Vitalik Buterin backs information finance using prediction markets

​Vitalik Buterin, co-founder of Ethereum, has long championed the potential of prediction markets, an area of decentralized finance that not only enables betting on future events but also creates new opportunities for gathering and analyzing information. Buterin has actively participated in this space, supporting platforms like Augur in 2015 and more recently, Polymarket, a decentralized platform that allows users to wager on real-world events.

To many, prediction markets may seem primarily like gambling, particularly when users bet on events like elections. However, Buterin argues that prediction markets are only a small part of a much broader phenomenon he calls "info finance." This emerging field leverages financial markets as tools for gathering knowledge, potentially revolutionizing fields such as governance, social media, science, and news dissemination.

Polymarket: prediction markets as information sources

Buterin highlights Polymarket as a platform that operates on two levels. For bettors, it's a place to wager on the outcomes of events. For everyone else, it's a source of information. For instance, during the 2020 U.S. election, Polymarket accurately reflected shifts in public sentiment and electoral chances. It provided real-time odds and outcomes that were sometimes faster and more accurate than mainstream news sources. Beyond the U.S., Polymarket also provided insight during Venezuela’s July elections. Observing large wagers on a 23% chance of Maduro’s government being ousted alerted Buterin to the severity and seriousness of the opposition's efforts, a reality that wasn’t as apparent from traditional news sources.

According to Buterin, relying solely on traditional news or prediction market charts is not enough. Markets can be manipulated, and news can be sensationalized. But by combining the two, users can gain a fuller picture. For Buterin, reading prediction markets has become an integral part of his information-gathering workflow.

Expanding prediction markets to “info finance”

While prediction markets are well-suited to forecasting specific future events, Buterin sees their value extending far beyond mere betting. In his vision of "info finance," markets are carefully designed to gather insights on a wide range of questions. For instance, decision markets could help organizations choose the most beneficial course of action by incentivizing participants to evaluate potential outcomes.

Artificial intelligence (AI) will play a significant role in info finance, Buterin predicts. Currently, low-volume markets are often ineffective, as they lack the financial incentives needed to attract sophisticated analysis. But with AI, info finance could facilitate millions of micro-markets for smaller, lower-impact decisions, which humans would be unlikely to prioritize due to low profit margins. AI could help maintain quality and integrity in these markets, making them useful sources of information.

Applications and future potential of info finance

Info finance, Buterin believes, could address many challenges in modern finance, governance, and even science. For instance, scientific peer review could benefit from prediction markets to identify potentially flawed studies that need replication, helping alleviate the "replication crisis." In governance, Decentralized Autonomous Organizations (DAOs) could reduce the need for constant human voting by using prediction markets to make real-time decisions, only calling for human input on the most critical issues.

Buterin also sees info finance playing a role in personal token projects like BitClout, which allow speculation on individual tokens. Info finance could refine these projects by structuring markets that are less vulnerable to manipulation and more focused on identifying valuable individuals or ideas.

Conclusion: beyond elections and into the future

Buterin’s vision for info finance suggests a future where decentralized finance enables new ways of gathering and validating knowledge. With blockchain technology and AI evolving, he believes info finance can offer unique solutions to problems of trust and reliability in today’s complex information landscape. Moving forward, Buterin envisions info finance as a catalyst for decentralized, unbiased information across various sectors. 

Let us recall that earlier, Vitalik Buterin revealed the revolutionary goals behind advancing the Ethereum Splurge phase.