1 00:00:00,000 --> 00:00:02,000 Hello, how are we doing? All good? 2 00:00:02,000 --> 00:00:03,000 All right. 3 00:00:03,000 --> 00:00:10,000 Well, hi everyone. Thanks for joining our talk today. We'll be discussing the incentives and illusions in prediction markets. 4 00:00:10,000 --> 00:00:15,000 Now, I'm very lucky to be joined by two of the leading experts in the space. 5 00:00:15,000 --> 00:00:21,000 To my right is Micah of the University of Oregon and Paul from LayerTwo Labs. 6 00:00:21,000 --> 00:00:25,000 Unfortunately, Derek can't be with us today, but I'm sure he's with us in spirit. 7 00:00:25,000 --> 00:00:32,000 So, first and foremost, Paul, can you give us a little bit of an introduction for those that may not be aware of what is a prediction market? 8 00:00:32,000 --> 00:00:42,000 Yeah. My name is Paul Sztorc, and I've been an advocate for prediction markets on BTC since the year 2013 or something. 9 00:00:42,000 --> 00:00:48,000 And the prediction market is an incredibly important technology that not a lot of people have realised how important it is. 10 00:00:48,000 --> 00:00:51,000 It's really like a new form of media, if you really think about it. 11 00:00:51,000 --> 00:00:58,000 And it's sort of like you would be in the same category as radio, the printing press, smoke signals or something. 12 00:00:58,000 --> 00:01:09,000 And a prediction market is special because it lets a large number of people disagree, and it produces one outcome without favouring any person arbitrarily. 13 00:01:09,000 --> 00:01:12,000 So, we have this slide here. I don't know if people can see it. 14 00:01:12,000 --> 00:01:13,000 They can see it either side. 15 00:01:14,000 --> 00:01:22,000 And so, yeah, a prediction market is, to keep it short, it's basically a contract on an event. 16 00:01:22,000 --> 00:01:26,000 And you have these events like, will the Republican Party win the next election? 17 00:01:26,000 --> 00:01:30,000 You pay out a dollar. If that happens, it will pay nothing. 18 00:01:30,000 --> 00:01:35,000 If it doesn't happen, that contract would trade on the market, and it would have a varying price, 19 00:01:35,000 --> 00:01:39,000 and that price would vary with the likelihood of the event actually happening. 20 00:01:39,000 --> 00:01:47,000 So, Micah, why do we need prediction markets as opposed to just doing opinion polls or forecasts or that type of thing? 21 00:01:47,000 --> 00:01:50,000 How do these differ from what we traditionally had previously? 22 00:01:51,000 --> 00:01:59,000 Well, with polls, you kind of have to get a phone call from someone who asks you a question, and you might not be the expert. 23 00:01:59,000 --> 00:02:07,000 Prediction markets are great because they're going to incentivise people who at least believe they know something about the topic to go engage. 24 00:02:07,000 --> 00:02:15,000 And add to the, I guess, market, add to the diversity of the bets that are being placed. 25 00:02:15,000 --> 00:02:18,000 You know, polls are just a data point. 26 00:02:18,000 --> 00:02:24,000 They don't give you a probability of the event, and you have to kind of handicap those. 27 00:02:24,000 --> 00:02:28,000 You know, there's some ways you might want to handicap prediction markets, 28 00:02:28,000 --> 00:02:34,000 but I think you're going to get better, kind of better in general, information that's kind of actionable. 29 00:02:34,000 --> 00:02:36,000 Like, you're going to get a number, which is a probability. 30 00:02:36,000 --> 00:02:42,000 Is that because there's this monetary incentive, there's this skin in the game, whereas with polls and stuff, 31 00:02:42,000 --> 00:02:46,000 you know, you can say what maybe you think you want the answer to be, 32 00:02:46,000 --> 00:02:52,000 but because you don't have that kind of fiscal involvement, they're maybe not as accurate as prediction markets. 33 00:02:53,000 --> 00:02:55,000 Yeah, that's exactly right. 34 00:02:55,000 --> 00:02:58,000 The prediction market treats error especially. 35 00:02:58,000 --> 00:03:02,000 It says this is the current price, and it says anyone who disagrees, you can make money, 36 00:03:02,000 --> 00:03:08,000 you can buy the cheaper leg of the event if you think something is selling for $0.70. 37 00:03:08,000 --> 00:03:12,000 You know, there's a joke on some of the prediction market sites where they say something like, 38 00:03:12,000 --> 00:03:17,000 they're selling dollars for $0.70, where they think this is certain to happen. 39 00:03:17,000 --> 00:03:20,000 They had one about, like, will Jesus Christ return? 40 00:03:20,000 --> 00:03:23,000 There was a colorful example on PolyMarket. 41 00:03:23,000 --> 00:03:25,000 It was like, will Jesus Christ return? 