On Polymarket, You Can't Pose a Question. On Delphi, Anyone Can

Transcript

Yeah, good question. Um ultimately, I would say the end goal of all of those prediction markets is probably very similar. It's to take the kind of trading value that people currently put through like the financial markets and pose it much more targeted onto these prediction markets themselves. So, I actually individual events and things. Um the way I phrase that is the ultimate end state of prediction markets or in my view actually information markets making by directional is a new UX, a new user experience over the financial markets themselves, which opens up access to the financial markets to many, many, many more people than currently have access.

Um it also allows the financial markets to extend to many different areas that right now they can, but it's very expensive for them to do that. So, to explain what I mean, uh when you for example, if you are if you're running a company and you need to hedge a certain risk that you have in the world, you right now can go and ask a broker to construct you a basket of options to hedge that risk. And that's an expensive process, but you can do that. The average person can't do that. They can't hedge a risk in that way. It doesn't make sense for them to go and pay to have that be created. But, an information market actually gives them the ability to do that. I use the example sometimes of like orange farmers in Los not Los Angeles, but in California. An orange farmer in

California sees that might be a drought coming. Uh if they're a very large company, they can hedge against that drought by buying a set of options which represent the opposite of that drought and therefore they've essentially insured themselves via the financial markets. You're a small scale orange farmer, you're not doing that. You're not going to like JP Morgan and asking for this like basket of options to be constructed. But, if there was an information market over that, you actually could hedge. If it was just an information market that said "Is it going to rain this month in California?" You are able to buy a position in that market which actually hedges your current risk. And that gives you access to the benefits of the financial markets in a way that you couldn't otherwise have. And so, I think information markets particularly with the creation

of markets that prediction markets don't have, allow you to get to the maximum scale you possibly can on becoming a neater UX over financial markets. When I say UX rather than alternative, what I mean is when information markets get to a certain scale, the financial markets are incentivized to come in and operate within the information markets. So, for example, if you are sitting there constructing these baskets of options and you see the liquidity in the market around is it going to rain in California this month get to a certain level, you're actually incentivized to put those options into that market because they make sense as a counterparty trade within the market. So, instead of having to go as the orange farmer and ask for the options, now you can actually just pose the market and the options will

come to you. And that's why it's a better UX over the financial system. So, I think ultimately most prediction markets, most people getting into prediction markets are trying to create that, but they're doing it in the wrong way in our opinion because they're doing prediction markets, which means they have to make every market. If you have information markets, you scale much further because you allow any individual to pose the market that they think is interesting and viable. And the markets are essentially selected by the volume that goes through them. So, if a market doesn't get any volume, it's not a very interesting question for the world. If it gets a large amount of volume, it is an interesting question for the world.

Polymarket, Kalshi, et cetera are currently deciding themselves what is an interesting market for the world, which is why you see huge volume go through these sports markets, huge volume go through the presidential election markets, et cetera. And if I was to predict what will happen, those companies will fight over those flagship markets and they will try to be the person that gets the most volume through the presidential election market, et cetera. Jensen with Delphi, not interested in that. We don't care about these big flagship markets. We care about the information market concept, which is the long tail of markets that do not exist right now on prediction market platforms because they can be created on Delphi. Okay. I just want to make sure I understand everything you just laid out there because it is it is an interesting point. Uh so,

like your contention is like Polymarket, Kalshi, whoever else, um they're sort of I mean, I know at least on I mean, I think on at least on Polymarket, I don't know if Kalshi's the same way, like almost anyone can actually launch a market themselves, but if nothing else, the liquidity gets concentrated in whatever's on the homepage, be it sports, be it some sort of big political event, elections, whatever. And then all the liquidity concentrates on on those markets and uh and then at some point there's an outcome and disputed or or not disputed and it's a binary outcome, people win, people lose.

Um what you're saying is with your market and when you I guess when you're trying to define a prediction market, it's not like necessarily betting on what's going to happen, but more using the your rainfall example, uh you're if I'm someone trying to perhaps put a bunch of options out there to let a farmer hedge, I would query data from whoever has it, like different farmers or meteorologists around the world to get a sense of what the likely rainfall's going to be. I get that information, I pay for that information through your platform, and then I can choose like how I want to structure the options, how I want to price them, et cetera. And then I guess the other by directional side of your

market is that uh the farmer or whoever or even just a a trader would then find them and be able to purchase them, et cetera. Am I capturing that accurately? It's actually much simpler than that. So, in in the current uh system, like take Polymarket for example, users cannot create markets. Only Polymarket can create markets. >> Okay. And so, users can suggest a market and Polymarket will decide whether or not they think they should make that market on that platform, but users can't create it, which means no one can ask a question. Um this is why prediction markets are very different from information markets. They are not by directional. You cannot pose a question to them. You could only go in and answer questions. So, in the Jensen uh or in the Delphi information markets, uh that farmer can pose their question. And so,

