Polymarket Exhibits Stronger User Retention Than Most DeFi Platforms, Wallets, and Exchanges

Attracting new users to crypto platforms is not the primary challenge; the real difficulty lies in keeping them active. Data from Polymarket reveals that user retention rates surpass those of numerous decentralized finance (DeFi) platforms, wallets, and exchanges, illustrating a widespread issue in the industry.

Key Takeaways

Retention of users after their initial month is notably challenging across crypto platforms.
Polymarket outperformed over 85% of the tested crypto projects in user retention.
The sustained usage of crypto platforms is rare, potentially indicating shallow growth.
Prediction markets incentivize repeated user engagement through event-based trading.
Major crypto players are exploring prediction market integrations to enhance user retention.

Polymarket shows stronger retention than most DeFi, wallets and exchanges

The Challenge of User Retention in Crypto

Attracting new users may not be the central issue for cryptocurrency platforms, but maintaining their activity beyond the first month certainly is. Recent data from prediction markets is bringing attention to this retention dilemma. Polymarket, in collaboration with Dune and Keyrock, analyzed monthly groups of new active users and assessed how many returned to trade in subsequent months.

According to their findings, which included a sample of 275 crypto projects across various networks, Polymarket demonstrated an average retention rate that surpassed over 85% of protocols analyzed. This data underscores the challenge of achieving sustained user engagement, a situation exacerbated in markets where user participation is crucial for liquidity.

Polymarket retention rate versus crypto entities. Source: Token Terminal

The Attraction of Prediction Markets for Crypto Platforms

Prediction markets present a unique structure compared to conventional crypto applications. Their design capitalizes on real-world events, such as elections, sports competitions, and macroeconomic indicators, providing users with consistent reasons to return.

This event-driven nature encourages more frequent participation when compared to speculative trading, thus lowering the need for incentives to maintain trading activity. This characteristic may help explain the increasing interest from leading crypto platforms in incorporating prediction markets, especially those struggling to engage users consistently beyond periods of high volatility.

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Crypto Entities Entering the Prediction Market Arena

Several notable crypto companies have recently signaled their ventures into the prediction market space. Coinbase, Gemini, Phantom, and Bitnomial Clearinghouse are just a few examples of entities making strides in this sector.

On Friday, reports emerged that Coinbase plans to introduce tokenized equities and prediction markets, following tech researcher Jane Manchun Wong's leak about the exchange's prediction markets website.

In a similar move, Phantom announced a partnership with prediction market Kalshi to incorporate event-based trading into its wallet interface, allowing users to trade tokenized Kalshi positions directly within the Phantom app.

Additionally, Bitnomial gained approval from the U.S. Commodity Futures Trading Commission (CFTC), permitting it to establish prediction markets and provide clearing services to other platforms.

Lastly, on Tuesday, crypto exchange Gemini launched its own prediction market that is accessible to users in all 50 states. Their goal is to create an all-encompassing app that combines crypto trading and prediction market participation.

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