Ethereum co-founder Vitalik Buterin has weighed in on the ongoing debate surrounding prediction markets, arguing that current designs are structurally unattractive for hedging purposes.
Buterin said in a Sunday post on Farcaster that most major prediction markets don't pay interest, which makes them "very unappealing for hedging." He said users would have to sacrifice a guaranteed yield of around 4% annual percentage yield available on stable dollar-denominated assets in order to participate.
"I expect lots of hedging use cases to open up once that gets solved and volumes increase more," he added.
Buterin's comment came as the volume on Polymarket declined last month. The prediction markets platform recorded $1.06 billion in volume in July, down from $1.16 billion in June, according to The Block's data dashboard. However, the number of active traders on Polymarket rose to 286,730 in July from 242,340 in June.
"The average user traded smaller in July even as the platform's total users grew," Brandon Kae and Ivan Wu, researchers at The Block, wrote in a report earlier this month. "Yet unlike the number of active traders, the number of new markets on the platform has consistently increased every month since Polymarket’s inception, reflecting expansion and diversification beyond the platform's early politics-heavy focus."