42 00:03:25,000 --> 00:03:31,000 And that was trading at $0.05, but if you flip it and you bet on no, then that's $0.95 on no, 43 00:03:31,000 --> 00:03:38,000 so they're selling dollars for $0.95, and you can make money by correcting the price towards zero, 44 00:03:38,000 --> 00:03:40,000 which seems a little more likely to me. 45 00:03:40,000 --> 00:03:46,000 So I think the first thing everyone thinks when they think prediction market is, is this just the new gambling? 46 00:03:46,000 --> 00:03:52,000 Like, what really differentiates prediction markets to gambling, Paul? 47 00:03:53,000 --> 00:04:00,000 Well, gambling, I think with gambling, there's no, like, the prices are fixed, 48 00:04:00,000 --> 00:04:04,000 and in the prediction market, the prices vary, and they produce socially useful information. 49 00:04:04,000 --> 00:04:12,000 So it's very useful for us to know, for example, like, how likely a certain thing is to happen. 50 00:04:12,000 --> 00:04:17,000 And, in fact, prediction markets have other features that have yet to be explored where you can bet on, like, 51 00:04:17,000 --> 00:04:19,000 if we did this, would that happen? 52 00:04:19,000 --> 00:04:25,000 So the prediction market will let us know what's likely to happen and what's likely to happen if something else happens. 53 00:04:25,000 --> 00:04:30,000 All that's useful if you go to, like, a roulette wheel, or if you, you know, like, the odds, 54 00:04:30,000 --> 00:04:33,000 it's just going to pay 35 to 1, and your odds are just whatever it is. 55 00:04:33,000 --> 00:04:37,000 It depends on how many green squares, but it'll be, like, 38 to 1 on hitting the number, 56 00:04:37,000 --> 00:04:40,000 and so it doesn't actually produce anything useful. 57 00:04:40,000 --> 00:04:47,000 I think there's another key part of gambling in particular, which is that gambling is always negative expected value, 58 00:04:47,000 --> 00:04:52,000 which is how the casino makes their money, whereas in theory, the prediction market should be something like, 59 00:04:52,000 --> 00:04:58,000 if you just, if a completely uninformed person just threw a dart, it should be something like zero expected value. 60 00:04:58,000 --> 00:05:03,000 And if someone had extra information, that should be more value. 61 00:05:03,000 --> 00:05:07,000 They should always be able to make money by putting their information into the market 62 00:05:07,000 --> 00:05:10,000 and changing the price and thus informing the rest of us. 63 00:05:10,000 --> 00:05:12,000 So those are some differences. 64 00:05:12,000 --> 00:05:18,000 So, Mike, would you agree that it's a little bit more than gambling, or at the minute, is that kind of where the market is? 65 00:05:18,000 --> 00:05:21,000 Well, yeah, unfortunately, I think that's the most salient thing going on right now 66 00:05:21,000 --> 00:05:26,000 because everybody's betting on sports and elections, and, yeah, and there's a lot of, I mean, 67 00:05:26,000 --> 00:05:30,000 I think people that have looked at these for a while know that there's a lot of good use cases for these 68 00:05:30,000 --> 00:05:36,000 where you can just kind of add, like, to the epistemic environment, 69 00:05:36,000 --> 00:05:40,000 just let people try to think about things and understand them. 70 00:05:40,000 --> 00:05:44,000 When you bet money on an outcome, it doesn't mean you're going to think correctly. 71 00:05:44,000 --> 00:05:47,000 I don't think skin in the game fixes everything. 72 00:05:47,000 --> 00:05:52,000 It means you're going to think about it, and you're not going to make the really stupid mistakes. 73 00:05:52,000 --> 00:05:56,000 And hopefully, you'll have people saying less stupid things. 74 00:05:56,000 --> 00:05:59,000 It's the kind of thing I wish, like, we had these in COVID. 75 00:05:59,000 --> 00:06:04,000 You know, we had people out there saying that COVID was going to be over in April 2020. 76 00:06:04,000 --> 00:06:11,000 I wish that person would have bet out their wealth on that, and we could have collected the Denny and Kruger tax. 77 00:06:12,000 --> 00:06:16,000 I mean, there's a number of, like, things like this where, you know, 78 00:06:16,000 --> 00:06:22,000 issues where people don't really think about something until you put a little money on it, 79 00:06:22,000 --> 00:06:28,000 and then you have to kind of, like, ask yourself, oh, you know, 80 00:06:28,000 --> 00:06:33,000 the experts were actually kind of probably right, but here's where they might be a little bit wrong. 81 00:06:33,000 --> 00:06:35,000 And I think that's useful. 82 00:06:36,000 --> 00:06:43,000 I think it's going to fix, well, it won't fix all the epistemic issues, but it could maybe work in that direction. 83 00:06:43,000 --> 00:06:48,000 Yeah, and Paul, if it's not gambling, then if we're, I mean, we're a Bitcoin conference, 84 00:06:48,000 --> 00:06:53,000 would there be any reason to trade prediction markets on what the Bitcoin price may be? 85 00:06:53,000 --> 00:06:58,000 And how can that be different to, say, buying an options contract or just spot Bitcoin? 