Ethereum co-founder Vitalik Buterin is looking for a elementary restructuring of decentralized prediction markets. He argues that the sector’s present reliance on speculative playing threatens its long-term viability.
This view comes as prediction marketplaces like Polymarket have loved vital success over the previous 12 months.
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Buterin Requires Structural Overhaul of Prediction Markets
On February 14, Buterin contended that whereas platforms like Polymarket have achieved vital quantity and mainstream consideration, they’re at present affected by an “unhealthy market fit.”
“[Prediction markets] seem to be over-converging to an unhealthy product market fit: embracing short-term cryptocurrency price bets, sports betting, and other similar things that have dopamine value but not any kind of long-term fulfillment or societal information value,” Buterin argued.
He warned that the sector is dangerously over-reliant on “naive traders,” outlined as speculators looking for short-term payouts.
This speculative habits contrasts sharply with the markets’ supposed objective: facilitating data discovery and threat administration.
Not too long ago I’ve been beginning to fear in regards to the state of prediction markets, of their present kind. They’ve achieved a sure degree of success: market quantity is excessive sufficient to make significant bets and have a full-time job as a dealer, and so they usually show helpful as a…
— vitalik.eth (@VitalikButerin) February 14, 2026
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Buterin categorized present market contributors into two distinct teams: “smart traders” and “money losers.” Presently, the latter class is dominated by retail gamblers.
He argued that if prediction markets proceed to prioritize income extraction from these customers over societal utility, they threat collapsing throughout bear markets when speculative fervor cools.
“There is nothing fundamentally morally wrong with taking money from people with dumb opinions. But there still is something fundamentally “cursed” about counting on this an excessive amount of. It offers the platform the inducement to hunt out merchants with dumb opinions, and create a public model and group that encourages dumb opinions to get extra individuals to return in,” the Ethereum co-founder contended.
To safe a sustainable future, Buterin proposed that these platforms transition to “hedging”—successfully serving as insurance coverage mechanisms relatively than betting platforms.
On this mannequin, a person wouldn’t wager on an final result to make a revenue, however relatively to offset real-world dangers, equivalent to a enterprise proprietor betting on a coverage change that might negatively affect their provide chain.
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AI-Pushed Hedge System to Change Fiat
The Ethereum co-founder’s suggestions prolonged into radical financial territory, suggesting that prediction markets might finally render fiat-pegged stablecoins out of date.
Buterin proposed creating granular worth indices overlaying main classes of world items and providers.
Below this theoretical framework, customers would make the most of native Giant Language Fashions (LLMs) to research their private spending habits. The AI would then assemble a personalised “basket” of asset shares that mirrors the person’s particular price of dwelling.
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By holding these prediction market shares relatively than U.S. dollar-pegged property equivalent to USDC or USDT, customers might theoretically keep their buying energy towards inflation with out counting on conventional banking infrastructure.
“We do not need fiat currency at all! People can hold stocks, ETH, or whatever else to grow wealth, and personalized prediction market shares when they want stability,” he wrote.
Buterin acknowledged that transitioning from the present “info buying” part to a sophisticated hedging financial system would require new infrastructure.
Nonetheless, he maintained that changing fiat forex with diversified asset baskets stays the expertise’s final evolution.
