Pooltogether is a protocol that enables "No Loss" lotteries and Polymarket is a prediction market based in Polygon's PoS chain.
If we combine the best parts of both protocols i.e. ("No Loss" + "Prediction Market / Wisdom of the Crowd") we get "Entropyfi", a lossless prediction market which will ensure a much higher participation that the existing prediction markets like Augur, Polymarket etc. In the former only those participants that are certain of an outcome took part in betting. In the current model, more users are encouraged to participate in the prediction and this provides a lot of useful information to 3rd party viewers as wisdom of the crowd is always quite accurate in most cases. The risk of participating is reduced from (Opportunity cost of capital + Loss of entire capital) to just opportunity cost of capital. Figure 01 below describes the model in detail:
Figure 01: Lossless Prediction Model Example for F1 Drivers Championship Winner 2021
In the above example there are 3 participants:
1. Bet Winner
2. Bet Loser
3. Liquidity Provider
Below are the outcomes to each party after the result of the bet is finalised:
1. Bet Winner: Return of Capital ($1000) + interest on capital ($3000). Winners capital efficiency is improved by 200% as a result of winning.
2. Bet Loser: Return of principle ($1000). No loss of capital. Actual loss is the opportunity cost of using the $1000 of capital during the lock-in period duration of the bet.
3. Liquidity Provider: Liquidity Mining rewards in the form of governance tokens. Stake governance tokens more more APY and voting rights of the protocol.
The above model in the low gas environment of Polygon could help boost the on-chain prediction market adoption.