Concepts and Utility

What is a prediction market?

A prediction market is an open market, allowing for incentives to be used to predict on a specific outcome.

In the case of Plation, we utilise two pools, Over and Under, users enter the pool which they believe will be the outcome for that 24 hour round for inflation. When the round is completed, the losing pool will be split proportionally amongst the winning pool's betters.

How can a prediction market be used?

In economist Friedrich Hayek's 1945 article "The Use of Knowledge in Society", he outlines the issues of knowledge in society, and how no one single entity in a decentralised economy is given all the data for any given economic problem.

We can follow from this concept and apply it to the problem of predicting an economic outcome, entities in an economy will hold disparate and often conflicting ideas about outcomes, a prediction market allows those ideals to be aggregated and can provide insights into the marketwide sentiment on the given outcome.

Why have an on-chain CPI prediction market?

Again leaning on the concepts laid out in Hayek's "The Use of Knowledge in Society", we can look at the current CPI prediction markets and the currently available 'official' CPIs, primarily there is a censorship issue in the 'official' CPIs, they can and frequently are modified, usually having weighting changes for individiual categories to produce a specified and usually political focused outcome, this degrades the decentralised economy model.

Truflation and Chainlink provides on-chain verifiable and censorship-resistant CPI data, and allows Plation to provide an aggregator of sentiment for inflation.

Who should use Plation?

There are many use cases for Plation, but chiefly it can be used as a potential hedge against short term inflation or provide an opportunity for those who believe they have a strong opinion on the future inflation rate to bet on the outcome (put their money where their mouth is)

What can Plation provide beyond predictions?

With enough disparate ideas and knowledge aggregated from those willing to bet on predictions, the percentages of the total pool can be used to derive a market sentiment indicator for inflation. This can be extended to the individual inflation categories as well with predictions provided for those.


"The Use of Knowledge in Society" by Friedrich A. Hayek:

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