Vitalik Buterin advocates for transforming prediction markets into a risk hedging tool., 2026/02/16 11:39:44

The developer of the second-largest cryptocurrency, Ethereum, Vitalik Buterin, expressed that prediction markets require a reboot, as they currently lack value for the crypto sector.

He emphasized that prediction markets have already demonstrated their viability: trading volumes remain substantial, and the platforms have effectively become sources of information for participants. This segment has managed to establish itself within the crypto industry and has shown consistent user interest.

However, in terms of their mechanics, these platforms increasingly resemble gambling services. They retain their audience through quick emotional responses and a “dopamine” engagement model; nevertheless, their long-term societal value remains questionable, Buterin noted.

According to him, developers continue to replicate the same product model because it reliably generates demand—especially during bear markets when speculative activity shifts towards short-term forecasts. While this is commercially justified, it strategically leads to a gradual degradation of the ecosystem.

“I have been thinking about how we can assist prediction markets in breaking out of this rut. I believe we should actively promote them in a completely different direction: hedging in a very broad sense,” Buterin stated.

He clarified that participants on such platforms can be roughly divided into two groups: “smart traders,” who monetize information, and other users, who essentially serve as sources of their profit. Within the latter category, three types can be identified—naive newcomers, information sellers, and those who use the platforms for risk insurance.

The influx of inexperienced users is what provides prediction markets with scale and liquidity, Buterin pointed out. However, this structure encourages the production of superficial content and leads to the ecosystem gradually devolving into a corporate environment with low-quality mass products.

Relying solely on data traders remains more of a theoretical model than a practical reality. There is a need to shift the focus from speculative trading to risk insurance in the crypto market. Hedging through such mechanisms represents a more sustainable and “healthier” concept for the industry’s development, Buterin concluded.

Previously, Vitalik Buterin stated that Ethereum could serve as a foundation for payment operations that artificial intelligence would autonomously carry out.