Polymarket spurs a sharp rise in prediction market offerings

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When you know, you know

As far as expressions of crypto mentality go, leverage and prediction markets are about as pure as they come.

Luckily, protocols are now marrying the two — enabling traders to ramp up bets on Polymarket outcomes using borrowed crypto capital.

Onchain perp platform D8X, which runs on Polygon zkEVM, X Layer and Arbitrum, is the latest, today announcing the launch of five leveraged orderbook markets based on Polymarket data.

D8X itself is a white-label engine for managing perpetual futures markets onchain. While the Switzerland-based team behind the protocol, Quantena AG, offers a lite front-end, D8X is intended to be the technological and liquidity backbone that drives perp DEX apps built by others, similar to the Synthetix value prop.

Four front-ends currently use the D8X engine, which as of today, includes the new leveraged prediction orderbooks: that Trump or Harris will win the US election, that Walz will be the DNC VP nominee, that the 49ers will win the next Super Bowl and that Inside Out 2 will be the highest grossing movie of 2024.

Leverage, fees and slippage are all dynamically scaled to the state of the underlying Polymarket. Closer odds means lower leverage limits, as the market is at its riskiest for the protocol when betters are split 50/50. Fees also operate on the same principle. 

So, a Trump win traded for $0.484 — almost even odds — which converted to 2x maximum leverage during a live demo of the market on OCTOFI earlier this morning. 1x leverage would’ve cost 26.65% in fees, going up to 39.12% for 2x leverage.

Polymarket meanwhile prices bets for Inside Out 2 grossing the most of any film this year at $0.88, making it a heavy favorite. Leverage on D8X for that market went up to 2.6x, with fees of only 7.94%.

The goal for D8X, co-founder Caspar Sauter told Blockworks, is to build “incorruptible financial machines” that can be used by anyone — even centralized entities like banks and other traditional financial institutions.

“A long time back, I used to be an economist, and I did a lot of academic research at the time — I love what Polymarket has built: markets that flesh out the views of people,” Sauter said. “It’s very effective to reveal what people really think, because you’re actually betting. That is beautiful, and building on top of Polymarket was a no-brainer.”

SynFutures, another derivatives protocol, launched its own leveraged markets on the US election outcome last week, while dYdX is reportedly looking to do the same later this year (and Katherine has the details on more implementations further on in this newsletter).

At least in the case of SynFutures’ markets, uptake has been relatively slow, with only $141 in volume over the past 24 hours for a Trump win, compared to over $5.1 million for the actual US election market on Polymarket. 

But Polymarket weekly volumes hit record highs last month, at almost $473 million, and they’re on track to post similar numbers in September. I’d watch for the rate of leveraged bets to rise leading into November.

Polymarket is now considered a rare killer crypto app, after betting on the US election with USDC turned out to be a real ‘a-ha’ moment in the wider culture. 

Perhaps adding leverage to the mix can do the same for DeFi.

— David Canellis

Data Center

• BTC and ETH are flat on the daily after a few ripper days, gaining 7.5% and 14% in the past week. (BTC: $63,500; ETH: $2,635.)
• WIF, TIA, TAO and LDO lead the front page with rallies of between 15.5% and 10% in the past 24 hours.
• TAO’s push extended its current rally to almost $592, having nearly doubled in the past week. It’s currently 22% below its March all-time high of $757.60.
• ETH briefly turned slightly deflationary overnight amid its longest inflationary streak since the Merge.
• Stablecoin supplies are up 7.3% on Avalanche in the past week to $2.213 billion, the most of any chain with $500 million or more. 

Too cool for school

Prediction markets really are all the rage right now. 

D8X isn’t alone in seizing the moment, Injective launched Election Perpetual Futures yesterday, and Wintermute launched its own OutcomeMarket last week. 

Then there’s the ongoing Kalshi case to allow a (non-crypto) prediction market to legally offer election markets to US residents. 

So yeah, it’s safe to say everyone’s trying to get a piece of the hugely popular pie. And, with 41 days left before the presidential election, it makes sense that we’d see a lot of projects launch their offerings now.

