Prediction Markets: Tales from the Election | Hacker News Reader

Prediction Markets: Tales from the Election

vitalik.ca

209 points0-_-0183 comments

Interesting that Vitalik doesn't mention that presidential gambling is illegal in the US, save for a few no-action letters[1] to specific clearing houses. That alone puts a massive selection bias when trading contracts on platforms like Augur or Polymarket.

[1]: https://en.wikipedia.org/wiki/Prediction_market#Legality

"The best way to predict the future is to create it."

I always thought the the problem with prediction markets is you have the incentive to make the prediction come true. And that gets ugly fast. But hell, I guess that's what all this is at the end of the day.

Yep, it clearly leads into assassination markets - for example, opening a large bet that person X will die on a specific date.

Yes, just like you can short Tesla and assassinate Musk.

This is ridiculous, regulate prediction markets like any other financial market (in particular, your identity should be traceable) and then all your clever plan does is get your funds frozen pending a very thorough investigation.

> assassinate Musk.

Would this cause Tesla stock to rise or fall?

Fall massively, I would imagine. Tesla's valuation is obviously not driven by fundamentals, Musk's personality is one of the things it is based on.

Isn't that just life insurance?

It sounds like term life for an unusually specific term. But you do typically have to have an insurable interest in order to buy insurance on someone's life.

That got ugly too until they prevented people from taking out life insurance on people without their knowledge/consent

Concrete example, Walmart took out life insurance on its employees because they were betting that their horrible working conditions made people more likely to die than the insurance companies thought. And then were incentivized to make those conditions worse.

See https://www.bankrate.com/insurance/life-insurance/dead-peasa... for an overview of current regulations that resulted from that.

>...Walmart took out life insurance on its employees because they were betting that their horrible working conditions made people more likely to die than the insurance companies thought.

No, Walmart was doing it since they thought the policies would be tax deductible. They ended up losing money and eventually ended up bringing up a case against their insurance companies:

>...Discount retailing giant WalMart cannot sue its insurers just because it gambled and lost $1.3 billion on getting a tax break from thousands of insurance policies it took out on employees, according to a brief filed by the insurers in the Delaware Supreme Court.

>WalMart is contending in an appeal that it was entitled to rely on its expert insurance brokers to warn the company of the inherent dangers of buying COLI policies. WalMart has asked the high court to revive its bad-faith and breach-of-duty claims against its insurers, which the Delaware Chancery Court had dismissed.

>Such policies lost their attraction for corporations long ago but disputes over liability for the tax consequences continue for companies in a position similar to WalMart’s.

https://www.snopes.com/fact-check/dead-peasant-insurance/

My understanding was based on articles like https://workdayminnesota.org/court-slams-walmarts-use-of-dea.... Where Walmart was being sued specifically because there were perverse incentives and what they did was against various state laws.

As to your case, Walmart thought that it could deduct the premiums. It turns out that it could not. Walmart also thought that it could create and collect them under Georgia law. It turns out that it could not. Walmart also has been forced to pay families of workers some of the payouts. None of which it expected.

All of these things affect how profitable the policy is for Walmart. But they don't change the fact that once the policies are taken out, Walmart has a financial incentive to treat workers poorly. Which is why many states had banned the practice. And is why federal law currently only allows companies to take out life insurance on approximately their most highly paid third of employees. (Who also have to consent to it.)

Back to the suit. Walmart sued its insurers in 2002 for fraud for failing to explain these risks. The brief quoted in Snopes is as filed by the insurers in 2005. They lost that judgement, but the case continued on. As of 2009, per http://www.contingentfeeblog.com/2009/05/articles/corporate-..., the Delaware Supreme Court ruled for Walmart a 3rd time. I don't know the final outcome of the case. But it certainly wasn't as open and shut as the insurer's brief made it sound.

Thank for adding more info about some of the lawsuits, but you haven't given any evidence for the key claim you made in your original post:

>...Concrete example, Walmart took out life insurance on its employees because they were betting that their horrible working conditions made people more likely to die than the insurance companies thought.

I have seen no evidence that is why Walmart instituted the corporate policy of buying life insurance on their employees. If any evidence of that sort had come out in the various law suits, it would have made headlines all around the world.

Even today many companies buy life insurance on their key employees - that doesn't mean their plan is to treat their key employees so poorly that they have an earlier death.

To answer that, let's talk about what insurance is for, and why it exists.

Insurance is a regular payment in return for a large payment upon catastrophe. The insurer sets the price such that they expect to make money. That means that it should be a money losing proposition for the insured. The insured is willing to pay for insurance either because it is required by law (for example car insurance), or because they cannot afford the risk of catastrophic losses.

It therefore makes sense for companies to take out insurance on valuable assets that they can't easily replace as a risk mitigation strategy. Valuable assets, including key employees. But if everything is priced correctly, insurance is still a money-losing proposition for companies. And therefore anything that companies can cover by keeping sufficient cash reserves and credit lines, they should. In particular for low-level employees, death is merely a minor contribution to normal turnover, and companies should find that they save themselves money by self-covering that cost without using insurance. And furthermore companies should only seek necessary insurance for real risks. Which means that valuable assets, including key employees, should only be insured for the company's expected loss.

There is one major exception to this pricing rule. And that exception is when the entity (person or company) seeking insurance believes that they have more knowledge than the insurer. Then they may buy insurance as a bet against the insurer. The history of insurance is filled with examples. And there is a constant cat and mouse game where insurers try to protect themselves against this risk, while still providing insurance at a competitive price.

One famous example is that unscrupulous ship-owners used to buy ships in bad condition, overload them with a valuable cargo, insure it to the hilt, then set them off into the sunset knowing full well that the ship was likely to sink with all hands on board. The fabled insurer Lloyds of London got was the first insurer to solve this problem. They would draw the "water line" around a ship that was loaded and quoted insurance rates based on where that line was. Which meant that they didn't sell insurance to unscrupulous ship-owners, and could offer much better rates to scrupulous ones.

Another example is that people really do buy insurance on a spouse, then try to kill said spouse for the insurance. Therefore insurance companies have convinced governments to pass "slayer rules" that allow them to not pay out life insurance if there is any hint that it might have been murder.

Now back to dead peasant policies. Whatever the details of the tax breaks that made Walmart think it could be profitable, if insurers have correctly priced the insurance policies, then Walmart is virtually guaranteed to lose money on those policies. The reason why is that insurance is a zero sum game, and insurers are in it to generate a profit for themselves. While the loss of low-level workers is a tragedy, Walmart has the reserves to cover its own financial risks. And certainly should not have an incentive to over-insure those workers to the tune of a decade of full-time pay. (And then maintain said insurance after the workers had stopped working for Walmart and there was no possible loss to Walmart from their death.)

Therefore the only logical reason for Walmart to buy all of those policies is that Walmart believes that it has more information than the insurers on the likelihood that its workers will die. And therefore the only logical reason to buy that insurance is as a bet that insurers are systemically mispricing those policies. If they don't have that information, why else would they spend billions on what is supposed to be a money-losing proposition? Insurers knew this, and that is EXACTLY the gamble that insurers were describing in their brief.

The various laws against dead peasant policies were passed on this theory. They exist for the same reason that slayer rules exist. Because insurers convinced politicians that it is a bad idea to give people a financial incentive to see other people die. And politicians agreed that this made sense.

The lawsuit that Walmart filed was not because Walmart disagrees with this characterization of its behavior. It is because Walmart was not informed by the insurers of tax laws that meant that it went from a straight bet about who better knew the statistics on Walmart's workers, to a guaranteed money-losing proposition for Walmart. (Because whether or not Walmart won the bet, it wasn't going to win to the tune of how much it had to pay in taxes.)

I am pretty sure everyone reading HN understands the basic idea of insurance. The issue is your specific claim that "Walmart took out life insurance on its employees because they were betting that their horrible working conditions made people more likely to die than the insurance companies thought. And then were incentivized to make those conditions worse."