86 00:06:59,000 --> 00:07:03,000 I think that actually, yeah, this is correct, that unfortunately, 87 00:07:03,000 --> 00:07:07,000 most of the actual use, the application of prediction markets in practice today 88 00:07:07,000 --> 00:07:12,000 is gambling on sports and things like that, which I think is a mistake. 89 00:07:12,000 --> 00:07:16,000 It's sort of misleading in the way that, like, when the printing press was invented, 90 00:07:16,000 --> 00:07:18,000 it was just used to copy the Bible over and over again. 91 00:07:18,000 --> 00:07:22,000 So that was, of course, that was a big breakthrough for technology. 92 00:07:22,000 --> 00:07:27,000 But that wasn't, if you just described the printing press as like a religious technology 93 00:07:27,000 --> 00:07:32,000 or like something, a way to make more Bibles, that would be like kind of missing the bigger picture. 94 00:07:32,000 --> 00:07:37,000 And similarly, with respect to having a prediction market on the spot price of Bitcoin, 95 00:07:37,000 --> 00:07:41,000 we kind of already have a market for the spot price of Bitcoin. 96 00:07:41,000 --> 00:07:43,000 And that's the spot price today. 97 00:07:43,000 --> 00:07:47,000 That kind of is a prediction of what the future price will be. 98 00:07:47,000 --> 00:07:52,000 So I think that, again, this is like, these are like unfortunate things that people like trying. 99 00:07:52,000 --> 00:07:55,000 They're kind of taking a stab at how to use this. 100 00:07:55,000 --> 00:08:00,000 But this is like a Gutenberg Bible kind of situation where they're fitting it into the old model 101 00:08:00,000 --> 00:08:04,000 and they're not doing the really cool new stuff, in particular, 102 00:08:04,000 --> 00:08:07,000 what Robin Hanson, Professor Robin Hanson, called the decision markets 103 00:08:07,000 --> 00:08:10,000 or what I call the multidimensional markets. 104 00:08:10,000 --> 00:08:12,000 We have like if this, then that. 105 00:08:12,000 --> 00:08:14,000 And you can do that an unlimited number of times. 106 00:08:14,000 --> 00:08:18,000 You could say like, if we nominated this candidate to run, would they win? 107 00:08:18,000 --> 00:08:22,000 Or one thing we could do would be like, if we activated this soft fork in Bitcoin, 108 00:08:22,000 --> 00:08:23,000 would the price go up? 109 00:08:23,000 --> 00:08:25,000 Or if we didn't, or if we rejected it, would the price go up? 110 00:08:25,000 --> 00:08:26,000 Something like that. 111 00:08:26,000 --> 00:08:30,000 So those would be much more interesting applications. 112 00:08:30,000 --> 00:08:31,000 Okay. 113 00:08:31,000 --> 00:08:34,000 And I know for myself and probably a lot of people, 114 00:08:34,000 --> 00:08:39,000 the first kind of exposure to prediction markets were when they blew up in popularity 115 00:08:39,000 --> 00:08:41,000 in the 2024 presidential election. 116 00:08:41,000 --> 00:08:46,000 Pauli Markit came out and said they were unbelievably accurate, far beating the polls. 117 00:08:46,000 --> 00:08:48,000 And Mike, I know you have a little bit of pushback on this. 118 00:08:48,000 --> 00:08:53,000 Maybe they're not quite as accurate, the social consensus, as maybe many are led to believe. 119 00:08:53,000 --> 00:08:54,000 Yeah. 120 00:08:54,000 --> 00:08:55,000 They actually did pretty poorly. 121 00:08:55,000 --> 00:09:03,000 I mean, they gave Donald Trump a 27% chance of winning the popular vote. 122 00:09:03,000 --> 00:09:05,000 And he won the popular vote. 123 00:09:05,000 --> 00:09:12,000 And giving him a 27% chance, that's not like evidence that you know something that we don't all know. 124 00:09:12,000 --> 00:09:17,000 I think a lot of people kind of got one shot when they were watching it at the end of the day. 125 00:09:17,000 --> 00:09:21,000 And you see the New York Times needle, which is kind of going like this. 126 00:09:21,000 --> 00:09:23,000 But this is after all the results are coming in. 127 00:09:23,000 --> 00:09:27,000 And the people that are, you know, they have their models and they're plugging them in. 128 00:09:27,000 --> 00:09:31,000 And they're driving the markets like really quickly towards, you know, 98%. 129 00:09:31,000 --> 00:09:35,000 Well, the New York Times was still kind of like, you know, slow. 130 00:09:35,000 --> 00:09:41,000 But there was only this very small window of time where I guess the New York Times knew less than the markets. 131 00:09:41,000 --> 00:09:45,000 The markets gave Trump a 57% chance of winning. 132 00:09:45,000 --> 00:09:49,000 I mean, Pauli Markit, for example, the day of the election. 133 00:09:49,000 --> 00:09:51,000 Like Nate Silver called it basically a tata. 134 00:09:51,000 --> 00:09:57,000 So this is really almost indistinguishable in statistical terms. 135 00:09:57,000 --> 00:10:09,000 You'd have to do like, you know, many, many trials to actually determine if this is like a really significant edge that the markets have. 136 00:10:09,000 --> 00:10:18,000 So, Paul, a lot of people look to prediction markets and say it's basically just a way for insider trading to be facilitated. 