the last uh few weeks uh everybody has seen uh aot um lots of people are talking about uh prediction markets of course predicting uh who's going to win the election and and uh this made a lot of uh generate a lot of excitement uh but uh actually the most interesting thing is not like predicting only predicting probabilities that normal prediction markets they do but uh predicting the consequences of of things so if you could have for instance uh conditional markets on uh inflation on uh GDP growth on um um spending on unemployment conditional on uh candidates right this would be even much more interesting for for for democracy you could actually see like a scorecard for the candidates right like a game you can pick one this one's better on this one this one's better on this other thing right so this is the promise of using conditional markets for decision making yeah sorry man go ahead maybe let me let me throw in one kind of uh uh concept to challenge this this idea so to say I mean I'm just pulling up here uh coin Gecko and and and look at prices of of of crypto and well they change by 6 7% a day um so I think prediction markets rely on the assumption that markets are so efficient um that out of those prices we can uh get reliable information um or better information but I would argue well there is also a lot of noise uh in in in markets and I would say that uh markets here um prices change by 6% is largely not related to any meaningful signal but is is or well I need to be careful the statement but but there's still a lot of noise so that that's I guess my question how how can is there enough signal in the noise so when you compare head-to-head this mechanism to other ones consistently this wins so that means all those other mechanisms have more than 6% mistake think about any committee you've ever been on think about the gossip Network do you really think that's within 6% of the truth come on like being 6% close is great compared to what we usually have yeah I would I guess I would comment the like the whole question from from a little bit of like a different angle I think that definitely prediction markets have a lot of power in terms of like fusting and decision- making uh but I think like in a in a crypto context what's really interesting and Powerful uh is the fact that essentially we can build these like Global efficient marketplaces and so I I really believe that markets in general accelerate human progress like if it wasn't for markets we wouldn't be where we were today in almost every field uh and even like they have positive trickle down effects like science funding for example Brian Armstrong sells his coinbase stock to fund like moonshots and and science funding that's a trival example in in in a global context but still kind of proves the point and I think that like building prediction markets on chin can be defensive in the sense that uh we actually have a capital formation and wealth generation outside of the the nation state in this kind of global onchain economy uh and I think why that's defensive is because we can build this kind of resilient independent decentralized systems that manag to kind of form their own Capital like without for example being taxed on it also without the very heavy regulation which is a big issue there are only 16 designated contract makers in the United States There are 16 licensed derivatives exchanges but money cannot move globally at the speed of info in the traditional system here it can and we can build these really powerful marketplaces that are Global and accelerate human progress I completely agree I think markets are very important important piece of technology I actually do believe that one of the reasons that we are able to accelerate defense particularly with prediction markets is because we're basically getting rid of any Authority's ability to lie to us right because we can delegate information and Truth to markets I think this is great and um actually speaking about this if you think about futaki so far as you said we've had lots of messy details I'd love to know what you think the key challenges in implementing futak will be for re World organizational decision- making right uh so um some some some challenges of course uh Robin mentioned uh the matter of the alst and the in the boardroom uh so there's always this uh this risk that uh uh prediction markets and also decision markets are um some sense threatening to uh the power of uh uh insiders of some organizations that maybe are not making most uh uh efficient uh uh decisions so this is uh for sure a big challenge uh so another challenge uh that is uh marching uh uh I'm going to try to connect uh the previous question from marching to uh the combinatorial market idea from Robin which is part of our basically Grand Vision on fitar which is uh um so matter of noise um when we evaluating a potentially a small or medium siiz uh prop proposal or decision in a company um many of those if you're relatively small or medium you're not going to have a clear impact uh visible impact on on the share price uh so that makes it really hard to um to use this directly to estimate uh but if you've had a a full Network or full tree uh where you can see like you can you could have uh markets for a share price or token price but connected to these you also see the kpis market for different kpi number of uses Revenue uh uh other kinds of metrics important for the company so uh you could actually see okay maybe I don't there's a lot of noise I don't see the impact of this decision on uh the sh token price but I see the impact of this decision on this minor kpi that has but this minor kpi is associated with this major kpi which is in then related to the share