The trading activity and volume reported for the prediction market platform Polymarket might be significantly inflated due to a “data bug,” as noted by a researcher from Paradigm.
“It turns out that nearly every significant dashboard has been double-counting Polymarket volume unrelated to wash trading,” stated Storm, a researcher at the venture capital firm.
Storm clarified that this issue arises because “Polymarket’s onchain data contains redundant representations of each trade.”
“Polymarket’s onchain data is quite intricate, leading to the widespread use of flawed accounting practices.”
When trades happen on Polymarket, the system generates multiple “OrderFilled” events: one for makers with existing orders and another for takers executing the trade.
These events reflect the same trade from different viewpoints, not as distinct trades. However, several major dashboards have merged these events, resulting in counting the same volume twice.
Recently, Polymarket has been perceived as a notable success in the crypto space amid turmoil in spot and derivatives markets. This revelation that its primary metric could be flawed across several dashboards might diminish some of its perceived achievements.
Polymarket’s intricate blockchain data
The researcher further explained that the accounting error “inflates both types of volume metrics typically utilized for prediction markets: notional volume and cashflow volume.”
“Polymarket’s data has been notoriously perplexing for crypto data analysts … the complexity of the data has too many layers to be untangled using only a block explorer.”
Related: Polymarket plans to employ an in-house market maker to trade against users: Report
This complexity emerges from the fact that Polymarket trades can either be straightforward swaps or involve “splits” and “merges” where both parties exchange cash for opposing positions.
The smart contracts produce redundant events for tracking, and typical blockchain explorers do not clarify this distinction, according to the researcher.
Cointelegraph reached out to Polymarket for a comment but did not receive a prompt reply.
Polymarket is valued at $9 billion
The Intercontinental Exchange (ICE) estimated the value of the prediction platform at $9 billion this week, according to reports, citing $25 billion in trading volume, now potentially questionable.
In September, news emerged that Polymarket was gearing up for a US launch with a $10 billion valuation. In October, Bloomberg reported on its intention to raise funds at a valuation ranging from $12 billion to $15 billion.
Meanwhile, Dune Analytics indicated that the platform achieved a record monthly trading volume of $3.7 billion in November, although this figure may be twice the actual amount if Paradigm’s findings hold true.
“DefiLlama, Allium, Blockworks, and various Dune dashboards were double-counting,” the researcher noted.
Prediction markets are swiftly evolving into a crucial financial sector, and “as the category matures, the industry should adopt consistent, transparent, and objective reporting standards,” the researcher concluded.
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