137 00:10:18,000 --> 00:10:23,000 That's the only real edge is that people have knowledge that isn't yet publicly available. 138 00:10:23,000 --> 00:10:25,000 And they're just exploiting that kind of time gap. 139 00:10:25,000 --> 00:10:26,000 Is that the case? 140 00:10:26,000 --> 00:10:29,000 And if so, is that a bug or a feature? 141 00:10:29,000 --> 00:10:37,000 Yeah, I agree that this topic has dominated the conversation about prediction markets over the last two months. 142 00:10:37,000 --> 00:10:40,000 I think really it's bizarre. 143 00:10:40,000 --> 00:10:48,000 It's an interesting situation because what the prediction market really what I was saying before is what it does is it says if you disagree with the price. 144 00:10:48,000 --> 00:10:54,000 And you think that you have better information than what the market is reflecting, you can then trade and make money. 145 00:10:54,000 --> 00:11:02,000 So, again, that's like if you knew Jesus wasn't coming back and you could buy the know for $0.95 and it would pay off a dollar. 146 00:11:02,000 --> 00:11:06,000 So, in a way, people kind of want to have it both ways. 147 00:11:06,000 --> 00:11:07,000 You know what I mean? 148 00:11:07,000 --> 00:11:17,000 I prefer to have it the way where the prediction market is eating all the information of the world, gobbles up all the information of the world, including all the insider information. 149 00:11:17,000 --> 00:11:21,000 And in so doing, it gives that information to the rest of us. 150 00:11:21,000 --> 00:11:27,000 So I think it's actually good that it has the ability to absorb information from everyone, including the insiders. 151 00:11:27,000 --> 00:11:30,000 And I think this is a feature. 152 00:11:30,000 --> 00:11:36,000 And there's a criticism of this that says basically that why would anyone trade if they're all insiders in there? 153 00:11:36,000 --> 00:11:41,000 But there are ways around that criticism by, like, for example, subsidizing the market and stuff like that. 154 00:11:41,000 --> 00:11:49,000 So I think that we want the world where the market is getting the right answer as quickly as possible. 155 00:11:49,000 --> 00:11:54,000 And we don't really – yeah, like the casino world, it's very fair. 156 00:11:54,000 --> 00:12:01,000 Everyone gets the same – when you sit at the roulette wheel, everyone gets the same odds and everyone has the same information because it's not really about anything. 157 00:12:01,000 --> 00:12:03,000 But with this, it's actually about things. 158 00:12:03,000 --> 00:12:07,000 And I think that's – so that's the whole – kind of the whole point. 159 00:12:07,000 --> 00:12:10,000 The original prediction market website was called Intrade. 160 00:12:10,000 --> 00:12:16,000 I think – I don't know, but I think that that was kind of a little bit of a joke, like to say Intrade, like insider trading or something. 161 00:12:17,000 --> 00:12:23,000 But, yeah, I think the information – the fact that the markets absorb information is the key point. 162 00:12:23,000 --> 00:12:28,000 And this insider trading word is like a very scary word that people are like, oh, that means bad. 163 00:12:28,000 --> 00:12:32,000 And so I understand why it hits people emotionally. 164 00:12:32,000 --> 00:12:36,000 But it's actually not the right way, I think, to think about what's happening. 165 00:12:36,000 --> 00:12:41,000 Yeah, I mean, insider trading, I think early days when they were talking about it was sort of the point. 166 00:12:41,000 --> 00:12:54,000 There's a lot of use cases like predicting what CEO is going to go down for embezzlement or sexual harassment or things like that, which might be hard to do if you just went to HR. 167 00:12:54,000 --> 00:12:56,000 You could start a prediction market. 168 00:12:56,000 --> 00:13:01,000 There's a lot of whistleblowing, those kind of things where you can just kind of get information into the public. 169 00:13:01,000 --> 00:13:06,000 And it's a new channel for that that you might not have if you just have that information. 170 00:13:07,000 --> 00:13:11,000 The – I think people are going to bet. 171 00:13:11,000 --> 00:13:14,000 I don't think you need to subsidize the market because people – 172 00:13:14,000 --> 00:13:15,000 Some don't, which is great. 173 00:13:15,000 --> 00:13:17,000 That's very convenient for people who like prediction markets. 174 00:13:17,000 --> 00:13:24,000 Then you have all these people giving – adding liquidity and giving money, essentially subsidizing the informed trader. 175 00:13:24,000 --> 00:13:26,000 So it's very convenient, yeah. 176 00:13:26,000 --> 00:13:34,000 Yeah, there was a paper I saw like a couple weeks ago that said like 3% of the traders basically make all the money, which – 177 00:13:35,000 --> 00:13:50,000 I didn't quite understand fully the methodology of like how they describe these people as accurate because it's kind of like saying the team with the most points at the end of the game has a pretty good chance of winning. 