Polymarket Trading Figures May Be Overstated: Insights from Paradigm

Recent analysis reveals that Polymarket, a popular prediction market platform, may be inflating its trading volumes due to a data error. A researcher from Paradigm has identified issues with how the platform's trading activity is recorded, suggesting that the true trading figures might be significantly lower than what has been reported.

Key Takeaways

Paradigm's researcher uncovered that Polymarket’s trading volumes may be inflated due to double-counting.
The issue arises from redundant data emitted during trade events.
Polymarket's current valuation of $9 billion is now under scrutiny due to potential inaccuracies in reported trading volumes.
The prediction market industry is urged to adopt clearer reporting standards as it matures.

Polymarket trading figures are being double-counted: Paradigm

Understanding the Double-Counting Issue

According to a researcher named Storm from Paradigm, it appears that many dashboards displaying Polymarket’s trading data have been miscounting volumes that are not related to wash trading. Storm explained, “It turns out almost every major dashboard has been double-counting Polymarket volume.”

This occurs because the platform’s on-chain data contains multiple representations of each trade. Specifically, when trades happen, Polymarket generates several “OrderFilled” events—one set for makers who have existing orders and another for takers who are executing trades. These events essentially communicate the same trade from different angles rather than indicating different trades. Unfortunately, several major dashboards have been aggregating these events, resulting in the same volume being recorded twice.

In recent months, Polymarket had been recognized as a notable success in the crypto arena while many other spot and derivatives markets faced challenges. However, if the key metrics are indeed inflated due to this data error, it could impact the platform's overall perceived success.

The Intricacies of Polymarket's Blockchain Data

Storm elaborated that this accounting discrepancy affects both metrics commonly utilized for prediction markets—notional volume and cash flow volume. The confusion arises due to the nature of trades on Polymarket, which can either be straightforward swaps or involve more complex “splits” and “merges,” where both parties exchange cash for opposing positions.

The smart contracts utilized by Polymarket release redundant events for tracking purposes, and the lack of clarity in standard blockchain explorers further complicates the understanding of this issue. Cointelegraph reached out to Polymarket for a comment but has yet to receive a response.

Polymarket volumes using different metrics. Source: Paradigm

Current Valuation Situation

The prediction market platform has recently been valued at $9 billion by the Intercontinental Exchange (ICE), which raised concerns about the reported $25 billion in trading volume. These figures may now come into question following Paradigm's findings.

In September, reports suggested that Polymarket was gearing up for a U.S. launch at an estimated $10 billion valuation. By October, Bloomberg noted the platform was aiming to raise funds, targeting a valuation between $12 billion and $15 billion. Meanwhile, Dune Analytics claimed that the platform achieved an all-time high of $3.7 billion in trading volume for November, although that figure might actually be inflated as well.

Storm added that data sources such as DeFiLlama, Allium, Blockworks, and numerous Dune dashboards have contributed to the double-counting issue. As prediction markets become a vital segment of the financial sector, the researcher stressed the importance of developing consistent, transparent, and objective reporting standards as the industry matures.

Magazine: XRP’s ‘now or never’ moment, Kalshi taps Solana: Hodler’s Digest