The prediction market is big business all over the world and is known as the premier form of entertainment. It goes back at least the 1500s, when people were speculating about the papal successor. In the United States, the first recorded instance of the prediction market dates back to 1884, when political predictions took place on Wall Street. These examples show that this industry has been associated with entertainment for centuries.
With the rapid growth of technology and innovation in theatre, we have discovered new forms of entertainment. Yet prediction markets continued to attract users in large numbers. He highlights the fact that despite its centuries-old history, this industry has evolved to meet the demands of the current times. As it evolved into the next phase, the prediction market lost the entertaining aspect due to the higher risk of losing money.
The time of transformation
A new kid on the gamified finance block, Nezha, has its eye on the centuries-old financial practice which, despite its evolution, continues to gain momentum even today. In fact, we are looking at an expected growth rate of 11.5% between 2019 and 2027. The global prediction market was worth over $50 billion in 2019, which will reach a record high of $120 billion by 2027 What is important here is that crypto prediction the industry will be a big part of it.
This is where the new DeFi protocol aims to enter with a very different concept from the first generation prediction markets. This essentially makes Nezha a next-generation prediction market protocol. According to Ivan Gowan, co-founder of Nezha, “When it comes to the crypto space, it is the DeFi segment that will have the greatest impact on the prediction market. Decentralized technology will be accessible to the greatest number and will open the path to unprecedented innovation.That being said, not all DeFi prediction markets are the same, as technology, concept, and the blockchain platforms they are built on are among the key differentiators.
Risk Reduction of Prediction Markets
Nezha is the very first insurance-backed prediction market built on Solana, which can transact up to 65,000 transactions per second (TPS), far more than Ethereum’s capacity of 13 TPS. It also allows Nezha to process transactions at a fraction of the cost, which averages around $0.00025. However, Nezha is not limited to Solana, as multi-chain is the future of the crypto industry. Thus, Nezha will also be available on the Cardano & Ethereum blockchain once its deployment on Solana is complete.
However, here is the most interesting part of Nezha’s concept. Nezha users do not risk their principal amount. Instead, they bet the return they receive on Nezha. With this move, the protocol has removed the impending sword of financial loss feared by prediction market users. At the same time, it allows it to take advantage of the entertainment factor of first generation prediction markets. In short, Nezha brings entertainment back to this industry by reducing the risk of losing staked funds which has become a kind of identity for this industry.
As for how Nezha generates yield, it does so with intelligent yield routing that ensures the highest possible yield on user funds. The liquidity engine first aggregates user funds and then directs pooled funds to various performance-based protocols. Examples of protocols might include market leader DeFi platforms such as Solend or Tulip.
The Nezha Pools are also an important part of this and consist of several pools with varying utility. The most important is the prediction pool, because this is where the return generated on user funds is transferred. This pool receives a large portion of the weekly return. From this pool, the funds go to the yieldpot, which hosts 100% of the funds in the prediction pool.
Now, depending on the outcome of the prediction game, winning wallet addresses can claim their winnings from the yield pot. As for how the winners will be determined, its outcome will depend on the weekly game cycle.
The first iteration
For its launch, Nezha imagined a draw game. In it, any user who enters the draw will receive six issues for each entry. The number of entries available to a user will depend on the number of staked tokens. These entries will be accompanied by unique ID numbers, as well as the series of numbers that will determine the winner.
The amount you can earn from the yield pot depends on the tier, as Nezha has taken a tiered approach to deciding what percentage of the yield pot you will receive as a payout.
“For the first iteration, we came up with a unique mechanism, which will change over time as the protocol grows and contains more games,” Gowan explains. “If the outcome of a game cycle does not result in the distribution of at least 50% of the funds, it will automatically trigger the second level distribution.
Access Nezha Prediction Markets
Anyone who wants to use Nezha must first place their tokens in the protocol. The betting period will continue until the end of each game. These funds are routed to a pool by Nezha’s liquidity engine, and from there the funds are transferred to yield-generating protocols, which are chosen by Nezha’s digital asset management partners. These experts also take into account the risks of failure of individual protocols to hedge against risks.
Once these funds are deposited into external DeFi lending protocols, Nezha will start generating daily returns. These funds are added to Nezha’s liquidity pools every week. As for the lockout period, it will end once the game cycle is over. After that, users are free to withdraw their capital as well as their winnings, if any. If they wish, they can also keep their wagered funds and continue to participate in the next round of play.
What the future holds
According to Gowan, the only thing stopping the prediction market from realizing its true potential was the financial losses it caused. Its impact has been such that fear of financial loss has turned users away despite the revenue opportunities the prediction market offers. But with the entry of Nezha, the industry will change for good.
If you believe the founders of the next-generation protocol, Nezha is ushering in the next stage in the evolution of the prediction market, which we can call prediction market 2.0. Thus, the project is not aiming to be another name trying to carve out a place in this attractive market. Instead, he wants to be a real disruptor who could open up the prediction market to the (crypto) masses.