Prediction markets, which allow participants to speculate on the outcomes of events, have been around for as long as there have been events to speculate on. In the middle ages, there were markets to guess the result of papal elections.
In ancient Greece, the philosopher Aristotle was the first to notice that, in these situations, groups tend to make more accurate predictions than individuals.
This concept, known as the “wisdom of the crowd”, asserts that groups have more knowledge, experience, and insights to draw upon than individuals, and therefore taking an average of a group prediction will likely be more accurate than a single guess. This idea was popularised by modern economists such as Friedrich Hayek, and underpins traditional prediction markets which are now used to allow participants to guess the outcome of, for example, the recent US election.
However, there are a number of problems and barriers to entry within these traditional markets which can prevent individuals from participating, and which have led to the recent surge in interest in crypto prediction markets. For example, to use such traditional markets an individual is required to have a certain level of trust in the institution they’re making the prediction with; users need to take it on good faith that the third-party they’re depositing funds with will return those funds promptly and without contention.
There’s also the issue around echoed influence; markets, and in particular prediction markets, can be easily swayed by bias and media, especially in areas such as shares and politics. This can create a departure from accurate predictions and ineffective market conditions.
Another barrier is the ease of access, as Individuals wanting to participate in financial prediction markets might lack the knowledge and understanding of the derivative instruments involved. This can either prevent them from entering into positions, or doing so without full comprehension of the position taken.
How TotemFi Helps Address these Problems
This is where TotemFi steps in to address these longstanding problems; it’s a decentralised finance (DeFi) platform, so it doesn’t rely on traditional financial intermediaries such as banks, brokerages or exchanges.
Instead, it’s built on blockchain smart contracts which execute automatically based on the terms originally programmed into them, and are verified by independent auditors. This makes it a completely trustless system, so users won’t have to take it on good faith that the system will operate as it should.
TotemFi was built with the community at its core, and as such, users will be encouraged to give as much feedback as possible on what features they want to see on the platform.
When it launches, for example, the platform will be focused on users predicting the future price of BTC at a given date. Further down the line, the community will be able to vote on other markets, asset prices, and events which they want to speculate on.
TotemFi’s decentralisation also promotes diversity of participation, which results in multiple media sources and viewpoints, reducing the likelihood that one individual will influence another individual’s prediction.
In terms of accessibility, TotemFi’s decentralised application (dApp) is being developed with a user-friendly interface, clearly defined concepts, and an accompanying FAQ section.
The platform was built to be as user-friendly as possible; no jargon, a clean interface, and minimal ‘friction to prediction’.
The aim of the project is to contribute to the development of the flourishing Ethereum, DeFi, and wider crypto community.
Our goal at Totem is to create innovative blockchain prediction markets that are driven by community consensus, with all participants being fairly rewarded for their efforts and participation. TotemFi will be run by its members, and by harnessing our collective intelligence we believe we’ll be able to see the future more clearly.