178 00:13:50,000 --> 00:14:00,000 Because these traders, what happens is these 3% of traders, which they move quicker and they move the market towards the resolution and they make the most money. 179 00:14:00,000 --> 00:14:08,000 And so what it sounds like what happens is everybody makes their bets and you get this kind of general idea, which is actually pretty good. 180 00:14:08,000 --> 00:14:11,000 People on average are really good at predicting things. 181 00:14:11,000 --> 00:14:14,000 Like we have this wisdom of the crowds. 182 00:14:14,000 --> 00:14:23,000 It's like Galton's ox phenomenon where Francis Galton asked a whole bunch of people to guess the weight of an ox. 183 00:14:23,000 --> 00:14:26,000 And he took the average and they basically nailed it. 184 00:14:27,000 --> 00:14:31,000 And so this is getting people kind of activated. 185 00:14:31,000 --> 00:14:40,000 He made people pay – I think it was like six pennies or something to discourage joke answers, which I think is – there's a tiny little bit of a prediction market. 186 00:14:40,000 --> 00:14:47,000 It wasn't quite the same, but it was like he did have to – he made people pay actual money to submit and he gave them a prize to whoever was closest. 187 00:14:47,000 --> 00:14:52,000 So there was a tiny prediction market dimension to that, even though that's often – well, yeah, sorry if we're drunk. 188 00:14:52,000 --> 00:14:58,000 Right, but there was no actually like invisible hand sort of like guiding the market to the truth. 189 00:14:58,000 --> 00:15:00,000 It was just like people are pretty good at guessing. 190 00:15:00,000 --> 00:15:10,000 And then it seems like what's happening is once the actual answer comes into focus, you have these traders which can kind of move in and then get that little bit of alpha. 191 00:15:10,000 --> 00:15:21,000 Sometimes it's just – I mean, like this is what happened in the election night is people really had the good models and they knew how to take the results that were coming out of all the precincts and plug them into their models. 192 00:15:21,000 --> 00:15:25,000 They got to 98 percent before everyone else did. 193 00:15:25,000 --> 00:15:40,000 I would like to add one thing about the insider trading phrase as being like a negative emotional phrase, which is like which two people in the world have ever had exactly the same information, which is like that's never happened. 194 00:15:40,000 --> 00:15:45,000 But again, in other contexts, such as like the roulette wheel or whatever, it's kind of like you do it. 195 00:15:45,000 --> 00:15:49,000 Everyone has the information because there is no information or if you bet on flipping a coin. 196 00:15:49,000 --> 00:15:51,000 So I just want to throw that out there. 197 00:15:51,000 --> 00:16:02,000 Like in the real world, if you're actually betting on like who's going to win the election, well, it's like I don't know if you could even find two people who have exactly the same information and then which one of them is an insider and which one is an outsider. 198 00:16:02,000 --> 00:16:06,000 How do you know before the fact which it is? 199 00:16:06,000 --> 00:16:16,000 I guess the next point from there would be it kind of brings some game theory into things, because now that is a financial incentive to potentially change public opinion. 200 00:16:16,000 --> 00:16:23,000 Maybe you could just try and play a deception card to try and make the masses think one thing so you can profit off another. 201 00:16:23,000 --> 00:16:32,000 I'm sure people have heard stories of kind of rigging how the results are verified by changing the weather markets, by holding a hair dryer next to the sensors. 202 00:16:32,000 --> 00:16:41,000 Is this just incentivising more deception rather than trying to actually gain more accuracy in finding the truth? 203 00:16:41,000 --> 00:16:48,000 Well, I mean, there's always like Goodhart's Law and Campbell's Law, which if you use any... 204 00:16:48,000 --> 00:17:03,000 This is why I don't think futarchy or decision markets are a great idea, because if you use anything as actionable, that number is going to have value and it's going to have value to move it. 205 00:17:03,000 --> 00:17:11,000 So people can put more money on an outcome if that's going to pay off for them, especially if it's a conditional thing. 206 00:17:11,000 --> 00:17:18,000 If this happens, then this happens. If you can kind of bluff, you can say that's never going to happen. 207 00:17:18,000 --> 00:17:25,000 And then maybe the outcome won't happen by the fact that you've bet against it. 208 00:17:26,000 --> 00:17:29,000 Well, my view is actually the decision markets are much, much harder to bluff. 