Heck, even the OG — Polymarket — is reportedly trying to cash in on the mainstream popularity it’s seen by raising roughly $50 million in new capital, which could come from a potential token launch, according to a report from The Information. Polymarket didn’t return a request for comment on yesterday’s report.

I did get a chance to chat with Eric Chen, CEO Injective Labs, about the blockchain’s newest offering. 

“This is an election perpetual futures contract, allowing users to gain leveraged exposure to an elections market. Unlike traditional crypto assets, an election perp on Helix is a perpetual futures contract that tracks the price of a market on Polymarket. Traders can go long (buy) or short (sell) the election perp with up to 3x leverage, enabling them to take a position on the outcome of elections with amplified exposure,” he explained. 

“Additionally, this market allows traders to implement a delta-neutral strategy on TRUMPWIN, the underlying asset of the 2024 Election Perp Market. In theory, they can go long on TRUMPWIN on Polymarket and concurrently short it on Helix, allowing them to profit from the (potential) negative funding on Helix regardless of the election outcome.”

The goal is to allow users to “trade Polymarket odds with leverage, ensuring they can engage with a price that reflects broader consensus.”

I asked Chen how prediction markets help shape DeFi, but he said it’s more about the utilization. Prediction markets, he added, are a way to “utilize blockchain as a tool for users to engage in real-time, trustless transactions.”

By enabling the interactions, we are all privy to “truly unique and unbiased data,” a popular point folks make about Polymarket. Polling doesn’t allow for such real-time insights, for example. Not to mention, you can pretty much find any market on Polymarket. 

Injective, unfortunately, isn’t offering the election perpetuals in the US due to the lack of aforementioned regulatory clarity. Kalshi briefly launched its markets after initially winning its court battle with the CFTC but the regulator proceeded to file an appeal and an emergency stay that halted Kalshi’s offering. 

Chen acknowledged that the larger issue is “understandably complicated” and digs deeper than just a regulator trying to shut down an outlet for free speech. 

But, as it stands, there are no clear regulations. And instead, “lawmakers have silenced a vocal outlet that has the potential to serve as one of the most objective indicators of public opinion, provided that proper rules are in place.”  

Clearly, with the continued battle around Kalshi, regulatory clarity will remain murky at best. Still, whether regulators like it or not, prediction markets are having their moment and everyone — not just the degens — wants to take part. 

– Katherine Ross

The Works

• Celestia said it raised $100 million in new fundraising.
• Artificial intelligence coins are leading the current altcoin surge.
• Fintech giant Revolut is looking to compete with eToro and Robinhood by launching its own app, Bloomberg reported. 
• Telegram said it’ll provide more data to governments after CEO Pavel Durov was arrested last month.
• Curtis Yarvin, founder of Urbit, discussed the evolution of the internet in this week’s Empire episode.

The Riff

Q: What’s Urbit’s cultural significance?

Urbit’s a weirdly fascinating one. It has a lofty idea: Rebuild the internet.

It’s cool. It’s somewhat controversial. It’s been around for a hot minute. And it’s so very crypto.

But at the end of the day, the goal has yet to be reached. This isn’t to say it can’t be, but rather that it seems the project just hasn’t managed to recapture its stride. Look at the recent shakeup, which brought Urbit founder (and Empire guest this week) Curtis Yarvin back. 

Yarvin’s no stranger to controversy, and perhaps he’s been the missing puzzle piece to push Urbit to its next step. But, admittedly, I’ll be watching with a cautious eye given the changes and the fact that the foundation is looking like it could run out of money.

– Katherine Ross

Urbit is super rare in that it is not only totally unique and radical in its approach, but it’s also built by someone so divisive to which there’s no real equivalent in crypto, at least of the figures still publicly active.

To be clear, Yarvin’s unfamiliar design choices alone do enough to turn some folks off Urbit. His writings then serve as a foundation on which to infer why he built it so.

Regardless, Urbit’s place in the zeitgeist mimics Bitcoin’s. Both exhaustively overhaul everything we know about a fundamental part of our everyday lives: the internet and money. 

It’s just that we know a lot about Yarvin and what he thinks about all kinds of stuff, whereas we have little clue who Satoshi Nakamoto really is, let alone anything definitive about their worldview. You never know, that could be for the best.

— David Canellis

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