Chainfeeds Summary:
How should new entrants compete?
Article source:
https://mp.weixin.qq.com/s/MtxCagLBY2c4iRhcFQqwlA
Article Author:
Blockchain Knight
Opinion:
Blockchain Knight: In the competitive prediction market, product quality itself is the most enduring core barrier. Founding teams can build differentiated advantages across multiple dimensions, including front-end user experience, API stability, completeness of development documentation, market structure design, and fee mechanisms. Currently, most established platforms have significant shortcomings, including unreasonable trading tier settings, opaque fee rules, slow and unstable API interfaces, and overly simplistic order types. These issues are tolerable for retail traders, but for high-frequency traders and quantitative trading teams, they directly determine the platform's usability. Especially in the API-based algorithmic trading field, stable, low-latency, and clearly documented system interfaces are scarce assets. A superior product experience not only significantly reduces user learning costs but also increases the certainty of strategy execution, enabling traders to maintain high stickiness even when facing competitors with stronger distribution channels. In the long run, product strength often has a greater compounding effect than subsidies and marketing, and is the most fundamental element in building an exchange's competitive moat. In terms of asset and market selection, current prediction market trading volume is highly concentrated in sports betting and crypto-native events, providing a structural breakthrough for new platforms. By launching exclusive markets unavailable to other platforms and supplementing this with a vertical market strategy, a significant amplification of differentiated advantages can be achieved. Simultaneously, capital efficiency determines the effectiveness of user-collateralized assets, directly impacting trading activity. Key levers include interest-bearing collateral mechanisms, allowing idle margin to generate higher returns beyond government bond yields, and more flexible margin systems, such as portfolio margin, limited leverage, and offsetting hedging positions. Platforms can even internalize gap risk by subsidizing lending pools or engaging in proprietary market making, thereby improving overall capital utilization. Oracles and market settlement constitute the central hub of systemic risk; settlement delays or errors are amplified exponentially by high leverage mechanisms. In addition to improving stability, innovative oracle mechanisms such as human-machine hybrid systems, zero-knowledge proof settlement schemes, and AI-driven oracles are expected to unlock more complex, higher-frequency, and larger-scale prediction markets, opening up new growth opportunities for the platform. The core of an exchange's survival lies in liquidity. Its supply paths primarily include paying professional market makers, incentivizing ordinary users to provide liquidity with tokens, and adopting an aggregated market-making pool model similar to Hyperliquid. Some platforms may also choose to fully internalize liquidity, establishing internal trading teams to undertake market-making functions in exchange for a balance between depth and stability. Regulatory compliance constitutes another invisible moat. Kalshi, leveraging its US compliance qualifications, has achieved embedded distribution with platforms like Robinhood and Coinbase, acquiring retail traffic that Polymarket struggles to reach, demonstrating the significant leverage effect of its license. Strategically, platforms need to choose between horizontal and vertical strategies: the former focuses on building the underlying trading infrastructure, opening up the ecosystem, and encouraging third parties to build front-ends and scenarios; the latter focuses on self-controlled front-ends and user experience, creating an integrated product loop. Polymarket's restrained cooperation strategy and Kalshi's open distribution path are direct reflections of these two approaches in reality.
Content source 