209 00:17:29,000 --> 00:17:40,000 So if you only had something that was like, will Hillary Clinton win the next election or something, she could put a lot of money on yes, make it look like a foregone conclusion, make it look like she should win the nomination, 210 00:17:40,000 --> 00:17:48,000 and then make it maybe look like she should win the election, maybe get the people who would vote against her demoralised and maybe stay home. 211 00:17:48,000 --> 00:17:57,000 But the decision markets, once you do that, it gets much harder because it says something like, if we nominated Hillary Clinton, would we go on to win? 212 00:17:57,000 --> 00:18:09,000 Or a different way would be if the Democratic Party or the Blue Party won the election, what would happen to GDP? 213 00:18:10,000 --> 00:18:23,000 Now you have to bet on two things at once. You only get paid if both of them happen, and they end up with a situation where maybe you can make it look like the person should be elected, 214 00:18:23,000 --> 00:18:30,000 but then when they ultimately fail to hit the GDP target, you lose all of your money, and you're losing an exponentially large amount of money at this. 215 00:18:31,000 --> 00:18:41,000 I actually think it becomes more difficult, but it's very hard to explain without slides and a big grid of numbers and charts and stuff, which we don't have here right now. 216 00:18:41,000 --> 00:18:49,000 I was just quickly going to say, just to tie this back into Bitcoin, the example we've got here is looking at the quantum threat potentially to Bitcoin, 217 00:18:49,000 --> 00:18:59,000 because if we see Satoshi's coins move, then maybe we can assume that someone has finally cracked a sufficiently powerful enough quantum computer to start breaking Bitcoin's cryptography. 218 00:18:59,000 --> 00:19:08,000 So could prediction markets also be a way to hedge your bets? Maybe you hold spot Bitcoin, but just in case, you maybe bet yes on Satoshi's Bitcoin to move, 219 00:19:08,000 --> 00:19:12,000 so if the outcome happens, you can mitigate your losses to some extent. 220 00:19:12,000 --> 00:19:17,000 Yeah, this is a lot of areas for cloak and dagger stuff. 221 00:19:17,000 --> 00:19:26,000 I mean, if maybe today China has started mining his Bitcoins, maybe they're not going to tell anybody. 222 00:19:26,000 --> 00:19:35,000 They're going to mine as many as they can, and maybe if they think it's leaking, they could wait until 2027. 223 00:19:35,000 --> 00:19:38,000 I mean, January 1st, 2027 or whatever. 224 00:19:39,000 --> 00:19:42,000 There's lots of things you can do. 225 00:19:42,000 --> 00:19:49,000 If I suspected that somebody else was mining Satoshi's coins in secret, I could go put a large bet on that, 226 00:19:49,000 --> 00:19:57,000 and then kind of try to scare them into, I don't know, firing one of their employees, figure out who's leaking information. 227 00:19:57,000 --> 00:20:03,000 Yeah, you can go on with lots of examples of things that you could mess with people's minds. 228 00:20:03,000 --> 00:20:12,000 We should absolutely do a prediction market that says a quantum computer that breaks ECDSA is built by such-and-such date 229 00:20:12,000 --> 00:20:19,000 because everyone is weighing in on whether or not this will happen, and I think basically, how do we know which people to believe? 230 00:20:19,000 --> 00:20:25,000 Probably a lot of them are just bullshitting, so it would be nice to have this prediction market. 231 00:20:25,000 --> 00:20:33,000 You could see, like, okay, will it be by December 31st, 2026? Will it be by December 31st, 2027, 2028? 232 00:20:33,000 --> 00:20:38,000 You could look at all these prices, and you could see how it's like 0, 0, 0, 0, 0, 99, 99, 233 00:20:38,000 --> 00:20:44,000 and you'd say, oh, it's probably somewhere this year because the people actually building the quantum computer, 234 00:20:44,000 --> 00:20:51,000 there's probably like 20 people somewhere who they really know either that it's around the corner or that it's still 100 years away, 235 00:20:51,000 --> 00:20:57,000 and everyone else is just a layperson compared to this, but this is exactly what the prediction market does and why it's so special. 236 00:20:57,000 --> 00:21:08,000 It converts what is known by the top people in the world to information that everyone in the world has, so that's what it does. 237 00:21:08,000 --> 00:21:15,000 Welcome to Predict. The world is a market. Everything is a market. 238 00:21:16,000 --> 00:21:21,000 Every headline moves the line. Every moment is your market. 239 00:21:21,000 --> 00:21:24,000 Call the moves. 240 00:21:24,000 --> 00:21:27,000 Bet on your instinct. 241 00:21:27,000 --> 00:21:31,000 Your prediction. Your edge. 242 00:21:31,000 --> 00:21:36,000 Dual Bits. Predict. Where everything is a market. 