>...Therefore the only logical reason for Walmart to buy all of those policies is that Walmart believes that it has more information than the insurers on the likelihood that its workers will die.

No, as I stated before, all the evidence indicates this was mostly done due to perceived favorable tax treatment:

>…Under a typical arrangement, buyers of the insurance pay a fraction of the premium up front and borrow the rest from the insurer. The insurer profits because the interest rate on the loan is higher than the rate of return credited to the buyer on the policy’s cash value. The buying company profits by deducting the interest payments from its taxable income (if eligible to do so under the 2006 law) and because life insurance proceeds are not taxable. Left holding the bag for those profits is Uncle Sam.

https://www.cfo.com/tax/2014/01/dead-peasant-insurance-still...

Of course this could be profitable for a corporation with a large number of workers if it was allowed. Little up-front money, deduct the interest costs and no tax on the death benefit at a time when corporate tax rates were about 35%. The IRS went after these insurance policies and congress also changed the law.

The cases against Walmart have been tried about this use of insurance in many jurisdictions and you haven't shown any evidence of Walmart making a business decision based on a calculation that "...their horrible working conditions made people more likely to die than the insurance companies thought".

Yes, insurance in general has this problem if unregulated, hence the evolution of the concept of “insurable interest”.

https://en.m.wikipedia.org/wiki/Insurable_interest

Opening the bet that they die on a particular date is a problem because they know when to be careful.

Opening a market on when they will die that goes to the person who is closest to the right date, now any would-be assassin can place their bet and try to win. And the target may know that people are hunting for them, but won't be forewarned of when.

They would need a counter party to be able to place the bet though, and those people have an equal incentive to keep the person safe. If no counter party exists then there’s no incentive.

Plus this ignores risks outside the market, like the risk the would be assassin gets caught and sent to prison.

It is a winner take all market. All money placed in the market goes to the winner.

So if I want Donald Trump dead and am willing to pay a million dollars, I start the market and put a million dollars in for tomorrow. Eventually he dies and someone collects. Almost certainly not me, and not necessarily an assassin.

But any would-be assassin who wants can place a bet and now has a million dollars riding on whether they succeed.

This is not novel, the idea has been around for a quarter century. See https://en.wikipedia.org/wiki/Assassination_market for more.

That's why there is the invalid token too.

Reputable prediction markets don't offer contracts where they themselves, or someone in general, could profit from human misery.

Disclosure: I work for one.

> the problem with prediction markets is you have the incentive to make the prediction come true

If players in the market have ways outside the market to significantly affect the outcome that the market is betting on, then it isn't a prediction market. The whole point of a prediction market is that there is no such feedback mechanism.

For example, the article discusses prediction market bets on Trump winning the election. The underlying assumption of such markets is that no player has more than one vote in the actual election, out of some 150 million or so votes, so each individual player's ability to affect the outcome is negligible.

>The underlying assumption of such markets is that no player has more than one vote in the actual election, out of some 150 million or so votes, so each individual player's ability to affect the outcome is negligible.

But this is not necessarily true. In the extreme case, a bettor could be one of nine Supreme Court justices. Or a participant in some sort of fantasy vote-rigging conspiracy. Or even a political insider tanking their candidate's own chances and betting against themselves. There's a pretty wide range of people who could plausibly (or not-so-plausibly in the conspiracy example) have more than a one-vote influence over the result of the election.

Sure, that’s why there are rules about when and how a CEO can sell their company’s stock (they generally have to announce the sale in advance). I’m not sure about the laws around Supreme Court justices, but I’m pretty sure it’s at least well-accepted that no judge should work a case when they have a personal interest in the outcome. I hope that would be grounds for removing a justice.

>Or a participant in some sort of fantasy vote-rigging conspiracy.

This is even more relevant outside of the US. In the US vote rigging conspiracies are impossible for some inexplicable reason, perhaps related to magical soil, but outside of the US they are a real concern.

May I be so bold as to suggest that not all vote rigging conspiracies are considered impossible. Just the ones that have been rejected by every court that has tested them.

One theory I've heard is that the magical soil in the US would compel the riggers to confess and/or provide evidence of their guilt to the courts and to the general public, rather than lying and/or concealing that evidence. In the rest of the world, courts often are not provided with relevant evidence or confessions, and therefore rigging remains possible.

Doesn't this path lead to believing anything you like, once you free yourself from the chains of needing evidence? I feel like I'd lose all track of what is real if I used this logic.

My understanding is that people in those other countries have not been lead down such a path, even though they know that sometimes people get away with stealing elections in their countries. I believe they use reason and inference when judging what is real, because all relevant hard evidence is not always available to them.

> My understanding is that people in those other countries have not been lead down such a path

Ah, that makes sense. They would require evidence to believe something. So for example, in an election where there was no evidence of fraud, they would not believe there was fraud. Such as the one which occurred in 2020 in the U.S.

Yes, and examples of evidence might include that some election facilities were administered by people with a seething hatred for one of the candidates, and election observers in some areas were prevented from being able to meaningfully monitor the election process. Of course there are many other potential forms of evidence, but those two right there would be enough to give anyone pretty good reason to believe there was election fraud, provided it happened outside of America, since election fraud can't take place in America.

I assume you're talking about Republican administered election facilities and since they have a well documented seething hatred toward Biden you're suggesting that Biden actually won by a _much greater margin_ except for the fraud that no doubt occurred in Trump's favor.

I was actually talking about Democrat administered election facilities since they have a well documented seething hatred toward Trump and instituted egregious and well documented restrictions on election observers, forcing them to stay far enough away from election workers that they could not tell what the workers were doing, and kicking them out of facilities entirely under any pretext imaginable with absolutely no recourse if they did anything other than sit silently in their designated corner. I am not aware of any such egregious restrictions that were placed on election observers in Republican strongholds.

If you remove the putting of stupid words in others’ mouths from this (great going there, btw), the only thing that remains is “but the courts could have not gotten the evidence”.

But if the evidence is not available, then there is no good reason to believe it. You have to explain why people claiming it have enough evidence to believe it, but the courts don’t have enough evidence for it to be even claimed in the courts, if you want to claim that the reason is that courts don’t have access to the evidence.

>But if the evidence is not available, then there is no good reason to believe it.

Based on this statement, I am guessing you are an American, and are therefore accustomed to all relevant hard evidence always being available. What you may not know is that in the rest of the world, sometimes some hard evidence is not available, so those people have adapted other mechanisms for forming beliefs about what is true. One such mechanism is the use of reason to draw inferences from other relevant facts.

For instance, in those countries, if a man who has professed a strong desire for wealth is tasked with guarding a large pile of money, and the money disappears, people in those countries will infer that the man likely took the money, even if no one saw him take it and the money is not later found in his possession.

> One such mechanism is the use of reason to draw inferences from other relevant facts.

The “other relevant facts” are called “evidence”. An observation is evidence for a proposition when the posterior probability for the proposition, after updating on the observation, is greater than the prior probability of the proposition, before the observation.

Ok, so I guess you are saying that the evidence is not __legally considered__ evidence, or isn’t “evidence” in the legal sense of the term, and that that is why it wasn’t presented it court?

I have to admit that I’m not particularly clear on what kinds of evidence are and aren’t considered “evidence” in the legal sense admissible in court. Are you familiar with the criteria that make the distinction?

In a bench trial, the judge is supposed to weight the evidence presented, and issue various different degrees of relief based on whether it meets certain standards in totality. For a case where the plaintiff is asking the judge to overturn the result of an election, the judge would require a rather high standard of evidence.

I was talking about hard evidence specifically -- think a smoking gun with the suspect's fingerprints on it. According to what I have been lead to believe, if election fraud happened in the US, sufficient evidence of said fraud would be discovered and presented to American courts, though that is not the case in other countries.

