On Feb. 27, KYC-free cryptocurrency exchange Hodl Hodl announced a new service called Predictions, which will soon be added to the peer-to-peer trading platform. Hodl Hodl believes prediction markets are useful financial instruments within the crypto ecosystem that offer an incentive for those forecasting the specific outcome of an event.
Hodl Hodl Is Adding ‘Predictions’ to Its P2P Multi-Signature Exchange
Peer-to-peer multi-signature trading platform Hodl Hodl will be adding a prediction markets feature this spring. Hodl Hodl is an exchange that doesn’t require KYC verification and utilizes a multi-signature escrow scheme that curbs the possibility of theft and fraud. At the moment, the exchange allows users to trade BTC and LTC, but the founders are considering adding other coins as well. The multi-signature escrow system protects funds during trades by using a P2SH contract, which gives traders the ability to hold keys to funds held in escrow. The latest prediction markets feature will use a similar approach by locking prediction contracts in a 2-out-of-3 multi-signature escrow.
Prediction markets are nothing new to the crypto ecosystem. They are used as financial tools that allow participants to create a contract with others and the system rewards the correct prediction after the event has unfolded. For instance, a contract could be created on the outcome of the next U.S. presidential election or someone could attempt to forecast the price of a certain cryptocurrency in 2020. The Augur platform is the leading crypto prediction market which relies on the wisdom of the crowd and its native currency REP. The Hodl Hodl concept utilizes BTC, and its developers claim their implementation “can be called a ‘peer-to-peer’ prediction market.”
“Because each party would lock funds in multi-signature 2-out-of-3 escrow, the oracle, in this case, is going to be sort of distributed: in a perfect case, both parties agree on the outcome, because neither party is able to return the coins locked in escrow unilaterally and, thus, they have nothing to win whatsoever by denying the outcome in favor of the other party,” the developers explained. “In fact, they risk losing their reputation on Hodl Hodl and future prospects for creating contracts.”
The blog post adds:
But even in case of a dispute, Hodl Hodl leaves a chance of interference with its third key, which can be used to sign the transaction in favor of the party, who guessed the outcome — Best part of it is that Hodl Hodl, as always, doesn’t have direct access to the funds and is not actually in possession of bitcoins at any moment.
‘Prediction Markets Do Not Equate to Gambling’
Hodl Hodl further explained that participants will be able to create contracts on things like election outcomes, the price of oil or other assets, and the weather. However, the team will make sure contract conditions are “not illegal or ambiguous.” Offers are pre-moderated, which means the contract creator will have to execute the prediction contract after it’s approved. The founders have detailed that Hodl Hodl’s prediction markets will offer a unique approach to contracts as well, such as offering different odds and a minimum contract volume and offer balance method. For example, the contract’s creator can up the odds by making them 1 to 10 which means the creator locks 1 BTC and the counterparty must lock 10 BTC.
Hodl Hodl added that they will be informing the public as soon as the prediction markets launch and emphasized that the new feature should not be considered gambling. The developers of Hodl Hodl said that gambling traditionally involves an “instant gratification expectation, fast execution, and randomness.” Whereas the trading platform’s prediction markets will rely on “low-time preference, financial planning, and responsibility.”
What do you think about Hodl Hodl’s prediction markets announcement? Do you think prediction markets and gambling are different or are they the same? Let us know what you think about this subject in the comments section below.
Image credits: Shutterstock, Pixabay, and Hodl Hodl.
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