243 00:21:37,000 --> 00:21:47,000 So just on to the potential future of prediction markets, and Paul, you said earlier that at the minute we're not kind of utilizing them to the full potential. 244 00:21:47,000 --> 00:21:55,000 Maybe we could use prediction markets to gain insights into popularity of new Bitcoin proposals or maybe hard forks or something. 245 00:21:55,000 --> 00:22:02,000 Is there anything that you see also within prediction markets that we've maybe not tapped into yet? 246 00:22:03,000 --> 00:22:06,000 I don't know if this – okay, good, it does work. Okay, great. 247 00:22:06,000 --> 00:22:11,000 Yeah, the multidimensional markets are really important, but I already mentioned those. 248 00:22:11,000 --> 00:22:16,000 I think I just want to say we have five or six minutes left. 249 00:22:16,000 --> 00:22:25,000 Not only do I think this is really, really important, and I also built Bitcoin prediction markets back in 2014, 2015, 250 00:22:25,000 --> 00:22:31,000 and then now the company has started Layer 2 Labs. We refreshed that, and we built more of them recently. 251 00:22:31,000 --> 00:22:37,000 So if this topic is interesting to you, you can go with – it's with fake money, fake Signet coins. 252 00:22:37,000 --> 00:22:43,000 But we have – if you go to layer2labs.com, you can check out what we're sort of working on on this. 253 00:22:43,000 --> 00:22:49,000 But yeah, the key thing is the multidimensional markets where you say it's not just will X happen. 254 00:22:49,000 --> 00:22:53,000 It's like if we did A, would X happen, or if we did B, would X? 255 00:22:53,000 --> 00:23:01,000 So it could be everything like if we changed Fed policy – like if we fired Jerome Powell, 256 00:23:01,000 --> 00:23:06,000 what would happen to the price of Bitcoin, or what would happen to the CPI, or what would happen to GDP? 257 00:23:06,000 --> 00:23:09,000 Or if we fired the CEO, what would happen to the stock price? 258 00:23:09,000 --> 00:23:13,000 Or if we fired the president or the ruling party, what would happen to such and such? 259 00:23:13,000 --> 00:23:16,000 So that's the really big payoff. 260 00:23:16,000 --> 00:23:19,000 Yeah, I still think there's a little bit of a bluffing game there. 261 00:23:19,000 --> 00:23:25,000 Like if – suppose we put a decision on should we do a billionaire's tax? 262 00:23:25,000 --> 00:23:31,000 Will the economy contract by 15% in the first year after we enact this billionaire's tax? 263 00:23:31,000 --> 00:23:35,000 But remember, the economy has to actually then contract. 264 00:23:35,000 --> 00:23:40,000 But not if you don't do the – not if you convince everybody to not do the tax in the first place. 265 00:23:40,000 --> 00:23:44,000 There's a way to do these conditional markets where what you do is instead of betting on one square – 266 00:23:44,000 --> 00:23:47,000 this is why I said I wish I had a grid of numbers and all kinds of charts and things. 267 00:23:47,000 --> 00:23:52,000 But you can do something where you basically say I'm going to make – you buy the other three – 268 00:23:52,000 --> 00:23:55,000 you basically kind of like short – you do like one and a half shorts or something. 269 00:23:55,000 --> 00:23:57,000 It's kind of hard to explain. 270 00:23:57,000 --> 00:24:01,000 But I have other slides where I've explained it in the past where it's like – 271 00:24:01,000 --> 00:24:07,000 what you say is I'm going to make a small amount of money unless we do the thing and I'm totally wrong. 272 00:24:07,000 --> 00:24:11,000 And in that way you get – you have people being paid off. 273 00:24:11,000 --> 00:24:13,000 It sort of works out better. 274 00:24:13,000 --> 00:24:16,000 It's hard to communicate it here with only one microphone. 275 00:24:16,000 --> 00:24:24,000 But it's – but, yeah, of course, people will try to spend money to influence public opinion, 276 00:24:24,000 --> 00:24:27,000 and that may include trying to move the market on this. 277 00:24:27,000 --> 00:24:32,000 But all I'm offering basically is saying if they do this, there will be – 278 00:24:32,000 --> 00:24:34,000 so let's say they're manipulating the market. 279 00:24:34,000 --> 00:24:38,000 You will be able to counter-trade it basically and say, OK, listen, 280 00:24:38,000 --> 00:24:42,000 they're making it seem like such and such will happen if we do this. 281 00:24:42,000 --> 00:24:45,000 But you'll be able to extract money from them when either – 282 00:24:45,000 --> 00:24:48,000 because you're going to say I make money either if we don't do the tax 283 00:24:48,000 --> 00:24:51,000 or if we do the tax and the disaster does not happen. 284 00:24:51,000 --> 00:24:52,000 So you'll just be doing that. 285 00:24:52,000 --> 00:24:56,000 That's what you'll be buying for like $0.90, and you'll get $1 for $0.90 286 00:24:56,000 --> 00:24:59,000 because you'll keep winning that bet over and over and over again. 