they can put they can create the market that says, "Will it rain in California this month?" By doing that, they're essentially putting up a in many ways like a bounty for the rest of the world because if there's somebody sat at home somewhere who sees that market and they say, "Actually, I know. I can go to all the meteorological sites. I can get the information together. I can be 99% certain about whether it's going to rain and this market only has 80% certainty. I there's an edge for me there. I can go and trade that information." And that isn't unintended. That's the entire intention of information markets because that farmer might not have the skills and knowledge to do that. They might not want to do that. They're the opportunity cost of their time is higher than going out and doing the orange farming. And

so, what they do is they put up the market, they put initial liquidity into it, and they're therefore paying somebody in the world to do that information collation work, come and trade in the market. The bit where it involves machine learning is saying it's not just humans who are going to do that. Actually, in our view, machines are far better at doing that than humans are. And so, gradually, these information markets start with human participation, but very, very quickly it will predominantly be machine participation because the machines will get access to as much data as possible, they'll scrape it faster than humans can, they'll come to an intelligent decision faster, and they'll trade it in the markets instantly. And so, you go from this world where the farmer puts up the market, some someone at home like reads all the meteorological sites,

maybe the next day they go in like trade a position because they think they've got a good answer. In the true information market future, the farmer will put up the market and within milliseconds, machine learning models will have scraped all of the information they need to have certainty and they'll have put it into that market. And it will instantly resolve. And so, it goes from days, hours, minutes, seconds of humans getting this data to milliseconds. And eventually, it becomes high frequency trading, but it's trading of information, not trading of pure finances anymore. That's the true scale there. It can't happen in prediction markets because they're centralized.

They they create the questions. Got you. How do you um prevent this from being misused? I mean, someone putting out a query saying, "Hey, where is this politician's child going to be?" Um where where are they going to college? Or or what what is the itinerary of I don't know, some some dignitary. Uh like how do you if this is to be decentralized, how do you make sure that doesn't happen? Yeah, that's a really good question. Um ultimately, the regulation of things like that in our view is done at the application level. So, if you create an application which allows people to trade the location of politicians' children, for example, we as society agree that that is not a good thing that should exist. And so, we regulate that and say,

"You should not create an application that does that." And we have all of our social governance tools that exist in the world right now to do that. So, um we would use existing laws to say that shouldn't exist. The same things exist for media that we don't think should be allowed to be distributed, for example. Um in those worlds, if somebody made a site that just distributes that illegal material, we have laws right now that stop that from happening. If you look at Delphi and the information markets underneath, they are raw technology itself. It's like saying that um you don't regulate, for example, encryption to stop certain downstream applications from being created, you just go directly after the downstream applications and you say, "Encryption's highly valuable for banking, et cetera. We don't want to

undermine it itself because it's too useful for the world, but when encryption is used for bad purposes, we will go after the applications that use it." And the same thing applies to Delphi information markets. And so, right now with Delphi, there is one user interface to Delphi, which is the one that we built for people to use. Any number of user can exist though. Uh Delphi realistically is a set of contracts that exist on chain, which allow these markets to exist in a purely technical sense. And then there's a front end that allows you to trade those markets. When we run the front end as a company, we will censor what we need to, we will go in, and we we already have abuse filters, those kick in in immediately, they de-list markets from the front end that shouldn't be there, et cetera. All

of that should exist. We strongly believe what shouldn't exist is censorship of the technology itself. Um an easy way of kind of comparing Delphi uh to like Polymarket Kalshi in this respect is Delphi looks like the kind of Uniswap alternative, where Polymarket Kalshi are like the Coinbase, which might kind of resonate with your users. Like Coinbase decides what goes on the platform, they are uh regulated to say what gets traded on their platform because they are the ones making the determination. If they list something that's illegal, it's on them because they've listed it. In the Uniswap example, anyone can create these pools, anyone can go in and put an asset on there because it's fundamental technology, and we agree that that should exist. The same thing exists for Delphi information markets. Okay. So,

anyone can on chain create these markets, but when it comes to front ends which give access to the world for those markets, those front ends should be regulated by standard social governance mechanisms. If somebody created a front end which only listed assassination markets, that should be shut down, that should not exist uh because that's what the social governance of the world says. If we decided something different, then we should do it a different way. We're not trying to kind of do anything against what like the our standard social governance systems say, we just think they should do it through the standard way they do, which is at the application level. If you've been loving Bits N' Bips, [music] don't forget that the show is transitioning to its own feeds on X, YouTube, and your favorite podcast player. If you're not already subscribed to Bits N' Bips on its own

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