Ever since I started learning about the blockchain industry, I’ve been constantly astounded at the various use cases being applied to it. One such use case is with Gnosis, a prediction market company with high aspirations.
Gnosis Prediction Market
A prediction market is basically a mechanism for turning user predictions into an aggregate forecast of future events. The idea is that based on the “wisdom of crowds” we can use information from the collective to be smarter and more accurate than any information from any one individual.
And the prediction markets create incentive for people to be correct about their predictions. This allows for users to bet on certain events occurring. The higher a likelihood of an event occurring, the greater that events’ “token worth” would be. And as something becomes more or less likely, the price of the token increases or decreases.
In a prediction market, the array of possibilities are split so that each of them has an assigned probability, and they all add up to 100%. Therefore, as an event becomes more and more certain, it rises in price. This would create a profitable opportunity for anyone who bets on a low probability event in the case it ends up being correct.
The Mechanics of the Market
There are a few implications of this market set up. First, efficient markets matter. If news is well-known and distributed equally to everyone, new info that creates certainty regarding a prediction will zero out all of the non-winning options. If not, it is possible that someone will buy a token thinking it’s a longshot or a bargain, when it is really, truly disqualified.
Additionally, there are two ways to make money trading on the market. You can take profit along the way by purchasing a token and later selling it once the probability of said event has gone up, or you can wait until receiving a payout for being correct.
GNO tokens are tradeable on the open market and have monetary value, but are not to be confused with Olympia tokens. These tokens are used inside the app to make bets. GNO only represents the payout for making the right choice with your Olympia tokens.
Gnosis tokens (GNO) are ERC20 tokens, with 10 million created and sold during ICO. No new tokens have been created since. The current architecture supports the Gnosis prediction market, but more prediction market applications will eventually be feasible. Some other features that are relevant to investors are the multi-sig wallet and robust developer tools that will help to create a sustained community around it.
The Buying Opportunity
GNO is currently trading around $12.66 USD, or 0.00317 BTC, and is ranked 191 in terms of market capitalization. The recent trend has been gradually upward, with the weak BTC continuing to depreciate against it. The coin is available on Bittrex, Poloniex, and Kraken, and could serve as a great short-term bet based on its strength versus Bitcoin. Whether you want to be involved in it long-term depends upon your belief in the prediction market use case and its ability to maintain strength against BTC.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.