Vitalik Buterin, co-founder of Ethereum, calls for a fundamental restructuring of decentralized prediction markets. He argues that the field's current reliance on speculative gambling threatens its long-term sustainability.
This perspective emerged amid the significant success of prediction market platforms like Polymarket over the past year.
Buterin calls for restructuring of prediction market
On February 14, Buterin claimed that platforms like Polymarket are attracting significant trading volume and public interest, but are currently suffering from an 'unhealthy market fit.'
"[Predictive markets] seem to be overly converging into areas that are helpful for short-term cryptocurrency price betting, sports betting, and other dopamine stimuli, but lack long-term satisfaction or social informational value." – Vitalik Buterin, co-founder of Ethereum
He warned that this field is excessively dependent on 'naive traders,' meaning speculators seeking short-term gains.
Such speculative behavior contrasts sharply with the original intention of the market, which is information discovery and risk management.
Buterin currently divides market participants into two groups: 'smart traders' and 'losers.' Currently, the latter group is mostly comprised of retail gamblers.
He stated that if predictive markets prioritize profit-seeking over social utility, they risk collapsing in a bear market when speculative fervor cools.
"Making money from people with foolish opinions is not fundamentally morally wrong. However, becoming overly reliant on this is clearly a 'curse.' It motivates platforms to seek out traders with foolish opinions and to foster a community and public image that encourages these opinions to draw them in." – Vitalik Buterin, co-founder of Ethereum
For a sustainable future, Buterin suggested that these platforms should shift towards being 'hedging' centered, meaning they should provide insurance functions rather than betting platforms.
In this model, users bet not to gain profits from outcomes, but to spread actual risks. For example, a business operator might bet on policy changes that could affect the supply chain.
AI-based hedge systems, fiat currency alternatives
Buterin's suggestions, as a co-founder of Ethereum, extend to audacious economic realms. He proposed that predictive markets could eventually replace fiat-pegged stablecoins.
Buterin proposed creating segmented price indicators for major global goods and services.
In theoretical models, users can analyze their consumption habits with a large-scale local language model (LLM). AI constructs a personalized 'asset basket' that matches the user's specific cost of living.
By holding a predictive market share like this, one can theoretically maintain purchasing power in line with inflation without relying on traditional banking infrastructure, instead of holding assets pegged to the US dollar such as USDC and USDT.
"Fiat currencies are not needed at all! People can increase their assets through stocks, Ether (ETH), or other assets, and when they seek stability, they can hold personalized predictive market shares," he wrote.
Buterin acknowledged that new infrastructure is needed to transition from the current 'information purchase' stage to an advanced hedging economy.
However, he emphasized that replacing fiat currencies with a diverse asset basket is the ultimate evolution of this technology.