287 00:24:59,000 --> 00:25:02,000 It's easier to explain if there are like – 288 00:25:02,000 --> 00:25:07,000 Is there limitations as well in that a lot of the insights that might be really useful, 289 00:25:07,000 --> 00:25:09,000 what could happen in five, ten years' time, 290 00:25:09,000 --> 00:25:14,000 locking up a large amount of capital in these predictions for five or ten years 291 00:25:14,000 --> 00:25:16,000 could be seen as a waste of capital. 292 00:25:16,000 --> 00:25:19,000 You could be putting your money to work in Bitcoin or other avenues, 293 00:25:19,000 --> 00:25:20,000 but you're having to tie up. 294 00:25:20,000 --> 00:25:23,000 So maybe does that play into the long-term accuracy of these? 295 00:25:23,000 --> 00:25:24,000 It does, I think. 296 00:25:24,000 --> 00:25:28,000 I think it quickly decays after like a year or two years, I think five years. 297 00:25:28,000 --> 00:25:29,000 So I don't know. 298 00:25:29,000 --> 00:25:30,000 There might be some way. 299 00:25:30,000 --> 00:25:33,000 People propose weird stuff of like could you take Dow Jones Industrial Average shares 300 00:25:33,000 --> 00:25:35,000 and like bet in those or something. 301 00:25:35,000 --> 00:25:37,000 And so there's people that have offered things. 302 00:25:37,000 --> 00:25:38,000 You lock up the capital in it. 303 00:25:38,000 --> 00:25:40,000 That's too expensive. 304 00:25:40,000 --> 00:25:42,000 Yeah, low probability events. 305 00:25:42,000 --> 00:25:45,000 They're going to trade just at much larger – 306 00:25:45,000 --> 00:25:51,000 I mean you could make a market like will two United Airplanes crash in the sky today 307 00:25:51,000 --> 00:25:56,000 and the natural price of that or like within the next two years. 308 00:25:56,000 --> 00:26:02,000 And it would be many orders of magnitude larger than the real probability of that happening. 309 00:26:02,000 --> 00:26:05,000 So it would be kind of garbage as far as useful information. 310 00:26:05,000 --> 00:26:10,000 So just to close out, where do you guys see prediction markets in 10 years' time? 311 00:26:10,000 --> 00:26:13,000 Because we can see they're growing very, very rapidly in popularity. 312 00:26:13,000 --> 00:26:16,000 They're seemingly making partnerships, specifically Calcium Polymarket 313 00:26:16,000 --> 00:26:18,000 with every big company in the world. 314 00:26:18,000 --> 00:26:22,000 Do you foresee this continuing or are we going to hit a roadblock? 315 00:26:22,000 --> 00:26:23,000 I read about them at first. 316 00:26:23,000 --> 00:26:30,000 Hal Finney used to post on Robin Hanson's blog back in 2004, 317 00:26:30,000 --> 00:26:33,000 and I knew from 2004 that they would be really big, 318 00:26:33,000 --> 00:26:35,000 and then now we've had Calcium Polymarket. 319 00:26:35,000 --> 00:26:37,000 I always knew they'd be big, and I think they will get bigger. 320 00:26:37,000 --> 00:26:41,000 And I just think the problem is if they get sucked into this gambling distraction, 321 00:26:41,000 --> 00:26:43,000 that would be a little bit of a setback. 322 00:26:43,000 --> 00:26:46,000 But I think much bigger, much bigger. 323 00:26:46,000 --> 00:26:47,000 Whether it's like radio or – 324 00:26:47,000 --> 00:26:51,000 Yeah, I mean I think there's a parallel between like crypto. 325 00:26:51,000 --> 00:26:55,000 Like 10 years ago I kind of had some hope that crypto would be used 326 00:26:55,000 --> 00:27:00,000 for a lot more interesting things than it ended up being used for. 327 00:27:00,000 --> 00:27:02,000 So we could be in the same position. 328 00:27:02,000 --> 00:27:08,000 And they also could be in the same bag as far as it's kind of the same type of 329 00:27:08,000 --> 00:27:14,000 marketing to the audience here, go gamble. 330 00:27:14,000 --> 00:27:17,000 That could be under a lot of hostility in the next few years 331 00:27:17,000 --> 00:27:20,000 depending on who is in charge of the government. 332 00:27:20,000 --> 00:27:25,000 And I mean the blowback makes sense if you're just sort of gambling. 333 00:27:25,000 --> 00:27:30,000 Yeah, I'm actually very worried about gambling addiction derailing the project too early. 334 00:27:30,000 --> 00:27:32,000 So I hope that doesn't happen. 335 00:27:32,000 --> 00:27:34,000 Fingers crossed. Well, that's time for us. 336 00:27:34,000 --> 00:27:35,000 Thank you all very much for attending. 337 00:27:35,000 --> 00:27:38,000 Thanks to Mike and Paul for presenting with me today. 338 00:27:38,000 --> 00:27:40,000 And if you'd like all the information, socials and everything, 339 00:27:40,000 --> 00:27:42,000 you can scan the QR code on the screen. 340 00:27:42,000 --> 00:27:43,000 Thanks, guys. 341 00:28:00,000 --> 00:28:07,000 And every year the stage gets bigger. 342 00:28:07,000 --> 00:28:10,000 Sound money center stage. 343 00:28:10,000 --> 00:28:17,000 So where do you go to celebrate the next chapter in Bitcoin history? 344 00:28:17,000 --> 00:28:20,000 You come home. 345 00:28:20,000 --> 00:28:23,000 Nashville, July 2027.