A close relative of binary options, prediction markets offer an alternative form of betting/trading (depending on who you ask). The product works with users given the chance to predict an outcome of an event as either yes or know. Examples incldue the closing price of Apple shares, tomorrow’s weather, or who will be the next US President. After an event is offered, customers choose yes or no with a payout outcome at the time of the prediction. One of the most famous prediction markets, was Dublin based Intrade. The firm offered a member to member market where users could bet on the likelihood of events. Pricing of predictions was based on member bids and offers with Intrade taking a cut out of every member to member agreed upon trade. As such, more than a betting firm, Intrade was of sorts a formal exchange for the prediction market. The exchange model differs from casinos or binary options broker that provide continuous, streaming odds and pricing.
However, Intrade’s life as a prediction market was short lived as it was hit by investigations by the CFTC and was subsequently sued by the regulator for ‘illegal commodity trades in November 2012. With volumes falling, Intrade’s owners decided to shut down the market and return client deposits over the last few months.
While featuring members from across the world, Intrade’s customers were primarily from the US, with odds for prediction bets of the 2012 US Presidential race often featured by major publications in their polling and forecast figures last November. As a result of the CFTC actions, Intrade was shut out of its key US market which led to the exchange’s eventual demise. Striving to fill the gap of the loss of Intrade and create a member to member prediction market exchange, comes Predictious. However, unlike its predecessor, Predictious replaces dollars for bitcoin denominated accounts.
The market is the creation of Irish based startup Pixode, a maker of mobile and web based apps and games. Speaking to Pixode’s Flavien Charlon, he told Forex Magnates that since launching in July, Predictious has 600 registered users and 270 BTC ($30,000) in deposits. Among the market’s early achievements was interest for trading on the outcome of the gender of the Royal baby last month.
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Explaining what they believe sets Predictious apart from other prediction markets, Charlon explained that “there are a few other prediction markets using bitcoin, but currently, all bitcoin prediction markets and betting websites use either pool betting or fixed odds. Predictious takes a different approach. It functions like a stock market where shares represent a particular outcome of an event. This has several benefits for the user, as not only can they set their odds (by setting the price), but they can also cut their losses or even profit early by selling a prediction before the event deadline, if they no longer think it will happen. “
Looking to boost liquidity for continuous trading of events, Predictious is currently soliciting market makers to provide pricing for popular financial instruments such as forex pairs, commodities, and shares. Overall, the market currently provides over 250 contracts for trading of events such as what will be the price of the EURUSD and BTCUSD, who will win Big Brother, and cinema related events. In regards to market makers, Predictious has created an API for liquidity providers to stream automated rates into the market. Charlon also stated that Predictious is willing to work with market makers to customize the fee structure for them.
While still in its infancy, bitcoin related projects continue to show innovation and we are rapidly seeing bitcoin versions of many online sites. Among them, by far the most widely used are bitcoin gaming sites, where recently Satoshi Dice was sold for around $11 million. While the majority of betting remains in micro increments (less than $1), taking a look on any of the popular sites shows a rapid array of bets taking places every few seconds (c heck out the furious action on Just-Dice).
Overall, Predictious can be described as one of the firms creating a bridge between the bitcoin and existing financial worlds. By creating a scalable marketplace, progress at Predictious could theoretically lead to the creation of an exchange based spot forex trading model, with accounts and clearing denominated in bitcoins.