From prediction markets to information finance: Exploring the future potential of financial information

Prediction markets, as an emerging blockchain application, are gradually demonstrating their tremendous potential. They not only provide profit opportunities for investors but also serve as an important platform for acquiring information. As the founder of Ethereum, I have always had a keen interest in prediction markets and believe that they represent the beginning of a broader "information finance" domain.

As early as 2014, I wrote about governance models based on predictions. In 2015, I actively participated in and supported the development of the prediction market Augur. During the 2020 election, I made a considerable profit through the prediction market. Recently, I have been closely following the development of another prediction market platform.

For many people, prediction markets seem to be just a form of gambling. However, I believe its significance goes far beyond that. This article will elaborate on my views regarding prediction markets:

1. The current prediction market has become a valuable information tool.

2. More importantly, prediction markets are just pioneers in the broader field of "information finance," which is expected to play a role in various areas such as social media, scientific research, news reporting, and governance.

The Dual Role of Prediction Markets

In the recent US elections, a certain prediction market platform demonstrated its exceptional value as a source of information. It not only accurately predicted the election results but also quickly reflected the real situation after the results were announced, showcasing a faster and more accurate information transmission capability than traditional media.

However, the value of prediction markets is not limited to major events. Taking the Venezuelan presidential election as an example, by observing market data, I realized that there could be significant variables in this election. Although the final outcome did not change, the market data reminded us to pay attention to the deeper dynamics behind this event.

The charm of prediction markets lies in the fact that they can serve both as investment platforms and sources of information. For investors, it is a betting site; for ordinary users, it is a news platform. While one should not blindly trust market data, combining it with traditional media and social media can greatly enhance the efficiency and accuracy of information acquisition.

The Broad Prospects of Information Finance

Predicting election outcomes is just one application of information finance. The core idea of information finance is to use financial mechanisms to incentivize and coordinate the generation and dissemination of information. While all financial activities are related to information to some extent, information finance goes further by starting from the facts that need to be understood and designing optimal market mechanisms to acquire that information.

In addition to prediction markets, decision markets are another typical application of information finance. They allow people to bet on the potential outcomes of different decisions, helping decision-makers assess the possible impacts of various choices.

The development of artificial intelligence will bring revolutionary changes to information finance. AI can participate in a large number of small-scale markets, allowing for high-quality information even in cases of low trading volume. This greatly expands the application scope of information finance.

Innovative Applications of Information Finance

1. Refine human judgment: Simulate high-cost, high-reliability human judgment mechanisms through prediction markets to provide quick and low-cost references for decision-making.

2. Governance of Decentralized Autonomous Organizations (DAO): Utilizing prediction markets to address the issue of low participation in DAOs and improve decision-making efficiency.

3. Personal Tokens: Improve existing personal token projects to become more effective tools for talent discovery and evaluation.

4. Advertising Effectiveness Evaluation: Utilize market mechanisms to predict the actual purchase rate of products and optimize advertising placement.

5. Scientific Research Review: Identifying research results that need revalidation through prediction markets to enhance the reliability of scientific research.

6. Public Goods Funding: Use information financial mechanisms to distribute funds more fairly and efficiently, avoiding the drawbacks of a "popularity contest."

Looking to the Future

The concept of information finance is not new, but the current technological environment has created conditions for its large-scale application:

1. Information finance can solve trust issues in reality, which is particularly important in today's society.

2. Scalable blockchain technology reduces implementation costs.

3. The development of artificial intelligence has enabled small-scale markets to operate effectively.

It is time to go beyond simple election predictions and explore the potential applications of information finance in broader areas. The development of this field will provide us with more reliable and efficient tools for information acquisition and decision support.