🔐Centralized & Decentralized Prediction Markets

The Essential Of Decentralization To The Traditional Prediction Markets

Historically, prediction markets have been centralized and named traditional prediction markets. It has been centralized in a way where a trustworthy entity maintains a ledger to aggregate trades, similarly, the outcome determination of an event and payouts distribution to traders is trusted to just one person centralized or an authority [2].

However, this centralization has many risks and limitations:

• Do not allow global participation

• Limit what types of markets can be created or traded

• ​​The exploitation of identity/information

• Security vulnerabilities

So it is important for the prediction market industry to decentralize the traditional platform into a decentralized one. Basically, decentralized prediction markets are just prediction markets that are more open and free, and which are not dependent on any one person or company to run effectively.

Integrating blockchain technology in the prediction markets not only eliminates many issues but also provides other benefits that encourage participation and create an environment for democratizing the prediction markets to the masses.

Let’s explore some advantages of decentralized prediction platforms:

They are open

Similar to cryptocurrencies, decentralized prediction markets are open, peer-to-peer, public, borderless networks and have no transnational boundaries. Participants from any part of the world can participate without any regulatory and licensing requirements.

Security

Blockchain provides a model for a permanent and immutable system of keeping records. The algorithms in a blockchain platform are implemented using smart contracts which are executed automatically. This provides better protection, flawless bet execution, enhanced data security, and complete information transparency.

Transparency

Fraudulent manipulations of betting, payouts, and game results are eliminated. Transactions in blockchains are immutable. This property prevents manipulation once the betting market is launched. Additionally, any suspicious activities can be detected because all the bet transactions are publicly available.

Easy withdrawal

In order to open and verify accounts, traditional bookmakers demand certain document works. The process is drawn out and time-consuming. In contrast, blockchain fixes these issues because it is automated. The payouts are directly redeemed to your blockchain wallet.

As explained above, the major disadvantages of traditional prediction markets arise from their inherent feature of centralization but blockchain technology can solve many of these problems and ensure the safety of funds and fairness of the whole process.