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Prediction markets are a simple concept: they allow you to bet on the outcome of various events, such as sports matches, political events, and market activity. And that’s just the beginning: you can place a bet on almost anything that you can imagine.

Blockchain and Prediction Markets: A Perfect Match?

Cryptocurrencies and prediction markets are sometimes considered a natural fit, as gambling regulations in the United States and elsewhere are quite restrictive. In fact, it is quite hard to operate a prediction market under most circumstances.

Blockchain-based prediction markets, however, can usually avoid regulations through decentralization. Instead of making predictions through a central party, users merely arrange their own bets, and the blockchain platform provides governance and financial incentives for good behavior.

In theory, this should make blockchain-based prediction markets uncensorable, and most decentralized prediction markets have indeed managed to avoid regulatory pressure. Unfortunately, these platforms aren’t just untouched by the law; they’re also mostly untouched by users.

This raises the question: can prediction markets thrive in obscurity?

Veil’s Sudden Demise

Some decentralized prediction markets have failed outright. Last week, Veil announced that it is planning to close its doors. This may not come as a surprise, since Veil was met with some cynicism when it went live in January.

Nevertheless, Veil offered several improvements over Augur, such as faster settlements and a greater number of trading categories. But despite these features, Veil failed after just six months of operations. The company blames its failure to a few factors: first, it tried to accomplish too much, and second, it failed to onboard users.

Veil also laments the fact that it took an uncomfortable middle ground between decentralization and regulatory compliance. For context, Veil did not permit users from the U.S. or OFAC-embargoed countries to use the site. It’s not clear how strictly Veil enforced this rule, but this restriction probably didn’t help attract users.

Things aren’t entirely over for Veil: at the moment, it is ensuring that all of its users manage to withdraw their funds. Veil has also open-sourced its market creation tool for developers, and it says that it will move on to other projects in the future.

Augur Stays Afloat

Augur (REP), which forms the basis of Veil, is not at risk. Even though Augur has only been in operation for just one year, it has already become one of the most successful decentralized prediction market platforms. Right now, Augur has over 2500 active markets, with approximately $3.5 million at stake.

But Augur’s usership rates are not so impressive. The platform has had consistently low user counts, and right now, about 30 daily users. And despite Augur’s high-stakes markets, very little money is changing hands on a daily basis. This week, less than 60 ETH (~$13,000) was transacted each day.

Admittedly, Augur doesn’t need to experience a lot of activity on a day-to-day basis, as many bets take place over long periods of time. For example, a bet that concerns an election may play out over several months. Still, low usage statistics mean that Augur isn’t terribly popular among users.

Gnosis Shifts Its Focus

Gnosis is another high-profile prediction market project. After raising $12.5 million in 2017, many people had very high hopes for Gnosis. However, it still doesn’t have a prediction market that the general public can use. Instead, it is currently working on a protocol for projects that want to build their own prediction market platform.

Despite developers’ good intentions, there are not many prediction market apps that have been built on Gnosis, and those that do exist are not making a lot of progress. Helena, a ConsenSys-backed platform that went live in May, is no exception – at the moment, Helena lists just eight active markets.

Meanwhile, Gnosis’ own prediction market apps are mostly inactive. In 2017, Gnosis Olympia gave the public a taste of Gnosis’ potential. However, Olympia only functioned as a “tournament,” not as a live prediction market platform. It was also short-lived: Olympia’s run was limited from the start, and the site is now defunct.

In some ways, Gnosis’ trajectory echoes the fate of Veil: both initiatives have shifted their focus to secondary projects. In addition to its prediction market protocol, Gnosis also provides a decentralized trading protocol and a cryptocurrency wallet. So, despite its general inaccessibility, Gnosis is working hard on many things.

Charting a Course for the Future

In some ways, prediction markets struggle with the same challenges that face other blockchain projects. They have niche appeal, and it is hard to hold that against prediction markets in particular.

However, it seems that decentralization isn’t enough to win. Some centralized prediction markets, such as PredictIt, are functioning in spite of restrictive regulations. These websites, which don’t rely on crypto or blockchain, will probably continue to overshadow their decentralized counterparts.

This isn’t a very appealing thought for decentralization advocates, but there is hope. Treating prediction markets as one facet of a larger whole could prove to be quite effective. Gnosis and Veil are taking this path, and the peer-to-peer exchange Hodl Hodl is similarly planning to offer its own prediction markets as a side feature.

It’s also possible that prediction markets are simply oversaturated with listings. Trying to accumulate as many markets as possible might not be the best strategy, and some projects are taking the opposite approach. Guesser, for example, is attempting to curate Augur listings down to a digestible size – only showing the best of the best.

In other words, prediction markets may not become the killer apps that some people expected them to be. Instead, they might continue to plod along, keeping pace with other parts of the crypto ecosystem.

That doesn’t mean that they are threatened – instead, prediction markets may continue to thrive just beneath the surface of the blockchain landscape.