- D8X is set to unlock leverage for Polymarket bettors.
- The planned tool has been tipped to provide a much-needed boost to the platform.
- Despite the touted benefits, some within the community fear that the new tool may be a recipe for disaster.
2024 has undoubtedly been the breakout year of the Polygon-based prediction market Polymarket. Amid the U.S. election cycle, the platform’s popularity has surpassed crypto and broken into the mainstream.
As Polymarket interest grows, D8X, a decentralized exchange on Polygon zkEVM, OKX’s X Layer, and Arbitrum, is looking to capitalize by offering bettors a way to leverage their positions. Is this the feature that crypto’s killer app has been missing, or will it create a recipe for disaster?
D8X Eyes Polymarket Perps
Polymarket thrillseekers are about to get an adrenaline boost. On Wednesday, July 24, Polygon disclosed that D8X was working to bring perpetual futures for Polymarket contracts by August 2024.
Sponsored
The thinking is that with perpetual contracts on D8X, Polymarket bettors could more than double down on their bets or hedge their positions. At the same time, D8X argues that a futures market would help bolster the liquidity of prediction markets.
According to the team, leverage is what the now-viral crypto sensation is missing. This is a view that 1confirmation founder Nick Tomaino shared in December 2023, tipping leverage among things like points and a token to lure in more crypto-native users to Polymarket. But not all believe it has been well thought out.
A Recipe for Disaster?
Some crypto community members have been quick to point out that the nature of prediction markets poses a significant challenge to the implementation of futures. Among them was Defi Llama developer “0xngmi.” Responding to the D8X announcement he posted:
"theyre doing leverage for assets that can go to 0 instantly (catching literally no bid on the way) based on some news and stay there forever? + most of these markets are illiquid af."
Expressing the same sentiment, another X user, “unicorn”, added, “How the fuck is leverage ever supposed to work?”
At the same time, Valio founder Karlis stressed the risks of adding leverage to illiquid markets. “study gap risk,” he cautioned.
These views come because traders in typical perpetual futures markets can usually manage their trades with a stop loss. However, this can be difficult with prediction markets as shares can instantly run to $1 or $0, depending on whether the predictions are correct or wrong.
At the same time, prediction markets on obscure or niche events are often illiquid as they may not attract as much attention as a market on the outcome of the U.S. election. Adding leverage to these types of markets can often lead to price volatility that could collapse the market.
Responding to these concerns, D8X co-founder Caspar Sauter asserted that adaptations would be made to account for the peculiarity of prediction markets.
"Going to look different from how leverage is done for perps on "normal" assets, but there will be leverage," he stressed.
On the Flipside
- The leverage feature would not be native to the Polymarket platform.
- It is difficult to tell how the feature will work till it goes live.
Why This Matters
Well executed, a perpetual futures market for Polymarket contracts could allow traders to execute sophisticated trading strategies and better manage their risks.
Read this for more on Polymarket:
What Is Polymarket? Crypto’s Latest Killer App Explained
See how Polygon Labs is looking to revolutionize ZK yet again:
Polygon (MATIC) Eyes Revolutionary zkVM Feat With New AggLayer Contributor
