Vitalik Warns Prediction Markets Are ‘Cursed,’ Pushes Hedging to Replace Fiat
Key Takeaways:Prediction Markets Chasing DopamineThree Types of Market ParticipantsFrom Betting to Risk ReductionHedging as the Core Use Case
Buterin suggests prediction markets should function as insurance mechanisms. He provides a simple example; an investor who owns stocks of biotech may lose money should a particular political party based on hatred towards biotech assume power. The investor mitigates the downside by purchasing prediction shares that are dependent on that event. Even if the bet has negative expected return, it smooths volatility. In this framework, prediction markets are not gambling venues. They are structured tools for risk management.About Author
