[English translation] Proof of the usefulness of decentralization ~ Why Gnosis is approaching decentralized prediction markets

This is a post by Matt Liston of Gnosis. Gnosis is one of the rapidly rising decentralized applications (Dapps) on Ethereum.

Now, I would like to read the English translation.

Proof of the Usefulness of Decentralization

Gnosis is the world’s first decentralized prediction market. The financial logic operates entirely on Ethereum's public network. There are no centralized intermediaries who hold funds or determine pricing. Market shares are directly owned by users’ wallets and settled directly back to their wallets.

So why are we pursuing this kind of decentralization?

Counterparty Risk

Generally, to participate in prediction markets or similar markets, users send a certain amount of currency to the site operators (Intrade, Betfair, Poloniex). Those funds are then deposited into wallets owned by the operators, and through entry into a database, the corresponding amount is reflected in the user’s account. This procedure carries risk for both users and operators.

Operators have the responsibility to safeguard and securely manage customer funds. If a hacking incident or other accident occurs, the site bears the liability and could be sued. On the other hand, users must trust that no emergencies will arise. Situations such as theft by the site or from the site, legal intervention, and limits on withdrawal amounts by payment processors can occur.

These are issues that must be considered seriously, and it is important to recognize that such problems occur regularly. From a market perspective, this means that users reduce liquidity as they weigh the risk of asset loss.


Gnosis can provide solutions to these emergencies by decentralizing and automating asset holding and share issuance.

Unused funds remain under the user’s control at all times. Users own the accounts and hold the private keys. No one other than the owner can move the funds, and even if Gnosis goes down, the user can still move their funds.

Funds used to purchase shares on the market are stored in an automated smart contract. That contract cannot be attacked by humans, and once the outcome of an event is determined, it is designed to allow withdrawals in a verifiable manner.

Under our model, the site operators (in our model, the Gnosis DApp or applications built on top of it) have no liability, and users are not exposed to counterparty risk. By reducing risk and increasing reliability, greater market liquidity is created.