Therefore if I have not been mislead, when a person considers whether there was election fraud in the US, they should only consider whether sufficient evidence has been presented to courts or to the media, not whether there exist other lesser forms of evidence.

> In the US vote rigging conspiracies are impossible

No, they aren't, which is why our most recent ex-President (who also was notorious for inventing fantastical vote-rigging conspiracies out of no evidence in the same election) is currently at the center of a criminal investigation for one based on fairly hard evidence, and his political party is trying to change the Georgia State Constitution to derail the investigation.

There's a difference between “That vote-rigging conspiracy is an unsubstantiated fantasy” and “Vote-rigging conspiracies are impossible.” Pretty much no one in the US has ever argued the latter.

>No, they aren't

Have I been mislead? If it is possible to carry out election rigging conspiracies in the US, then how can we be so confident that no such conspiracies were carried out by people that viciously hate the former president? Surely if it is possible for conspirators to get away with it in other countries, and there is no magical means of preventing it here, then it's possible for them to get away with it here as well. They have courts and investigations and evidence in other countries as well, and that has seemingly not prevented election rigging there.

It's kinda like how Bigfoot and the Loch Ness Monster could be real, and we'll never really know for sure, but most people conclude that they are almost certainly not real.

Some motivated people have spent a lot of time and money trying to find proof of those creatures, and come up with nothing but some blurry pictures (including some known to be intentional fakes) and conjecture. So there's not much reason to take them seriously.

It's also kinda like how Al Capone might not have ordered the Saint Valentine's Day Massacre, and we'll never really know for sure, but most people conclude that he probably did, even though no one could definitively prove it.

And also kinda like how Kim Jong Un might be the preferred candidate of 100% of North Koreans, and we'll never really know for sure, but most people conclude that he is almost certainly not.

Thanks for the additional examples. Another good one is the moon landing. I don't strictly know we went to the moon, I don't have direct proof, but based on the evidence available to me and the crappy arguments from people claiming we didn't, I'm pretty confident it happened.

As usual these arguments never really end, but thanks to prediction markets, this time the people who believed the possible-but-highly-unlikely outcome, "Trump actually won", ended up donating lots of their money to the people who believed the much more simple and plausible scenario: "No, he didn't".

>this time the people who believed the possible-but-highly-unlikely outcome, "Trump actually won", ended up donating lots of their money to the people who believed the much more simple and plausible scenario: "No, he didn't".

No, that's not what happened. People who believed the odds of the courts ruling in favor of Trump made the payout worth it gave their money to people who believed the odds of that not happening made the payout for that scenario worth it.

Of course, courts only have access to the evidence which is given to them by either side, so really we only know that the evidence Trump's legal team was able to get its hands on on short notice was not sufficient to convince the court to take the very significant step of overturning election results. We do not know who "actually" got more legitimate votes.

Big difference between the general statement of "vote rigging is impossible" and "this last election wasn't rigged". The usual claim is the latter, not the former.

If it is possible to carry out election rigging conspiracies in the US, then how can we be so confident that no such conspiracies were carried out by people that viciously hate the former president? Surely if it is possible for conspirators to get away with it in other countries, and there is no magical means of preventing it here, then it's possible for them to get away with it here as well. They have courts and investigations and evidence in other countries as well, and that has seemingly not prevented election rigging there.

> Surely if it is possible for conspirators to get away with it in other countries

I'm not convinced that it is. Sure, election rigging happens, but that's not the “getting away with it” that would be at issue. Either people who get away with it undetected in the very short term are so good that they manage to suppress all evidence completely and it never comes out (which seems an implausible binodality in outcomes), or it usually is quite evident in even the very short-term, and either fails to do enough to change results, does enough to change results but is corrected by institutional processes, or it does enough to change results and is allowed to stand by corrupt institutions despite being widely decried.

There's not a whole lot of modern cases where election fraud is discovered only long-after the event rather than virtually in real-time.

Is vote rigging and conspiracy to rig votes possible in the modern world? Yes. Is it ever both significant and not immediately evident? It's not impossible, but it doesn't seem to be the case. If it were, you'd expect there to be examples of cases undetectable in the short-run but later discovered.

>Either people who get away with it undetected in the very short term are so good that they manage to suppress all evidence completely and it never comes out (which seems an implausible binodality in outcomes)

Why do you think that's implausible? What evidence of election fraud would you expect to be left behind that would be difficult to dispose of?

>is allowed to stand by corrupt institutions despite being widely decried.

By whom?

>If it were, you'd expect there to be examples of cases undetectable in the short-run but later discovered.

Why would that be expected? Many crimes are much harder to prove if the perpetrator is not caught in the act. Why would you not expect election fraud to be among them?

This isn't someone slashing your tires overnight when you are parked on a street.

It involves thousands of people directly and an extreme amount of information collecting and statistics analysis.

> This isn't someone slashing your tires overnight when you are parked on a street.

Happens only in the ghettos tbh

I think you missed the point to a pretty extreme degree here.

This is about the likelihood of something occurring with no evidence left behind.

Not necessarily no evidence left behind, just no "smoking guns" that can be trivially discovered by private citizens without power of subpoena or warrant.

Not thousands of random people picked off the street, though. It involves thousands of people that overwhelmingly share a seething hatred of one of the two candidates.

The threshold isn’t just “it’s possible”. There needs to be some evidence. All sorts of things are possible, doesn’t mean we go around thinking they are true, or even assume they are potentially true.

It’s not Impossible I’ve murdered someone, doesn’t mean I should be presumed a murderer.

Yes, absolutely. We must use the evidence available and draw inferences, assuming that there is no magic soil type phenomenon involved. In this case, the evidence available includes 5 years of statements and actions performed by members of one political party which demonstrate beyond any doubt that they overwhelmingly possess a seething hatred of one of the candidates. It also includes undisputed evidence that election officials instituted rules for some election facilities that greatly hindered the ability of outside election observers to ensure no fraud was taking place. And it also includes undisputed evidence that these same election facilities are totally politically dominated by that one political party, and have been for decades. We can therefore infer that it is overwhelmingly likely that they engaged in fraud.

There is no “overwhelming evidence” of any election or voter fraud. Such claims have been debunked[1]. Your use of that adjective does not make them true, and your assertion is literally theorization of a conspiracy.

1. https://voterprotectionprogram.org/wp-content/uploads/2021/0...

Your link seems to agree with me. From the facts for GA and PA:

"Furthermore, in an election conducted in the midst of a pandemic, each of the 159 counties was required to balance the close presence of poll watchers to election workers against the requirements for social distancing essential for the protection of public health."

"As Trump-appointed federal district court Judge Grimberg found, there is no legal “authority providing for a right to unrestrained observation or monitoring of vote counting, recounting, or auditing.”

"Second, there is no right under federal or state law for observers to stand at a particular distance or have a particular view of ballots. The Pennsylvania Supreme Court and the Third Circuit have rejected such claims. As the Third Circuit noted: “The Pennsylvania Supreme Court held that the Election Code requires only that poll watchers be in the room, not that they be within any specific distance of the ballots.” Id. (citing In re Canvassing Observation, No. 30 EAP 2020, 2020 WL 6737895, at *8-9 (Pa. Nov. 17, 2020)). Similarly, there is no federal right protecting the location or view of observers. Id. (noting that the Campaign “cites no federal authority regulating poll watchers or notice and cure.”). As long as observers were allowed in the room, which they were, complaints about minor deviations in the location and view of observers are legally insufficient.66"

In other words, the restrictions that were placed on observers were consistent with the law, and that is what the courts have ruled. I am willing to accept for the sake of argument that the restrictions were legal, but that's not the point. The point is that no one disputes that there were such restrictions. Nor do I see anyone disputing that the restrictions would have made it harder or impossible for election observers to detect fraud. The defense they put up is just that no fraud was detected, and that the restrictions were legal.

