A significant portion of the reported trading activity and volume on the prediction market platform Polymarket might be inflated, potentially being twice as high as the actual figures. This discrepancy is attributed to a "data bug" identified by a researcher at Paradigm.
The researcher, known as Storm, stated that nearly every major dashboard has been double-counting Polymarket volume, excluding instances of wash trading. This issue arises because Polymarket's on-chain data includes redundant representations of each trade.
Polymarket’s onchain data is quite complex, and this has led to widespread adoption of flawed accounting methods.
When trades are executed on Polymarket, the system generates multiple "OrderFilled" events. One set of events is for makers, who have existing orders, and another set is for takers, who fulfill those orders. These events, while describing the same trade from different viewpoints, are not indicative of separate transactions. However, numerous prominent dashboards have been aggregating these events, effectively counting the same trading volume twice.
Polymarket has recently been viewed as a standout success in the cryptocurrency space, particularly given the volatility in spot and derivatives markets. The revelation that its key performance metric might be inaccurately reported across multiple platforms could potentially diminish its perceived achievements.
Polymarket's Complex Blockchain Data
The researcher further elaborated that this accounting error inflates both notional volume and cashflow volume, which are commonly used metrics for prediction markets.
Polymarket’s data has been notoriously confusing for crypto data analysts … the data has too many layers of interacting complexity to untangle using just a block explorer.
This complexity stems from the fact that Polymarket trades can range from simple swaps to more intricate "splits" and "merges," where parties exchange cash for opposing positions. The smart contracts emit redundant events for tracking purposes, and standard blockchain explorers do not adequately distinguish these events, according to the researcher.
Cointelegraph reached out to Polymarket for comment but did not receive an immediate response.
Polymarket's Valuation and Reported Volume
This week, the Intercontinental Exchange (ICE) reportedly valued the prediction platform at $9 billion. This valuation was cited alongside a reported $25 billion in trading volume, which is now subject to scrutiny due to the potential data bug.
In September, it was reported that Polymarket was preparing for a U.S. launch with a valuation of $10 billion. In October, Bloomberg reported that the platform was seeking to raise funds at a valuation between $12 billion and $15 billion.
Meanwhile, Dune Analytics had reported that Polymarket achieved a monthly record of $3.7 billion in trading volume in November. However, if Paradigm's research is accurate, this figure could be double the actual amount.
The researcher noted that DefiLlama, Allium, Blockworks, and numerous Dune dashboards were among those double-counting the volume.
Prediction markets are rapidly developing into a crucial sector of finance. As this category matures, the industry should strive for consistent, transparent, and objective reporting standards, the researcher concluded.