Buterin asks whether cryptomorphic forecasting markets reflect the opinion of the population or are distorted by the illiquidity and political bias of their social base.
On the eve of the US presidential election, most conventional polls point to a Joe Biden victory, although this is not reflected in cryptomorphic forecasting markets.
For Ethereum co-founder Vitalik Buterin, the „big difference“ between them presents a kind of puzzle, and he offered three guesses as to why this difference is so.
In what he posed as a pro-prediction or favourable vision market, Buterin suggested that these markets „correctly incorporate the possibility of greater electoral interference, voter coercion, etc. affecting the outcome“. In contrast, statistical models may „simply assume that the voting process is fair“.
To verify this, Buterin appealed to Nate Silver in an attempt to understand how the statistical models account for the impact of both ‚regular‘ electoral irregularities, such as electoral and lawbreaking, and the Trump campaign irregularities for 2020.
Silver is a statistician as well as founder and editor-in-chief of the political news website FiveThirtyEight. In 2016, FiveThirtyEight gave Trump a significantly better chance of winning the election than most researchers and experts, as well as traditional betting markets. To date, Silver has not answered Buterin’s question.
Buterin’s second guess was that the forecast markets are still too illiquid to be really accurate. Buterin also observed the supposed political loyalties of the forecasting market players:
Forecasting markets are difficult to access for statistical / political experts, they are too small for hedge funds to hire these experts and people (especially wealthy people) with more access to PMs are more optimistic about Trump
(This is the explanation of the pro-statistic model)
– vitalik.eth (@VitalikButerin) 3 November 2020
Buterin’s third hypothesis, which he rejected, was that researchers and other technocrats and analysts are „incorrigibly dumb and simply have not learned their lessons about pro-Trump voter movements, as they did in 2016. That, Buterin wrote, „intuitively seems unlikely to me.
Buterin notably spent significant time developing an alternative collective decision-making procedure called quadratic voting, along with his collaborator Glen Weyl, which they claim is fairer than existing systems.
On the eve of the election, FiveThirtyEight is predicting a 10% chance of a Trump victory. His list of „unusual and not so strange possibilities“ largely explains the whims of the US electoral college system and the various ways in which it distorts the weight of the popular vote.