See: "The Trump Campaign and its surrogates have tried, unsuccessfully, to equate an alleged lack of observer access with fraudulent results. There has been no credible evidence of significant voter fraud presented in any form. The suggestion that the Trump Campaign and its surrogates were prevented from detecting fraud, and that is tantamount to evidence that there must have been fraud, is absurd."

I don't think that suggestion is absurd at all, and neither do tens of millions of other Americans. Members of the Democrat party viciously, bitterly hate Trump, and everyone knows it. Why would we not suspect them of cheating, if they made it difficult or impossible for anyone to tell?

>...neither do tens of millions of other Americans...

Because they've been propagandized to think that way by a president with a conflicted interest. The number of people who hold an opinion has no bearing on whether it is factual.

Again, all you've done is to reiterate the same conspiracy theory without any evidence.

I literally quoted evidence from the link that you provided.

No, you most certainly haven't cited evidence of election fraud. You're asserting a conspiracy based on nothing more than "Democrats hate Trump".

I cited evidence that restrictions were placed on observers that made it difficult or impossible for them to detect fraud. Do you deny that I did so?

>...that made it difficult or impossible for them to detect fraud...

That's their claim (which is already suspicious considering their obvious motivations), but it's not the objective truth. And even if it were, it's certainly not actually evidence of fraud.

>but it's not the objective truth.

I'm genuinely surprised to hear someone claim this. The election centers handed out papers to observers telling them what the restrictions were. There were livestreams from various facilities during the process where workers were clearly seen handling election materials far away from where the observers were. There are pictures where observers are sitting impotently behind a line, watching 5+ election workers each from far enough away that they would never be able to read what's written on the materials that the workers are handling. The claims that restrictions were placed on observers which did not exist in past cycles and which would make it more difficult or impossible for observers to detect fraud were never denied in court. Instead, the defendants claimed that those restrictions did not prevent observers from being anywhere or seeing anything that they had a legal right to be or see.

>it's certainly not actually evidence of fraud

In combination with the undisputed hatred of democrats for Trump, it provides good reason for a person to believe that there was election fraud in those areas. Therefore it is evidence of fraud. It is not conclusive evidence, of course, but it is evidence.

This is the explicit aim of prediction markets: to incentivize people with real knowledge to place bets, implicitly leaking information

That's why you have counterfactual prediction markets. You don't have markets on an outcome; you have two markets of an outcome conditional on some action, and on an outcome conditional on that action not being taken.

did you just describe sports betting?

One recent example is the man who ran onto the field at the Super Bowl after having proxies place $370,000 in bets on that occurring. However, he bragged about what he had done on a radio show and those bets were invalidated.

Another example that springs to mind is a British bookmaker that ran a promotional betting offer on a fat lower division substitute goalkeeper eating a pie during a televised cup match.

The fat goalkeeper ate a pasty whilst sitting on the bench, and was promptly banned for a couple of months even without any evidence of financial gain for "intentionally influencing a betting market"

There was another example of this in Australia back in 2016 where some prediction markets offered a novelty bet on what colour tie one of the TV hosts would wear.

The host got wind of it and, for fun, changed ties at least five times throughout the evening.

https://twitter.com/sportsbetcomau/status/749219697359396864

https://www.smh.com.au/politics/federal/federal-election-201...

Rumor on PredictIt was one of the reasons they shut down tweet markets was Andrew Yang's campaign received email threats in regards to him tweeting.

Just have to keep in mind that bets could be a strange gofundme & don't participate in bets that can be bought out against you

That's similar to short sellers trying to manipulate a stock: pretty much only works in the shallows (small cap, thin coverage, moderate liquidity).

You could manipulate the dogcatcher election (or, more profitably, a bond initiative) but a presidential election is probably too hard, especially in this case (amount of money you'd need to spend is much larger than the amount you could make on these markets).

I considered myself pretty in-the-know and knew about Predictit, all kinds of crypto, and therefore I thought I was up-to-date on the crypto news but I did not even know that there was a crypto clone of Predictit.

>blockchain-based markets are highly niche

Not sure if he means if the whole of blockchain is highly niche or blockchain-based prediction markets are highly niche, but if it's the latter, I definitely agree.

Check out Polymarket, much smoother UX than Augur (at the cost of being more centralized, as I'm sure you guessed).

https://astralcodexten.substack.com/p/metaculus-monday and https://astralcodexten.substack.com/p/metaculus-monday-2821 mention a few other markets.

I had heard of Augur but not PredictIt.

There was news out on Wednesday about YC-backed Kalshi raising $30 million: https://www.wsj.com/amp/articles/online-trading-platform-wil.... The big difference is that they are approved by the CFTC, hopefully resulting in higher trading limits and more liquidity.

"Prediction markets" is a fancy word for gambling. It is a highly regulated activity almost everywhere, mainly has it can have terrible consequences at the individual levels and major side-effects such as corrupt games in sports. Let's not even talk about politics where it is generally forbidden for obvious reasons.

The conclusion is disheartening "It shows a lot about how market efficiency actually works in practice, what are the limits of it and what could be done to improve it." Yes at a small scale, but at the current rate of adoption of crypto it will not go well if it is still treated as a playground.

It's worse that people actually believe it is a reliable way to predict the future especially now with the pseudo-intellect speak that people in the crypto space resort to.

If wisdom of the crowd worked then casinos would be out of business. There's an entire industry on the other side.

What is the relationship between casinos and wisdom of the crowd? Just about all casino games I am familiar with have known and controlled odds. There is no need for a 'wisdom of the crowd' to compute the probability distribution.

> If wisdom of the crowd worked then casinos would be out of business.

That does not follow. In prediction markets or sports betting, the gamblers aren't betting against the casino. They're betting against each other, and the casino (PredictIt, BetFair, etc) is skimming off the top, just like Duke & Duke in Trading Places. Most forms of gambling where players do bet directly against the house are games of pure chance where no amount of wisdom will help you beat the odds -- odds which are naturally always stacked in the house's favor.

Not to say that I think these betting markets are good at predicting future outcomes. They're clearly very bad at it! But I do think in concept they could be at least as good as any other method, since the existence of a betting market essentially sets a bounty for beating that market.

What is limiting them is a mix of: obscurity, bet size limits, bet participant count limits, counterparty risk of shady betting sites, cost of fees/taxes making many bets not worth taking. Some prediction markets eliminate parts of that equation but amplify others, like the crypto markets not having the bet size limitations but also being much more obscure and shady.

Furthermore, I don't even think those are problems that should be solved, because if none of those problems existed you'd see big traders like investment companies playing in prediction markets with billions of dollars, and then you'd have way bigger problems with insider trading and the market affecting the outcome. Things as mundane as surprise resignations and as shocking as assassinations.

People already joke about stuff like that happening on PredictIt, with its $850 investment cap. No way to prove that it did, but it would be very easy for certain employees to do and get away with it. For example, in the 2020 election there was a market for when the GSA would ascertain the winner (releasing funds to the transition team). That was a decision made by one government employee. The market started on Nov 18th and had brackets like "Nov 23 or earlier", "Nov 24-Nov 30", "Dec 1-Dec 7", and so on. By the afternoon of Nov 23, with no news, the "Nov 23 or earlier" bracket was trading at 1c. Then the ascertainment happened and it settled.

Now, that could have been a coincidence. It probably was a coincidence. But if you were the GSA administrator you could've made around $70k taking those 1c shares on the 23rd, and nobody would have to know.

> In prediction markets or sports betting, the gamblers aren't betting against the casino.

Are you saying the crowd has an edge over the house? Sports betting platforms, poker sites, they are in the business of profiting off people who think they have an edge (aka ppl believe in the non-zero sum nature of these markets)

I'm saying the house doesn't even have skin in the game. At least in the prediction markets, the house is just pairing one person who'll bet "Trump wins" against another person who'll bet "Trump loses".

