How crypto prediction markets differ in how they handle betting outcomes

Polymarket and BET are two crypto prediction markets that are attracting a lot of attention. Both use blockchain technology to offer unique features and user experiences. Polymarket has amassed over $750 million in bets on the US elections this year, while newcomer BET has amassed around $22 million since its launch this month.

How do Polymarket and BET work?

Polymarket operates on the Ethereum blockchain and uses Polygon as a layer-2 scaling solution to improve scalability and reduce transaction costs. This setup allows Polymarket to efficiently handle high trading volume without overloading the Ethereum network or incurring high gas fees.

The platform primarily offers binary outcome markets, where users can bet on “yes” or “no” outcomes for various events through a continuous double auction model. Alternatively, markets can be created for multiple outcomes, such as betting on which terms will be used during a political speech. This model ensures dynamic price discovery, with prices representing the probability of an event occurring.

Notably, Polymarket does not require its users to own a native platform token and supports self-custodial wallets, improving user security and control over their funds. The platform also encourages liquidity and participation through various reward mechanisms, including liquidity provider rewards and market-specific incentives.

On the other hand, BET is a Solana-based prediction market platform launched by Drift Protocol. It benefits from Solana's high transaction throughput and low fees, making it an attractive choice for decentralized applications. BET allows users to make event-based predictions by buying YES or NO shares for the outcomes of real-world events. The platform also offers structured betting that allows users to implement complex trading strategies.

Differentiation of asset collateral and betting mechanisms

Polymarket's auction system enables dynamic price discovery by representing the probability of an event occurring. For example, if “yes” shares for an event are trading at $0.72, this represents a 72% probability of that outcome. Users can trade their positions at any time before market resolution, increasing flexibility and liquidity. Polymarket requires users to deposit USDC into their wallets, and the platform does not require a native token, simplifying the user experience.

In contrast, BET supports over 30 cryptocurrencies as collateral, including USDC and SOL, giving users significant flexibility. BET also integrates yield generation through Drift's Borrow/Lend platform, allowing users to earn interest on their collateral while waiting for the outcome of events. This feature, combined with structured betting that allows users to implement complex trading strategies, makes BET stand out in the prediction market landscape.

Polymarket focuses on simplicity and ease of use by using USDC as its primary currency, eliminating the need for a native token. This approach reduces barriers to entry and improves user security through self-custodial wallets. Polymarket encourages liquidity and participation with various reward mechanisms, including liquidity provider rewards and market-specific incentives, promoting a healthy trading environment.

In contrast, BET offers a more complex financial ecosystem with multiple collateral options and yield generation opportunities. The platform's FUEL rewards program further encourages user engagement by distributing tokens based on trading volume, which can be redeemed within the Drift and Solana ecosystem. BET's financial structure and high transaction throughput on Solana provide a fast and efficient trading experience and are attractive to users seeking flexibility and additional financial incentives.

Polymarket and BET address different user needs. Polymarket emphasizes simplicity and decentralized solution, while BET offers flexibility and yield opportunities through its diverse collateral options and integration with the Drift platform.

Solution tools for prediction markets

Polymarket and BET use different resolution mechanisms to determine the outcomes of their prediction markets, reflecting their different approaches to decentralization and governance.

Polymarket uses UMA's Optimistic Oracle, a decentralized and trustless system to determine market outcomes. This mechanism integrates real-world data into smart contracts, which is crucial for determining the outcomes of various bets. When a market is created, a solution request is automatically sent to the Optimistic Oracle.

Applicants in the UMA system submit answers to this query, backed by a surety bond. If the proposed answer is undisputed, it is accepted after an appeal period of typically two hours. In the event of a dispute, the system resets the question and issues a new query to ensure trivial disagreements do not hinder resolution. Ongoing disputes escalate to UMA's Data Verification Mechanism (DVM), where UMA token holders vote on the correct outcome, which is typically resolved within 48 to 72 hours. This process exemplifies Polymarkets' commitment to a community-driven and transparent resolution system.

BET resolves its markets through a structured process managed by a Security Council and an elected multisig under Realms Governance. At the designated resolution time, the Security Council updates the oracle with a binary outcome (0 or 1) representing the result of the event. After this update, an expiration date is set for the market, after which it enters a “reduce only” mode, preventing new positions from being opened or existing ones from being increased.

The market is settled based on the outcome of the oracle and users can then settle their positions at the set settlement price. In the event of a deficit where the market does not have enough funds to cover all positions, the deficit is factored into the settlement price, potentially reducing the payout even if the resolution is set at 1. This structured approach ensures fairness and transparency and has mechanisms in place to deal with potential financial shortfalls.

For example, Polymarket emphasizes decentralization and community involvement through the UMA oracle, while BET focuses on structured governance and Security Council oversight to ensure accurate and fair market outcomes.

User incentives and reward systems

Polymarket encourages user engagement through various reward mechanisms designed to improve liquidity and participation. One of the main incentives is the Liquidity Provider Rewards Program, which encourages users to place dormant limit orders near the market midpoint. This program aims to create a balanced and liquid marketplace by rewarding users weekly for maintaining healthy market conditions.

Polymarket occasionally runs public competitions based on profit and loss or trading volume to further encourage user activity. These incentives, combined with the platform's use of USDC and self-custodial wallets, make Polymarket an attractive option for users seeking a hassle-free and secure trading experience.

BET offers a number of other incentives through its FUEL rewards program. This program rewards users based on their trading volume with FUEL tokens, which can be redeemed for various benefits in the Drift and Solana ecosystem. BET also offers yield generation opportunities, allowing users to earn interest on their collateral while awaiting the outcome of events. This feature, and the platform's support for over 30 cryptocurrencies as collateral, provides users with significant flexibility and potential financial benefits. BET's structured betting feature increases the program's appeal even further by allowing users to implement complex trading strategies, such as taking long positions on prediction markets while shorting Bitcoin.

Summary of Polymarket vs BET

Polymarket uses Polygon to improve scalability and reduce transaction costs. This setup allows the platform to handle high trading volume without overloading the Ethereum network or incurring prohibitive gas fees. Polymarket uses UMA's Optimistic Oracle for market resolution with a commitment to decentralization and community-driven governance. This oracle system ensures fair and transparent market outcomes by integrating real-world data into smart contracts and allowing community voting in the event of a dispute.

BET benefits from Solana's high throughput and low fees, making it a fast and efficient platform for decentralized applications. Its resolution process includes a security council, an elected multisig under Realms governance that updates the oracle with the outcome of the event. This structured approach ensures accurate and fair market resolutions and has mechanisms to deal with potential financial bottlenecks.

Both platforms offer diverse market opportunities, with Polymarket supporting various thematic areas including politics, sports and entertainment. BET initially focuses on political events but plans to expand into the sports and culture space, thus increasing its market reach. These differences highlight the platforms' unique strengths: Polymarket emphasizes simplicity, security and decentralized solution, while BET offers flexibility, yield opportunities and a structured governance model. Users can choose between these platforms based on their preferences for market diversity, financial incentives and technical infrastructure.

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