Polkadot-powered prediction market protocol Zeitgeist has announced the launch of its latest innovation: a decentralized court system.
Designed to adjudicate disputes arising from incorrect reports by the market’s oracle, the decentralized court leverages community consensus to ensure the integrity and accuracy of all outcomes.
Zeitgeist, whose active markets include those related to Polkadot referenda as well as which film will win Best Motion Picture at the Oscars, believes the court will preserve the reliability of the entire ecosystem.
Decentralized Justice
Prediction market protocols like Zeitgeist rely on oracles to deliver accurate event results, such as the outcome of a football game or the price of bitcoin at a given point in time. In the case of the latter, an oracle would need to faithfully report the market value of bitcoin, otherwise the entire system crumbles.
Problems emerge when oracles produce invalid data, which can occur if an oracle is hacked or the data itself is contested. The reliability of data supplied by an oracle is of the utmost importance.
Zeitgeist’s decentralized court system compels jurors and delegators (who delegate their voting rights to jurors) to participate in dispute resolution. Based on the idea that people independently gravitate towards the most likely truth in lieu of direct communication (known as the Shelling point), the system incentivizes community members to cast a secret vote on a disputed oracle report. Thereafter, the outcome with the most votes is deemed to be correct on the basis that an unbiased consensus has been reached.
Participation in the system occurs on a stake-weighted basis with incorrect submissions penalized and users who demonstrate a commitment to the truth receiving token rewards. Thus, all parties are encouraged to come to a fair resolution any time data generated by oracles is called into question.
All court courses in which one is participating can be viewed, at a glance, in the Zeitgeist application and users can take part in the judicial process via the Zeitgeist App.
The Huge Potential of Prediction Markets
The introduction of a decentralized court system to effectively police oracle data is a novel idea, and one that promises to bolster the already strong value proposition of prediction markets, which have been generating lots of hype over the last 12 months.
Back in October, The New York Times published a story entitled The Wager That Betting Can Change the World, which took a closer look at modern prediction markets and their prospects of “settling on the facts in an unbiased way.” A month later, The Financial Times printed a story asking why US regulators were so afraid of prediction markets that enabled users to place wagers on the outcomes of American elections.
Political events, including elections, tend to be the topic of many blockchain-powered prediction markets, not least because they determine legislation that affects the crypto industry itself. Some claim prediction markets can forecast the outcome of elections with more accuracy than public polls, since participants have to put their money where their mouth is, so to speak.
As well as a decentralized court system, Zeitgeist recently launched its own Dynamic Logarithmic Market Scoring Rule (DLMSR)-based Automated Market Maker (AMM) to enhance prediction market creation and liquidity provision.
