Should There Be a Market for This?

Many markets in the traditional world are implicit: the good has value, but isn’t traded directly. For example, social media posts aren’t directly traded but monetized through advertisements.

Blockchains enable developers to make anything an explicit global market. Now, social media posts can be directly bought and sold.

Here are some other examples:

But what should there be an explicit market for? Here are some attributes from a market that works: prediction markets for the US presidential elections.

The real world derives value from it. News organizations, political parties, company executives, and investors derive real value from knowing ahead of time who the US president is going to be. There is a financial incentive to make sure the probabilities of outcomes are adjusted every second.

There is a case for serious volume on the market. Because of real world value, there is a case for serious demand: billions of dollars in 2024 and potential scope for hundreds of billions of dollars in future elections.

The outcome cannot be easily manipulated. It is difficult and costly to manipulate the outcome of the market.

The main subjects of the market did not create it, so market participants cannot be angry at them for losing money. The US presidential candidates did not initiate this market and while both are trying to win, they cannot easily manipulate the outcome. So market participants accept that the market is not rigged by the main subjects.

The market has longevity. As long as the US lives as a democracy, the US presidential election market has value. The demand for the market doesn’t die based on the whims of public sentiment.

There can definitely be markets that work without these factors. For goods like storage, wireless coverage, and open source contributions, the goal is to directly incentivize actions like contributing storage at the lowest cost possible.

Only experimentation will help us know what can be valuable markets, but it is worth understanding the factors that make successful markets like the US presidential elections work.