DeFi prediction is a relatively new aspect of the crypto world that gives people an opportunity to buy and sell contracts based on future events. Similar to futures markets, which let traders predict the future price of an asset, decentralized finance prediction markets let traders forecast future events that are not tied to asset prices. Some examples can be election results, company sales, or the weather.
Decentralized prediction markets use smart contracts to eliminate the need for a central party to connect participants. These DeFi markets often employ quadratic voting, which allows participants to allocate more votes to a particular contract if they feel strongly about it. The cost of votes in the decentralized finance market follows a quadratic formula, meaning one vote costs $1, two votes cost $4, three votes cost $9, and so on.
Overall, a decentralized prediction market offers several advantages over a centralized one. Firstly, it operates without intermediaries. Plus, unlike centralized markets, decentralized prediction markets have a broader reach, reducing bias and providing a more diverse range of opinions globally.