Prediction Markets Should Become Hedges for Consumers – Crypto News

Ethereum co-founder Vitalik Buterin said he is starting to “worry” about the direction of prediction markets and suggested that they shift to become marketplaces to hedge against price exposure risk for consumers.

Prediction markets are “over-converging” to “unhealthy” products that are focused on short-term price betting and speculative behavior as opposed to long-term building, Buterin said in an X post.

Instead, onchain prediction markets coupled with AI large-language models (LLMs) should become general hedging mechanisms to provide consumers with price stability for goods and services, Buterin said. He explained how this system would work:

“You have price indices on all major categories of goods and services that people buy, treating physical goods and services in different regions as different categories, and prediction markets on each category. 

Each user, individual or business, has a local LLM that understands that user’s expenses and offers the user a personalized basket of prediction market shares, representing ‘N’ days of that user’s expected future expenses,” he continued.

Individuals and businesses can hold a combination of assets to grow wealth and “personalized prediction market shares” to offset the rising cost of living created by fiat currency inflation, Buterin concluded.

Related: CFTC pulls Biden-era proposal to ban sports, political prediction markets

Prediction markets are useful market intelligence tools, supporters say

Prediction markets are crowdsourced intelligence platforms that can provide insight into global events and financial markets, while allowing individuals and businesses to hedge against a wide variety of risks, proponents of prediction markets say.

Prediction markets are more accurate than polls and should be treated as a public good, according to Harry Crane, a statistics professor at Rutgers University.