Vitalik: Prediction markets are healthier than traditional markets and help in seeking the truth.

PANews reported on December 21 that Vitalik Buterin published an article on the Farcaster platform stating that prediction markets are a remedy for the irrational views expressed on emotionally charged issues. While the worst-case scenario for prediction markets is that they induce harm for profit, this is not the case for small-scale prediction markets targeting large-scale events. Traditional stock markets also suffer from similar drawbacks, where political actors can profit from disasters by shorting stocks.

Vitalik points out that prediction markets have advantages over social media and mainstream media. Social media lacks accountability, while prediction markets, through profit and loss mechanisms, ensure that the system tends to seek the truth over time, and the probabilities they display more accurately reflect the uncertainty of the world than other systems. Because prediction market prices are confined between 0 and 1, they are healthier than ordinary markets and less affected by reflexivity effects, the greater fool theory, or market manipulation.