Even when the "wisdom of crowds" holds true, the crowd is made up of thousands of individual winners and losers. The house just extracts a cut (fee, commission, vig, juice, take) from the winners' profits. They stay profitable no matter how "wise" the odds settled on by the crowd ended up being.

Edit: concrete example. If you want to bet on Andrew Yang winning election for NYC Mayor, right now you'd pay 47c for a share on PredictIt. If he does win the election, you get a dollar. Where does the dollar come from? Well, you didn't really buy your "Yes" share from PredictIt. You bought it from somebody else on PredictIt, who's placed a standing offer to pay 53c for a "No" share. You accepted their offer when you bought your share taking the opposite end of their bet. Your 47c plus their 53c makes the dollar, and whoever wins gets the whole dollar. Except not quite, because PredictIt takes 10% of profits, so if you're right, you actually get your .47 back + (0.9 * .53) = $0.95, PredictIt gets the $0.05, and the loser gets zero.

It's good to be the bookie.

> Are you saying the crowd has an edge over the house?

No, the crowd is paying the house to bet against each other.

> Sports betting platforms, poker sites, they are in the business of profiting off people who think they have an edge

In that that's a big part of what motivates people to gamble, yes, but parimutuel gambling—which, in effect, includes prediction markets—the house isn't taking a side against the gambler, it's taking a cut off the top from all the gamblers on all sides, then the winners split the remainder. (Or splitting among winners first and charging a fee to the winners, which amounts to the same thing.)

> people actually believe it is a reliable way to predict the future

It's comical because I made like 30 percent in the span of a few months by betting against well known biases in IEM -- the investment stakes are too low for informed participants to move the market meaningfully.

But it's too low stakes to bother automating arbitrage strategies that would remove some of the bias of the public market.

> "Prediction markets" is a fancy word for gambling.

Hard disagree.

Gambling is set up with the principal aims of a) making money off the spread and b) getting participants as "gamified" as possible with exciting events and the ability to bet lots of money.

Prediction markets are set up with the principal aim of crowdsourcing intelligence from a diverse set of minds. They can be set up by academia, think tanks, research labs, etc. And while (arguably) necessarily tied to real money, they also often limit participants and the size of bets through various mechanisms for a host of reasons (one being to make corruption non-viable as you mention).

Gambling is more often related to entertaining events like sports and national politics; prediction markets are often focused more on niche or technical outcomes though they also often expand into national politics to garner participation and scale.

Obviously any market in practice can lie somewhere in the middle. But that doesn't make the distinction any less important. They're not just the same thing.

Do you think politics can qualify as a sport? It seems to be a sport to some.

Theoretically, that might exist.

I recommend that you open each platform mentioned in the article and apply your definition.

I recommend you simply read the Wikipedia article for prediction markets. It even has a list of prediction markets you can visit yourself:

https://en.wikipedia.org/wiki/Prediction_market

Clearly there's nothing theoretical about it.

The problem with making this bet is that the value of the underlying crypto can move by far more than the possible 15% return while the result is pending.

2 months is more than enough for the price to double or halve and people want to be able to exit to fiat at a moment's notice when they think things are heading south.

There are cash-based markets like Predictit where you could've made a similar bet. Predictit charges 5% withdrawal fees + 10% of profits, but if you expect a 15% ROI, it's still profitable.

The fiat-based prediction markets tend to limit the number of people in a particular markets, the size of positions in the market, and a number of other aspects of the market in a way which make it difficult to seize apparent opportunities and to limit the possible returns from doing so, even before considering the way that their fees eat up returns.

These limits are because the ones you're thinking of are research projects, not in fact betting markets (even though as an individual you can treat them as betting markets just fine). This makes them accessible (legally) to US residents.

Betfair is a British gambling firm, and isn't a research project, when Betfair's "Did Donald Trump win the US presidential election?" and "Did Joe Biden win the US presidential election?" closed it had hundreds of millions of pounds of bets across those two questions.

I got paid, as in I put cash in and a couple of weeks later more cash was paid out to my bank account when BetFair closed it, for knowing that Donald Trump did not win that election in December.

It was even possible (though of course risky) to buy the lows and sell the highs as MAGA rallied when they thought the Kraken had been released, or when Rudy was going to prove everyone wrong, or whatever other nonsense.

I was actually underwater for more than 50% of the two weeks between placing my "bet" and the cash returned, because MAGA were bidding up the "Donald Trump won" position even as it became increasingly obvious that they'd lose everything.

PredictIt didn't have this anomaly where Trump had a 15% chance of winning. After Georgia called the election the percentage went above 95%.

Oh, it definitely did. Maybe not to the same degree as the crypto markets (never looked at them), and there were certainly spikes this way and that, but you could get Trump NO cheaper than 90c well into December.

The Texas v. Pennsylvania case getting swatted down by SCOTUS was probably the last of the cheap shares where it was worth depositing money just to play, but if you already had some money in your account it was worth taking the obvious bets all the way to the end.

edit: went back and checked one of the markets to refresh my memory. Yep, check the 90-day chart. Dec 6 "NO" on a Republican win was only 84c!

https://www.predictit.org/markets/detail/2721/Which-party-wi...

edit2: here's another hilarious one.

https://www.predictit.org/markets/detail/5554/Will-Donald-Tr...

Yep, "Will Trump win the popular vote" closed on Nov 24th while still trading at 8 cents. The popular vote. Jesus Christ. For reference he lost the popular vote by 7 million.

I'd actually be curious to know if there was a crypto-market equivalent to that one, because I want to believe most of that pricing was due to PI's limits. For example, one Trump bettor maxing out his $850 limit of 7c shares, requires 14 Biden bettors maxing out $850 of 93c bets to be his counterparty. With a 5,000 trader limit that means that there might be just a handful of Trump-won-landslide bettors vs a few thousand No-he-didn't bettors with a lot more invested, all maxed out and unable to move the price further. But I don't know if that shook out differently in the crypto space with no limits.

You are correct, thanks for providing those sources.

I mean for anyone who wants to use BTC any anything other than an investment vehicle this is how it’s gonna be. BTCs value to non-currency speculators is as a settlement layer of last resort for people that can’t access or don’t want to use foreign exchange markets. You want to get in, do your transfer, and go back to fiat as fast as possible specifically because of the volatility.

Poly.Market which he mentions (and where I bet on the US election) just uses a stablecoin (USDC) pegged to the US dollar. Same situation for the DAI he mentions he used. So this is an already solved issue.

I've used Poly.market a few times and been pretty happy with it - they use a second layer network, so after depositing, trades are fairly cheap (you just pay a market maker fee, no crypto miner fee as far as I can tell). Downside is that the outcome is provided by the poly.market creators, but your actual bets are non-custodial.

The fees were quite expensive before they started using Matic.

Pretty much all the crypto betting protocols use stablecoins (mostly pegged to the $), people arent betting in eth/btc. Vitalik placed bets on https://catnip.exchange/ so would have been in dai.

Also on the topic of stability, Rai launched this week so we now have non-pegged stable assets backed by eth -> https://www.reflexer.finance/

He did need 1 million dollar simply to make a one time 50k return, and it also seemed like it took considerable effort to do it. I don't know how many people with that money also have the know how, are aware of these betting markets, and care much that they'd make an extra one time 50k.

I think it'll be interesting to see how crypto based betting markets evolve and if regulations will strike them or not. I don't really know what to think about people simply full on gambling on whatever world event, is that a good thing?

He locked 1m dollars to take a loan to use, he didn't use 1 million dollars. You can use your assets directly and do earn a 10%+ profit on whatever you put in this case (which I did).

I don’t know why everyone here is talking about dollars, while there is zero dollars involved all the time. The author did not put in any dollars, but his ETH, which he has plenty, since he created the Ethereum thingy. That may be a large part of the answer why no one “exploited” that hole: most people would have to put real dollars in, expose themselves to all kinds of crypto gymnastics, and end up with ETH, which may or may not be convertible to real dollars where they live. And, yes, they would also have the always pleasant exposure to tax authority now (which may or may not be solvable, depending on the place of Earth one happens to live at).

