Prediction markets allow you to speculate on various events such as election results or the outcome of sporting events. With blockchain and crypto, these markets are evolving to become more transparent, secure and open to all. It is in this line that the dYdX protocol has introduced its own prediction markets. Find out how these markets work on dYdX and what the platform provides in terms of additional features.
This article is presented to you in commercial collaboration with dYdX (learn more)
What are dYdX prediction markets?
Founded in 2017, dYdX has quickly established itself as one of the most innovative decentralized trading platforms on the market. It stands out by offering a robust infrastructure allowing users to trade cryptocurrencies while maintaining control of their funds.
In October 2024, dYdX introduced a new feature: prediction markets. These markets allow users to speculate on various future events, whether political, financial, or related to global phenomena.
Speculating on the US Elections with dYdX’s Decentralized Predictive Market
In the case of dYdX, these markets operate in a decentralized manner, allowing users to buy and sell perpetual contracts (PERP)which offer a high level of flexibility. Indeed, unlike traditional prediction markets, where bets are often limited to simple answers like “Yes” or “No”, dYdX prediction markets allow for much more nuanced strategies.
For example, the 1st market of its kind available on dYdX allows users to speculate on the outcome of the 2024 US presidential election with the TRUMPWIN-USD perpetual market. Although this is currently the only predictive market available on dYdX, the platform plans to add new markets in the near future, touching on various areas.
What really sets dYdX apart from other market prediction platforms is the breadth of trading tools it offers.. Users can use advanced orders, such as limit orders, stop-loss, and other complex order types that allow them to manage their risks more effectively. Additionally, dYdX allows its users to access positions with leverage, up to 20x.
Another key element of dYdX is its commitment to decentralized governance of its protocol. All additions or modifications to the platform are decided by a voting process open to DYDX token holders. It was precisely a vote by dYdX governance that allowed the introduction of the TRUMPWIN-USD perpetual market.
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To understand how prediction markets work on dYdX, let’s analyze in detail the first market created on the platform: TRUMPWIN-USDa perpetual market that allows speculation on Donald Trump's chances of winning the next United States presidential election.
In the case of TRUMPWIN-USD, users can speculate on the outcome of the elections by taking “long” positions (betting on a victory for Donald Trump) or “short” positions (betting on a defeat for Donald Trump).
Then, as soon as the results are officially confirmed, the market is closed and traders' positions are liquidated depending on the outcome of the election. Here are the 2 possible scenarios for this specific market :
- $1 Settlement Price: If Donald Trump wins the election, the final market price will be set at $1;
- $0 Settlement Price: If Donald Trump loses the election, the final price will be $0.
For the settlement of the TRUMPWIN-USD market, dYdX relies on Polymarket to power its oracles. The latter are responsible for retrieving electoral data from widely accepted and trustworthy sources, such as official results published by American authorities. Once this data is transmitted to the blockchain, a predictive market settlement process is executed on dYdX.
Speculating on the US Elections with dYdX’s Decentralized Predictive Market
The particularities of prediction markets on dYdX
Trading with leverage
One of the distinctive features of dYdX is the ability to trade with leverage. On the TRUMPWIN-USD market, users can apply leverage of up to 20x, allowing them to multiply their exposure to the event.
For example, if a trader believes that Donald Trump has a high chance of winning the election, he can take a long position with leverage. If his bet turns out to be correct, his winnings will be amplified depending on the leverage used. However, the lever works in both directions. If Donald Trump loses the election, this trader's losses will also be multiplied.
Beware of leverage
Leverage amplifies both potential gains and possible losses. Its use requires careful risk management, particularly in prediction markets, which can be subject to large fluctuations due to the volatility of the underlying events. It is essential to carefully assess these risks before using leverage
Advanced orders and risk management
Furthermore, dYdX doesn't just offer single bets; it offers advanced risk management tools. Users have access to different types of orders, such as limit orders, which allow you to define a predefined entry or exit price, or stop-loss, which automatically close a position to limit losses.
These features are particularly important in prediction markets such as TRUMPWIN-USD, where fluctuations can be rapid and unpredictable. By using these tools, traders can, to some extent, protect their capital in the face of uncertainty.
Decentralized governance and future markets
Finally, the launch of the TRUMPWIN-USD market on dYdX was not decided arbitrarily. On dYdX, each new feature or new market is the result of a decentralized governance process. In the case of TRUMPWIN-USD, the proposal was put to the vote of DYDX token holders via proposal #165which was approved by the majority.
Speculating on the US Elections with dYdX’s Decentralized Predictive Market
This article is published as part of a commercial collaboration. Cryptoast has carried out prior research on the products or services presented on this page but cannot be held responsible, directly or indirectly, for any damage or loss caused following the use of a good or service highlighted in this article. Investments related to crypto-assets are risky by nature, readers should do their own research before taking any action and only invest within the limits of their financial capabilities. This article does not constitute investment advice.
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Publishing Director of Cryptoast, I discovered Bitcoin and blockchain technology in 2017. Since then, I have accumulated a vast knowledge of Web3 and I strive to share high-quality content to democratize this sector to the general public. Thanks to a dedicated and passionate team, Cryptoast has become an essential reference, providing in-depth analyzes and relevant information for all enthusiasts and curious people in the world of cryptocurrencies and Web3.
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