Written by: cookies
Compiled by: Tia, Techub News
In this article, I’ve covered what Prediction Market Agents (PMAs) are all about, including how they work and why I think they’ll grow into a massive market.
• What is PMA
• PMA mechanism
• DeFi derivatives on PMA
• Why and how PMA wins
• Existing PMA projects
What is PMA?
PMA = Automated Agent that helps place bets on prediction markets.
PMA bets are roughly based on the following two points:
- User preferences • Market type, such as culture, economics, politics, sports, etc. • Betting size
- Market Analysis • Brokers are responsible for finding Alpha • For example, Steph Curry gets injured = bet on the Warriors (Curry’s team) to lose
PMA Mechanism
I thought about it and found that PMA can be constructed in many ways.
• Single-market PMA vs. multi-market PMA
• Long PMA and long-short PMA
For the sake of simplicity, the rest of this article will be written in the following format:
• Single Market: Basketball
• Long and Short
Let's build a PMA-B (Basketball Prediction Market Agent) • PMA-B will focus on basketball-related markets • A treasury will be launched for users to deposit funds. The treasury deposit will be capped based on the liquidity of the market PMA-B participates in • PMA-B will use the treasury deposit to trade based on its algorithm and source information • 2% management fee and 20% performance fee (based on profitability)
PMA-B Token • Similar concept to creator token • Each PMA has its own token
PMA-B Token Utility • Stake to gain priority deposit access: the required stake amount can be increased based on PMA’s profitability • Management fees and performance fees will accrue back to tokens (in the form of buybacks/yields)
DeFi derivatives on PMA
Some interesting derivatives
- Lending Market : If the market in which the PMA participates has a longer maturity period, the position may be used as collateral in the lending market. To better understand this concept, please refer to Gondor
- Alpha-Sourcing Agent : Another agent layer that invests based on which vault has the highest profit
Why and How PMA Wins
Prediction markets are going mainstream:
• Polymarket secures $2 billion investment from ICE at $9 billion valuation
• Kalshi receives investment from Sequoia and a16z at a valuation of $5 billion
• Kalshi's trading volume exceeded $1 billion in the first week of October
With the new injection of liquidity, it may attract builders to build ToC applications on top of the prediction market, and may also mean participation incentives.
PMA has the potential to gain support from consumers and institutions:
- Consumers • Gen Z thinks differently about finances: earning quick cash (e.g. livestreaming), not saving much (heavily relying on BNPL) • Prediction markets describe themselves as “making money while engaging in activities you love!” For example, betting on Taylor Swift-related markets
- Institutional • Diversified income streams unaffected by macroeconomic conditions • For example, Stephen Curry’s performance on the court will not be affected by Powell’s comments
How can PMA win? I believe the key lies in the following:
- Model Strengths• Is PMA really good at generating alpha?• Does it actually make money and provide returns?
- Interface • Smooth user experience • Integration with common social media platforms such as Instagram, Snapchat, Meta (Facebook), Xiaohongshu
- Go Viral • Will my friends see I’m making money with PMA? • Consider shareable P&L cards
Why choose PMA x Cryptocurrency?
• Stablecoins: low cost, global access, and the ability to make micro-bets
• Transparency: Agents’ betting records cannot be tampered with
Existing PMA projects
in conclusion
The current PMA scene is quite limited, with most betting on cryptocurrencies or sports. I expect markets like esports and even niche markets like sperm racing and robot combat to expand.