I mean speaking personally, the reason I don't get in on such things is that I'd have to hold cryptocurrency. This means both technical complexity (Buterin discusses the fairly low complexity of getting into such markets once you know how to effectively use Ethereum, but not that of getting up to speed on using Ethereum in the first place) and a security problem: Either I keep it in an exchange and have to worry about how trustworthy that exchange is, or I keep it myself and have to worry about losing it all should my private key accidentally become exposed.

So, that's the specific reason I haven't gotten in on it. Get past that barrier and yeah I would've been buying NTRUMP for sure.

It took me just under 5 minutes to go from debit card to Poly.market in the summer the first time I bet on it, though I later did it with my bank account via Coinbase for slightly lower fees.

I decided to just go for it, I mean if there's free money like this article suggests, why not take it? I can throw the minimum 250 bucks at this and expense it on the company card for research purposes.

There's literally a market for whether Donald Trump will be president on March 31st of 2021 with offers available at 98 cents, so presumably I can make a 2% return in a month right?

Okay well I signed up, I had to buy USDC and that cost me 8%. In the future I should use Coinbase to cut that down to 0.50%, but for now my motivation is just to see if this thing is for real.

After a fairly smooth sign up process that took about 10 minutes, involved confirming my e-mail address, an SMS and then verifying a credit card transaction, I got the 230 USDC sent to me and immediately used it to buy NO on Trump being president.

I wont lie, this was easier than I expected, the whole process took about 10-15 minutes tops and as far as I can tell I do legitimately have this position.

I guess the only concern left is whether there's some loophole that will cause this market not to resolve at all/become invalid.

I will do a few more transactions later today since the site is literally displaying some fairly significant arbitrage opportunities. I will do it with just a couple hundred dollars at a time as a proof of concept, and if this works out then perhaps I go a little deeper, use Coinbase Pro to buy and sell the USDC.

Ensure you take into account fiat deposit fees, trading fees for USDC and withdrawal/transaction fees from the wallet you deposit with along with counter-party risk.

I've used polymarket and want it to succeed, but it's not a smooth process yet.

Steps I had to follow to bet:

1. Send USDC to polymarket address

2. 'Claim' USDC when it arrives in Polymarket, but due to ETH gas fees, this function didn't work. It only works when they top up the relayer with ETH, so you can wait (as I did but it was emptied before I clicked), or pay more ETH yourself to self fund this conversion.

3. Place your bet

4. Wait for the bet to complete (to be fair, the team quickly resolved the market)

5. Withdraw the cash, this worked, although I got several errors throughout.

The best part here over other crypto based prediction markets is the resolution is quick (unlike the weeks/months augur can take), but that's due to the resolution being a centralised process, at which point, why am I bothered about using crypto at all? What's wrong with a traditional betting exchange like Betfair?

What I read was a story of making money from some niche prediction market sites (that I would never touch). There is also quite a bit of handwaving, eg "I saw more and more arguments from Very Smart People whom I respected arguing that the markets were in fact being irrational and I should participate and bet against them if I can. Eventually, I was convinced." and showing some math from trivial arbitrary scenarios the author poses (nothing to do with the story). This then dovetails into how ETH is a good bet because, they know some calculus? This is crypto-promotion, plain and simple.

...it's written by Vitalik Buterin. Of course he thinks Ethereum is good?

Vitalik is Ethereum founder

Thank you for pointing out the obvious: That even on HN people talk before they know even they tiniest thing about who or what they are talking about.

> That even on HN people talk before they know even they tiniest thing about who or what they are talking about.

Regardless of the author (I don't bother to google every author) the content is as stated. It's a crypto-ad and not much else.

I think the expectation of the article is that the reader knows who the author is, and therefore expects the article to be pro ETH , insofar as it mentions it.

I think the fascinating part of this article is in the third paragraph: ". . . I would make all of these remaining bets, against willing counterparties, after Trump had already lost the election." I wasn't expecting that. But we are in GME and WSB phase of markets. I guess I have a lot of catching up to do.

Many people felt Polymarket resolved the market too early after the election was called. They then setup another market where the question was whether Trump would be inaugurated. It was possible to make 20% on that market at one point.

I wouldn't compare it to GME and WSB though. It's still stupid.

Then after he wasn’t they set up yet another market asking if Trump would be the sitting president in March 2021. It returns 5% or so in only a few short months.

> There just really are far fewer people than I thought who are actually motivated enough to take a weird opportunity even when it presents them straight in the face

It Me hehe

I feel my only motivation is fomo, but I'm actually not interested in putting in the effort and time with associated stress, my job already delivers on a lifestyle I'm happy with, so the potential additional money isn't enough to push me to act.

One thing he didn't talk about was capital gains tax.

If I wanted to bet on the election, I would first have to realize my short term capital gains.

He avoids capital gains in the article by using a MakerDAO CDP. This is a loan that is collateralized by his Ethereum holdings. (IIRC 1.5 ETH to the amount of DAI you want)

Indeed, though at 3:2 you are apparently at considerable risk of the loan being called by anyone (with no margin call beforehand):

If the value of the ETH collateral that you deposited drops to less than 150% the value of the DAI you withdrew, anyone can come in and "liquidate" the vault, forcibly selling the ETH to buy back the DAI and charging you a high penalty. Hence, it's a good idea to have a high collateralization ratio in case of sudden price movements; I had over $3 worth of ETH in my CDP for every $1 that I withdrew.

While this is true, you could easily write a listener script (very easy with ETH due to the extensive bloom filter use) that adds more collateral to your position if it reaches, say, within %175 of the capital you withdrew.

DeFi Saver does this and has a large userbase. https://defisaver.com/

Prediction market positions are not capital gains in the same way that lottery tickets are not capital gains. It is gambling.

Yeah, my PredictIt winnings (also from betting against Trump after Trump lost) are on a 1099-MISC as "Other Income", which I believe is what gambling would be. Still, the point stands that gambling sucks since not only are you likely to lose more often than you win after fees, but taxes eat your winnings too! But then again, it's hardly gambling when you are betting against Q.

Hilariously, on PredictIt you could see the market inefficiency in action as the site has a cap of $850 risked per bet, but after the election you could make essentially the same bet a dozen different ways. Which party will win? Which candidate will win? Will the winning candidate also win the popular vote? What will be the electoral college margin of victory? Will a woman be elected VP in 2020?

Of all those different ways to make the Trump/Biden bet, the most straightforward ones like "which party wins the 2020 election" had the highest Trump prices, while the less prominent markets like "Will the SC Dem Primary winner win the general election?" had lower Trump prices.

Now, why would I and other gamblers not sell my bets from the expensive 88c "SC Dem Primary Winner" market, and move the money into the cheaper 84c "Which party wins" market? Why would the prices not equalize since they are, at this point, bets on the same outcome? Because I'm already at the $850 cap in the "Which party wins" market. I can't put more in. Or, if I wasn't betting on that before the election, I might not even be able to because PredictIt also caps each market at 5,000 total traders.

In other words, the more obvious markets filled up to their limits earlier in the process and had their price influenced more by people who thought Trump would win, and had less price movement after that due to the distribution of traders already locked into the market. The obscure markets were low-volume before the election, but filled up after-the-fact with people like me eager to find "free money" bets, so the price on the Biden side ended up a few cents higher.

But your source of funds might be. Sounds like the OP avoided this by borrowing against assets, but since his assets are volatile blockchain stuff, the interest rate was absurd.

The interest rate on the loan was 3.5%. Long term capital gains in the US are typically 15% (short term 30%), so using a CDP can save a lot of money depending on the tax laws that apply to you.

Huh, I thought I saw 35 percent APY but admittedly I wasn't playing as close attention to the numbers as I would if my own money was on the line.

