I wanted to share some thoughts on the PayPal integration of crypto and what it means for the space but let’s start off with the 2020 Presidential Election since Election Day was yesterday and the election is still going on.
My colleague Joey Krug was one of the co-founders of Augur, a decentralized prediction market created in 2015 and one of the first ICOs on Ethereum. A prediction market is a valuable source of data as users are submitting predictions with real money on the result of an outcome. Some examples of markets includes sports matches, elections, and prices of stocks. The beauty of a decentralized prediction market is that markets can be created on decentralized infrastructure (i.e. Ethereum), thus run without a centralized intermediary on smart contracts where payouts can be made automatically through code and data goes into the result of the outcomes comes from a diverse set of reporters. A native token can incentivize the creation of markets and accurate reporting of data. Entry into these markets can be done through crypto, enabling a greater set of users.
The presidential election has proven to be like the super bowl for prediction markets in terms of traction as millions of dollars have gone through markets on FTX, Polymarket, and Augur. More importantly though, they seem to be a much more accurate source of data for how the election will go vs early polls which has been a bit inaccurate during recent elections.
Below is a chart from Polymarket:
Below is a chart from FTX:
These prediction markets are proving to be a good way to watch the election, as real-time analysis and data are updating these charts through crowd perception and betting. Crypto is really enabling greater access, more accuracy/transparency, and more economic equality. So far, it’s been a really competitive race and the crowd has recently swung back to Biden for the win. It’ll be interesting to see what happens!
What does this mean for the industry? I believe the Paypal service would benefit the industry as a whole. The first suggestion I give to folks that are trying to get educated about crypto is to just buy a little bit of crypto. Having skin in the game is an important step for motivation to learning more about how it works and its use-cases, eventually using crypto in applications when they are ready. Since folks already use Paypal, the service will reduce the friction of getting fiat into crypto and enable crypto payments to their merchants. This service could be integrated into decentralized applications, making it easier for user onboarding.
What does this mean for Pantera and its investments? Pantera has made quite a few investments in exchanges, wallets, custodians, trading, lending, and payment platforms that really provide solutions to getting fiat into crypto and financial use-cases for crypto globally. In addition, Pantera has made investments into projects that enhance scalability and provide security and services to digital wallets. These portfolio companies could potentially partner or even get acquired by PayPal if PayPal decides to buy vs build. Regardless, because PayPal is enabling crypto to be held by a greater number of users, Pantera’s investments on the application layer of decentralized finance for example will benefit. These includes products such as decentralized marketplaces, prediction markets, gaming, and non-fungible tokens (collectibles). Finding a cost-effective and accurate fiat-to-crypto on-ramp has been one of the hurdles to greater crypto and application adoption.
- Paul V
In just over three weeks, the trading volume on decentralized betting platform Polymarket went from zero to almost $3 million.
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Hi, I’m Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing in blockchain companies and cryptocurrencies. The firm invests in equity, pre-auction ICOs, and cryptocurrencies on the secondary markets. I focus on early-stage investments and share my thoughts on what’s going on in the industry in this weekly newsletter.