Ethereum co-founder says solving yield gap could boost adoption and volumes
Ethereum co-founder Vitalik Buterin has criticized the current structure of prediction markets, saying they are “unappealing for hedging” due to the absence of interest payouts.
In a recent post on Farcaster, Buterin explained that most major prediction markets do not pay interest on locked funds, forcing users to give up potential returns from safer options like stablecoin yields. He highlighted that users could earn around 4% annual percentage yield (APY) on stable dollar-based assets, making prediction markets less attractive in comparison.
“I expect lots of hedging use cases to open up once that gets solved and volumes increase more,” Buterin wrote.
Polymarket Volumes Decline Despite Growing User Base
Buterin’s remarks come amid a drop in prediction market activity on Polymarket, the leading platform in the sector. According to recent data, Polymarket’s trading volume fell to $1.06 billion in July, down from $1.16 billion in June.
Interestingly, the number of active traders increased to 286,730 in July, up from 242,340 in June, suggesting more users but smaller trade sizes overall.
Researchers noted that despite the decline in overall volume, the number of new markets on Polymarket has continued to grow every month, showing the platform’s expansion beyond politics-focused bets to more diversified topics.
Why Yield Matters for Prediction Market Growth
Analysts argue that integrating interest-bearing features or yield opportunities could make prediction markets a stronger tool for hedging and speculation. Without these incentives, traders may prefer stable yield products in DeFi over locking funds in non-yielding markets.
As Buterin suggests, resolving the yield gap could open the door to significant growth, driving institutional and retail participation in decentralized prediction markets.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.