That depends on the rules of the particular tax system(s) you are subject to. In the UK one it's kind of a grey area. Buying and selling a crypto at a profit would probably be treated as a capital gain but betting with a bookies or spreadbetter isn't.

>Blockchains are often criticized for being speculative toys and not doing anything meaningful except for self->referential games (tokens, with yield farming, whose returns are powered by... the launch of other tokens). There >are certainly exceptions that the critics fail to recognize; I personally have benefited from ENS and even from >using ETH for payments on several occasions where all credit card options failed. But over the last few months, >it seems like we have seen a rapid burst in Ethereum applications being concretely useful for people and >interacting with the real world, and prediction markets are a key example of this.

Was hunting this week for real-world use cases for blockchains, this is one to add to the list I feel.

It is in the same way drug bazaars are: states have been hesitant to regulate blockchain applications, so they're a form of regulatory arbitrage. Without regulation, nothing prevents conventional predication markets from removing limits.

I've always had the impression that the cryptocurrency community was trending rightwards. So it's good to see some quantifiable evidence of it.

Which leaves the question: why? Technology as a whole is centre-left, so there's something else going on.

One common theme seems to a loss of trust in any institutions, and democracy itself: "the FED is just a private bank" isn't far away from "the mainstream media is lying", and even the latter is an opinion more common among the crypto bubble as far as I can tell.

Or are crytocurrencies of interest primarily to people interested in "getting rich, fast" and therefore liable to glorify a self-annoited master of making money with little work?

The enormously wasteful environmental cost of PoW is certainly a turn off to those of us on the left as well.

That's not quantifiable evidence of a political bias. You win in a prediction market by guessing who will win, not by stating who you want to win.

Right, and as mentioned in the article: The markets were guessing Trump would win after he had already lost. If that's not evidence of a political bias to you I'm not sure why.

When hurricane forecasters predict that a hurricane will strike a city, would that be evidence of their pro-hurricane bias? If they were consistently overeager to predict hurricane strikes, would that be evidence that they supported hurricanes, or merely were overcalibrated to predicting them?

If a forecaster saw a hurricane make landfall in Texas and still gave it a 15% chance of hitting Alabama, that'd be pretty far beyond simple poor calibration, and I think it'd be justified to ask some pointed questions about why they're so dedicated to their bad prediction.

Whilst your second sentence is true, belief that Trump would be declared the winner of the election even after he lost is something highly skewed towards people inclined to believe Trump and Trumpists' claims about electoral fraud,- Mike Pence having the casting vote etc.

And the most obvious reason why not enough unbiased cryptoenthusiasts were tempted to place massive bets on something already decided to correct the odds was suspicion that the oracles might be too biased in favour of Trump being the real president for them to be sure of the easy profit the odds implied

There's another possibility, which is that "Crypto people," are another isolated pocket separate from any mainstream faction, that come up with their own weird beliefs for their own divergent reasons. An uncorrelated niche faction would be expected to go closer to one mainstream faction's beliefs over another's about half the time.

I'm not sure I understand your comment. Crypto was always about freedom, and as things stand the right is advocating for freedom more than the left (gun rights, freedom of speech, smaller taxes).

Crypto was always about freedom, you're liberated from the dependence on your country, bank, or whatever else it may be. Your fate is in your own hands, your wallet, your funds.

> the right is advocating for freedom more than the left (gun rights, freedom of speech, smaller taxes).

You got that backwards: The left is advocating for freedom more than the right (freedom from gun violence, freedom from hate speech, freedom from preventable/treatable medical conditions).

agree about freedom re: healthcare. it would also mean freedom to take risks as a creator or entrepreneur, if you don't have to rely on an employer for health insurance.

the gun issue is a city vs rural thing. you don't want them in a city, but you might in the rural context.

> freedom from hate speech

but reframing censorship as freedom is blatantly Orwellian. also, the left is not a monolith.

the liberal left advocates for free speech and liberty. aligned with freedom.

the illiberal left advocates for censorship and control. the opposite of freedom.

> reframing censorship as freedom is blatantly Orwellian.

Why? People largely agree that things like false advertising and fraud regulations increase freedom, despite being literally censorship.

It's a positive vs negative liberty difference. Decentralization and unregulated currency is aligned with the right wing ideas about freedom.

The original meaning of “right wing” meant supporters of monarchy or aristocracy. (The supporters of the aristocracy sat on the right in the Estates General assemblies right before the French Revolution, the commoners on the left). What you are describing is a free market libertarianism that denies or pretends that class doesn’t exist at all, which generally serves the interests of economic aristocracy.

Yes - I just finished reading a book about the French Revolution and it was surprising how far the modern definition of right vs left has strayed. Imagine living in a time when the leftists were pro-war nationalists who loved prison and the death penalty! But in the current political climate, libertarian market ideas are generally included in the basket of ideas labelled 'right'. That's all I meant.

Yes, I think also that the word freedom is a bit ambiguous which lends itself to being distorted. The left wing view is that freedom means not being dominated by authority figures, and the way you fight back against authority is to band together to pursue your common interests, which means that to obtain freedom you have to take collective action. So freedom is seen in terms of power relations. The right wing idea of freedom is being alone or being independent; but we on the left would say that being alone just makes you vulnerable, unless you are already in a position of considerable power. But you know, independence from other people is a kind of freedom too, so I can see the idea there.

The kind of freedom the left advocates is more about freedom from being dominated by some authority; but we see your boss or your landlord as being more of an immediate authority than the government. So we support labor organizing and tenant rights. Many leftists support the right to bear arms (Karl Marx, famously).

> and as things stand the right is advocating for freedom more than the left

I don't think that's quite clear cut. The right politically makes more hay about freedoms these days, but they have equally strong positions that are anti-freedom (pro-life, voting restrictions, immigration policies, drug policies, religion) and the left has pretty strong advocacy areas for freedom (religion, drug policies, "gay marriage" ) etc.

Crypto has always been about a number of things.

> right is advocating for freedom more than the left (gun rights, freedom of speech, smaller taxes)

immigration, religious tolerance, lgbt rights.

There are multiple kinds of freedoms, I suppose. For immigration, yeah, being free to move somewhere seems clearly freedom. A freedom to do something.

Not being forbidden from practicing ones religion is also a freedom to do something.

Being free from being discriminated against on the basis of religion is a different kind of freedom, I think.

There is a similar way to split the third kind.

I suppose the boundary between “the freedom to do x” and “freedom from being treated badly for doing x” is kind of fuzzy. It would be absurd to say that “we have freedom of immigration, it’s just that basically anyone who comes in we happen to shoot.”, in such a situation, people are clearly being forbidden from immigrating.

But if someone is endlessly harassed by people, and treated with extra suspicion by the police, in response to their practicing their religion, yeah, that is kind of going against freedom of religion kind of in the first sense, or perhaps somewhere between the two senses, even if officially by law there is nothing forbidding it, and another law says that no law can be made which does forbid it.

But, even if things like this show that the distinction between the two senses is kind of fuzzy, I still think that the distinction is still somewhat relevant and somewhat reasonable.

A self-consistent rightist could very well support nearly-open borders, and legal protection of the practice of other religions, and oppose attempts to criminalize or otherwise legislate against LGBT things, on the basis of freedom, while at the same time also being somewhat discriminatory on a personal level against one or more of those groups.

> A self-consistent rightist could very well support nearly-open borders, and legal protection of the practice of other religions, and oppose attempts to criminalize or otherwise legislate against LGBT things, on the basis of freedom, while at the same time also being somewhat discriminatory on a personal level against one or more of those groups.

They probably could. The large bulk of right wing legislators and media personalities aren't like this, though.

Crypto understandably leans libertarian, which is increasingly becoming orthogonal to the right-left axis of American politics.

Why do you believe that technology is centre-left? Crypto is basically a libertarian fantasy come true.

Center-left is a liberal euphemism for normal. It's what you assume everybody is when you're part of the urban middle-class and don't really talk about politics.