price so I think that's a this is BR vision for many decisions is actually have the markets all the information connected to each other maybe the to kind of reorient the question what problems are you running into building and operating these things prediction markets fakis what are the hard problems what are the solutions yeah I I I can say one one hard problem or well relatively hard problem is to just uh find traders that are comfortable kind of going into those um into those positions and just to give you give you an example of um let's say we would do this for ethereum we would say Okay conditional we we might go this rout road map or that route map um and then um we want to use this futy mechanism so essentially people can say conditionally to this route map I I buy eer and conditional to that I sell but then to to practically do that you need to you need to believe that the going back to this correctness of of prices um I mean yes 6% is in a day but but I mean we really or what is really the fair price of Isa right now and I think there is there could be a range of some people believe it should be 10,000 and some people would believe it's could be less than a thousand so uh so if you are in the camp of it should be 10,000 then kind of probably probably in even in both uh in both decisions you would say well I want to be long eer I want to hold eer and if you're in the camp of well this is really not worth it it's just just worth 10,000 and again in both sides so you need that person that says well the price is pretty much right now and really that decision makes a marginal difference for me to um uh to hold the asset and then let's say let's say there's a really good proposal and you really like that so you go along on that now you hold this conditional yes now the next day some external completely unrelated event happens where the whole crypto Market crashes by 50 % you hold this uh yes proposal and hold it under a price of um well the price from yesterday um you still think the proposal is good but now your incentives are to um for the proposal absolutely to not pass because then you would hold all the dollars and not the asset at a price that's now 50% um uh or where the real asset is now 50% cheaper from from what you bought it so not sure if anyone could follow but but those are kind of the challenges I I I I see so so 20 years ago we had a burst of applications of prediction markets including in corporations so I think we saw typical failure modes there that are instructive about today typically if you went to work with a company about setting a prediction Market you would say well what are your most important issues and and you know numbers you'd like to track and let's set up markets on those and they would usually say that's a little sensitive let's do something a little safer and they would pick safer topic and then they'd get accurate estimates on them and satisfied users but they go yeah but we didn't really care about those so you know that would be one outcome or you know they would say talk about something important and then management couldn't resist having opinions that disagreed with the market and the market gets proven right and the manager went wrong and they're just really mad and want to kill it so for for example the US government missile test agency had uh prediction markets on which tests would actually go forward so they put up they try to make a lot of of tests and a lot of them don't actually happen because they have to coordinate a lot of different parts of the military make a test happen if one part isn't there the whole thing has to be scrapped and a lot of money is lost and so they wanted to know which things would actually happen and they actually were able to better estimate which tests would actually go through it and maybe Sav money by cutting back earlier but then it was more legible that they knew ahead of time that it wasn't going to work and that was a management problem so they didn't want that anymore they'd rather pretend they don't know how these things are failing yeah uh like I guess I'm going to like talk about this from more like consumer product building perspective um L like the future Aly side and I think definitely like and historically it's it's absolutely true that marketplaces are like very hard like uh products to to boot trap and to activate like the atomic like Network effect uh I think that like uh it's definitely like uh to incentivize like market makers or liquidity providers especially for things like pop culture markets right I mean you can always build the the model for for like elections or Sports markets or especially in Limitless cases like the financial markets right you can use the the volatility to understand how to price them and so it can be attractive to institutional market makers because it's essentially like a short-term retail option flow um but at the same time you know you may look at Poly Market how much they spend per month to incentivize market makers to come like into their Autobook uh actually I spent a lot of time previously and like I I spoke to Robin about it in Berkeley like kind of obsessing about incremental Improvement m ments in the amm uh which we see like for example like Paradigm just launched the P PM amm right we actually going to spin up a contract for it to see how how much of of improvement is it uh but I definitely think that challenge is like how do you incentivize the market makers either you you use cash or you use your token or what but it's still a huge expense uh for for bootstrap in like the initial Network yeah but uh maybe over time it will be will be worth it all right brilliant thank you so much CJ thank you Kelvin thank you Robin and