While opinions on Bitcoin’s future differ, most agree that the current scalability debate has become a mess. Trolling, misinformation, populism, vote manipulation, vocal minorities, censorship and other distractions have made it hard to find a signal above the noise . And importantly, if protocol development is going to be driven by what seems like popular opinion on message boards, this could potentially ruin the whole Bitcoin project. The essence of this problem, Yale researcher and Truthcoin Chief Scientist Paul Sztorc argues, is that “talk” does not scale. “The real function of a debate is for people to examine each others’ reasoning, and find some area of agreement, or maybe highlight areas where they don’t agree,” Sztorc told Bitcoin Magazine. “But debates do not scale,” he said. “It’s literally O(n^2) scaling: With five people, you need at least 10 conversations in order to know that everyone is on the same page … with 50 people, you need at least 1,225 connections. If someone changes their mind or learns something new, that’s all reset. So it’s no surprise – to me – that the conversation is becoming socially dysfunctional at around this time.” Luckily, Sztorc believes there is a solution for this problem: prediction markets. Prediction Markets The concept of prediction markets is not new, Bitcoin legend Hal Finney advocated them years ago . Basically, prediction markets are markets for so-called “event derivatives,” which represent a possible future event. “Hillary Clinton will be elected president of the United States in 2016” could be such an event, for example. The relevant derivative might then be redeemable for one dollar if Hillary Clinton is indeed elected, but will be worthless if she is not elected. Up until the election, this derivative will be tradeable on the prediction market. As such, it will command […]