"trending rightwards" .... LOL!!! ...

> Technology as a whole is centre-left

or maybe it just isn't and crypto is a counter example? not sure why it has to be an axiom that tech is "Centre-left" especially considering the historical relativity of terms like right and left

Prediction markets are fascinating to me. Of course they are not perfect, as demonstrated by this post, and also by the spreads of certain "fan favorite" sports teams that people throw money at irrationally. I still think that on average (just like prices in any other decentralized markets), the prediction prices are better than any known centralized system, and with a robust implementation, could be used for important planning.

I had a similar experience on Predictit which I wrote about here: https://ja3k.com/blog/predictit

It's still very strange to me that the prices were so irrational.

Say what you will about cryptocurrencies, it sounds like a damn interesting area in which to be spending your time as an engineer, even if 90% of the stuff ends up being total crap or a fraud.

> even if 90% of the stuff ends up being total crap or a fraud

Working on something that turns out to be total crap or a fraud is actually very demoralizing, not to mention not great for your resume.

In the distributed systems space, I've interviewed a lot of burnt out engineers who thought they were getting in on the next big blockchain company that turned out to be a couple founders use blockchain as a get rich quick scheme.

For every story we hear about people getting lucky by timing something blockchain-related just right, there are many more people who got the timing wrong and lost out when the hype collapsed.

Be careful out there.

>Working on something that turns out to be total crap or a fraud is actually very demoralizing, not to mention not great for your resume.

Too bad most people here have worked on startups that failed then.

On the other hand, my friend worked as CTO for a doomed blockchain startup that raised a huge amount in an ICO. They paid him handsomely and then imploded. No harm.

I see quite a bit of disappointing talk that disregards the contents of the article, here.

Namely, the author names one sort of bias that led 'Very Smart People' to give an outsized likelihood of Trump winning:

>I remember thinking at the time that this particular opinion of his was over-confident, perhaps even a result of over-internalizing the heuristic that if a viewpoint seems clever and contrarian then it is likely to be correct.

Doesn't this explain crypto-user's pro-Trump bias? Someone who uses crypto as a way to play on a prediction market is necessarily going to be contrarian, to some degree (remember we're being constantly bombarded by claims of how all crypto is "just speculation"). In the same way, believing Trump actually has a case for overturning the election results is a highly contrarian view.

Note that PredictIt offered similar options for all-cash users, and they were also still at 15% for Trump winning after he had clearly long lost.

This was not solely, or even primarily, a crypto thing.

This was addressed in the article, though. PredictIt odds could've been skewed by:

* Maximum of $1000 being able to be invested on the platform

* A small fee being taken by PredictIt out of every bet.

So PredictIt odds were skewed by bet limits and fees, but you assert that the crypto markets, skewed to almost exactly the same degree, were instead skewed by the contrarian nature of crypto users?

Occam's razor suggests that when two different sites correlate so closely, their reasons are likely not so completely different.

> Doesn't this explain crypto-user's pro-Trump bias?

It does. But I was never surprised that there were people willing to bet for Trump. I was surprised by the lack of people taking the opportunity that was sitting there for over a month to bet against them.

I hung around the Polymarket discord channel for awhile and there were very strong believers in the pro Trump narrative. Polymarket whales (Twitter) showed people sinking tens of thousands of dollars in pro Trump bets.

I actively participated in the prediction market this election cycle on Predict-It. I didn't know anything about the Ethereum applications so this was an insightful read.

My main takeaway from this whole election cycle was that the betting markets were not that great at predicting the outcome. As the article points out, and I agree with, a big reason is just that these markets are underdeveloped. You have to really be interested in politics or gambling to get involved and the transactions costs are high. Because of this you end up with a mix of die-hard partisans and gamblers looking for an edge. No normal people are participating on these sites. In fact the markets on predictit were sometimes comically wrong because of partisan money. As the author mentions there were contracts trading at 15 cents for Trump to win states after he had already lost them. I bought the NO contracts for 85 cents and made good money on that. For quite a while on predictit there was a persistent pro Trump bias to almost every state level contract. It persisted even after the count was over!

The second reason is that the betting markets themselves were just a reflection of polling data. I'm sure some sophisticated people were using other sources to make bets but most of the predictit discussions were just about polling and how to weight certain polls. There didn't seem to be some big insight that analysts like Nate Silver had missed that the prediction market sniffed out.

In the interest of full disclosure I fall into both the partisan and gambling camps. I wanted Biden to win but knowing that I avoided contracts that were political since I knew I would bias myself. I went instead for proxy contracts where pricing was out of whack. I settled on the total vote count: https://www.predictit.org/markets/detail/6882 Each bracket has a 3 million vote range and about a month out from the election I saw that the higher range contracts were underpriced. For some reason the predictit market had concentrated the betting around the 2016 vote total which made no sense to me. I knew this was going to be a big turnout (even more partisan than 2016 and everyone was at home with covid). At the very least it was going to be more than 2016. The prices were so low on the contracts I just bought all of them above the 2016 numbers with a bias to the upside and it worked out quite well.

It was a fun game but I didn't think it gave me much more insight into the final result.

> There was also another problem: I did not have any DAI. I had ETH, and I could have sold my ETH to get DAI, but I did not want to sacrifice my ETH exposure; it would have been a shame if I earned $50,000 betting against Trump but simultaneously lost $500,000 missing out on ETH price changes.

Doesn't this fact pervert the underlying market? Now there are two components at play: the actual underlying odds of the election result, and the price fluctuation inherent in DAI/ETH.

Another way to frame this bet is as a high interest loan with some probability of not needing to be paid back. They are borrowing $0.85 worth of DAI/ETH now and may need to repay it in the future.

That being said, I could be misunderstanding how this all is working. The system seems complicated.

This seems like an extremely risky way to make this bet. By trying to keep his exposure to ETH price changes, he set himself up for a scenario in which he could lose $1 million for a potential upside of $50k. Not sure I would make that bet.

A lot of people recognized this for what it was, but chose not to play because of how finicky PredictIt and other prediction markets were around the rules of the game. In most previous elections they would have already closed the markets.

Personally, I made off with a nice chunk of change buying No-Trump on WI, MI, GA, and AZ after the election, but I only played with what I could afford to lose.

Vitalik is worth hundreds of millions (if not more - I haven't checked in a while). He can afford to play games like this.

What happens if Jan 6 had happened and Trump was successful in remaining president despite having lost the election. Who would win the payout? However the market makers decided?

Prediction markets, more specifically predictit, have an hard extreme bias towards the right.

I was basically printing money last year.

You may be correct, but since we are dealing with long tail events, I really doubt that we have anywhere close to enough data to make statistically significant empirical statements about bias. You are almost certainly being results-oriented.

Nope. Prediction markets always have a hard right bias. I have been doing this for years.

I think what we’re seeing is that the set of people making bets on political outcomes leans sharply Republican. It’s selection bias.

There may be a broader message there about representation too: if you are sitting in a meeting and 8 people think something is going to happen, but you disagree, and they are all upper class men (for example), and you’re a lower class woman, you probably have a better than 1 in 9 chance of being right, if it’s an issue that affects the public generally. People don’t realize their views are non representative if they live in an echo chamber.

You should start a quant firm employing only lower class women, and use their insight to decide which companies to invest in. If your hypothesis is correct, you'll be filthy rich in no time at all.

That’s actually a pretty good idea.. but in the short term and during a speculative bubble, you make the most money by chasing what everyone else is also investing in, so it pays to have groupthink. The approach you suggest would probably work though if you could be patient over the course of the whole business cycle, 20 or 30 years.

This is already kind of true but you don’t have to employ them, just run focus groups and surveys.

By the way the point I’m making is about echo chambers not women being wiser than men. If you are the only white man in the room the same rule might hold. I feel like people are making an excessively shallow reading of what I just wrote.

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