Prediction Market Three-Panel Theory: If you want to understand prediction markets, you need to first understand what prediction markets are actually predicting?

Written by: Yue Xiaoyu

The essence of event prediction markets can be categorized into three main demand types:

1. High-Frequency Gambling Events

Purely driven by trading, high turnover, and strong stimulation, these events primarily satisfy users’ speculative and gaming needs. They form the basic volume and liquidity of the platform.

Typical examples include: 5-minute / 15-minute crypto price fluctuations, sports matches.

2. Cultural and Entertainment Events

Focused on trending topics, fun, and discussion, these events emphasize entertainment, participation, and social sharing to attract new users and engage the broader audience.

Typical examples include: public opinion events, U.S. elections, and the Spring Festival marketing campaigns I previously tried at Probable.

3. Risk Hedging Events

Practical, rational, and real-world risk-avoidance scenarios that mainly serve professional needs like hedging and risk management. They determine the platform’s long-term value and compliance potential.

Typical examples include: macroeconomic data, pre-TGE events, U.S. and Hong Kong stock markets, gold and silver.

Furthermore, these can be closely integrated with real-world insurance products: weather insurance (agriculture), earthquake / typhoon insurance, CPI inflation insurance (purchasing power insurance).

From this, we see the “Three-Plate Theory” of prediction markets: Prediction Market = Gambling Plate (high volume) + Entertainment Plate (user acquisition) + Hedging Plate (value creation).

Currently, 90% of Polymarket’s trading volume comes from sports and political events—high-frequency gambling and entertainment—but it falls far short in risk hedging.

Ethereum founder Vitalik previously tweeted about prediction markets, emphasizing that they shouldn’t just serve “gamblers” in a casino but should develop into more impactful risk hedging tools for the real world.

True hedging markets are almost nonexistent.

This presents a larger market opportunity and a chance for new platforms.

If prediction markets only focus on high-frequency gambling events, they are essentially a new type of casino.

There are two future development paths:

On one hand, broadening participation so that more ordinary users can engage with trending events, indirectly enabling mass adoption of crypto.

On the other hand, professionalizing to become specialized risk hedging tools that genuinely address real-world needs and problems—only then can prediction markets truly break through their current limitations.

The development path of prediction markets is quite clear. I will continue working with Predict to see how far we can go!