Polymarket to launch real-world event oracle system to verify bets

UMA Protocol announced its work on a real-world event oracle, to resolve bets on Polymarket. The oracle will be built in partnership with EigenLayer and Polymarket, utilizing the liquidity of the re-staking protocol and the EIGEN token. 

Polymarket is partnering with UMA Protocol and EigenLayer to build a new oracle for marking undeniable proof of real-world events. With that move, Polymarket will solve the issue of bets resolution, where some markets do not close, despite either the ‘yes’ or ‘no’ tokens going to 100%. 

UMA Protocol will track natural events and opinion markets, by analyzing natural language to gauge events. The oracle-building process will be transparent and engage the community. 

While some events are straightforward and resolve to one of the two possible logical positions, UMA  Protocol aims to deal with edge cases, which revolve around natural language and have a degree of subjectivity. To that end, the protocol may train AI agents, testing their ability to yield verifiable data. 

Polymarket value grows in the past week

UMA Protocol already secures Polymarket pairs with different methods, though it wants to expand and include community voting to protect a wider array of markets. In total, UMA Protocol secures $109.55M on Polymarket, with a peak above $455M during the 2024 election season.

UMA Protocol secures up to $1B for different projects, based on its own reporting. DeFiLlama aggregates $281.77M across multiple other oracle users. 

Polymarket mostly relies on sports events for the bulk of its volumes. However, parts of its markets are linked to popular culture and social media, creating demand for a more complex oracle with a decision process utilizing the technology of Shelling Coin to resolve disputes based on coordinated community voting. 

Currently, the UMA token is used to incentivize users to resolve issues. The protocol wants to build other oracles that can use any token as an incentive. UMA tokens support 1,000 betting markets of varying complexity. As the prediction markets scale, UMA Protocol sees a problem with scaling a complex system of proposers, voters, and handling disputes. 

To avoid bribery attacks, UMA Protocol considers utilizing EigenLayer and its EIGEN token as a way to discourage attackers. EigenLayer has built an infrastructure to ensure skin in the game via a mix of staking and slashing in the case of flawed voting or bribery attacks. 

The next generation of oracles will tap the new technology of EigenLayer to build verifiable, accountable AI agents with real on-chain value. 

Polymarket switches to smaller bets

Polymarket starts work on its new oracle as it switches to smaller bets from a higher number of users. The bulk of volumes still come from big sports games and several clear-cut political issues.

New types of bets rely on a natural language resolution and observing more varied data. One recent bet was set to check if Kanye West would launch a token by the end of February. The market gives a 33% chance for this event. Other markets with a complex answer include the launch of a Bitcoin reserve by the end of the first 100 days of Donald Trump’s presidency.

The smaller markets still build up volumes of up to $10M. Those markets rely on the activity of over 70K daily users, with over 337K new accounts created in January.

Overall Polymarket volumes ranged between $75M during the busiest days in January, and down to $31M as a baseline level. In January, Polymarket saw over 347K traders, down from 445K for December. The market is now down to a lower baseline level, with the top bet made for the NBA championship with over $1B in trading volumes.

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