Polymarket

Potential investor: “just tell me one thing that has actually worked, that is a viable product, that isn’t bitcoin that’s out there right now, today”.

Me: “OK. Polymarket. The largest prediction market in the world“

The styling as a ‘prediction market’ is rather cute. You can open a market on something, price your prediction and hope other people match your offer, all settled via smart contract.  A crypto-bookmaker in many senses, you can only use stablecoin USDC to settle trades and the whole thing runs on the polychain blockchain.

A quick note on ‘smart contracts’. They are not that smart. Say You think Trump, I think Harris. The contract takes our cryptocurrency addresses, holds the money. We agree on an oracle (say the CNN twitter feed). When the oracle declares a winner the contract releases the money to the correct address. It’s probably 10 lines of code

• money in: me

• money in: you

• outcomes: {Donaldo/Kamala}

• oracle;{@cnn on twitter}

Obviously there are nuances, what ifs etc. But in principle the contracts are small and simple.

Quietly, Polymarket has become very large, they have matched $632 million on the US Presidential market which is 10x more than Betfair. Even smaller markets have crazy amounts of money involved. Nearly half a million matched on the release date of GPT5.

Perhaps more interesting is that the quote on the election is now much more relevant than any opinion poll. Who cares what people say to a pollster on the phone. What does the money say? It says close, very close.

The fact that Polymarket actually is more meaningful speaks to the purity of its price. For now it is free from regulation, doesn’t use USD or any fiat currency at all. This story on how it called Biden dropping out long before the mainstream media speaks volumes.

So yes, smart contracts are working out in the wild. With very large amounts of money.

Why am I reading this now?

In 2018, I read an article by Epsilon Theory entitled: Why am I reading this now? Unfortunately, it is behind a paywall but the central idea is to question the timing and underlying motives of why particular narratives are pushed in the media, perhaps because they form part of a larger agenda.

I have found applying it to be rather fun. I see an article in the press, perhaps about some unexpected corner of the world and I wonder. Often months later it becomes clear.

Throughout this year, most recently two weeks ago, we have pointed out a trend that US jobs reports are almost always subsequently revised downward. It never seemed that well reported, to the point that we might assume it didn’t matter. This week though it was, wall to wall. The story, which has been evident since the early part of the year (mostly thanks to Zerohedge), is now a story where it wasn’t before.

850,000 jobs have simply disappeared, or were reported, but never actually existed.

It was in the AFR, the Wall Street Journal and The Financial Times.

The revisions suggest the labour market started moderating much sooner than originally thought. It wasn’t until earlier this month that markets and economists grew concerned with the release of the July jobs report. That set off alarm bells with a weak pace of hiring and a fourth month of rising unemployment – but other metrics like jobless claims and vacancies have suggested a more moderate slowdown.

Three weeks out from the next Fed meeting. No doubt papers are currently being prepared for it.

I can’t imagine what will happen. But, if in late August I am reading “Bidenomics Defeats Inflation” then I will understand exactly why I am reading this now.

The best croissants

In the top 50 hotels of the world sits Eden Roc. Built in 1869 by the founder of Le Figaro newspaper, it was designed to give writers inspiration. It worked too because F Scott Fitzgerald’s Tender is the Night emerged from the dreams at Eden Roc. I have never been but last weekend I met someone who had just returned having had a few days there. “The croissants were the best in the world; just incredible” he mused.

I was pleased to hear this and mumbled something about trying them some day. Actually, I think it is unlikely they are the best in the world though; for reasons we will get to shortly.

Elsewhere in France, somewhere less salubrious, sits Marseille. Birthplace of the magnificent Zinadine Zidane, an industrial city and home to seven of France’s seven poorest districts. There sits la Pâtisserie Des Marseillais.

This particular cafe has a number of issues. Firstly there are not that many tourists in Marseille these days, so it must rely on the repeat custom of locals. More than that though, the price point is actually relevant unlike at the hotel. The population of Marseilles stratifies income levels like no other place in France. Very rich people, very poor people and lots of people not even close to the middle.

Getting a croissant right in that environment is much harder than in a hotel. These croissants came highly recommended on the internet. Here is the Marseilles croissant. It looks golden, it is not too big, obviously it is not cut open so we cannot consider aeration or smell but still, it is appetising.

What I am suggesting is that this croissant is forged in much more difficult circumstances. As the best croissant in Marseille, it is likely very good and better than the hotel croissant. Crucially, the croissants at Eden Roc do not even have to try. I am sure they are excellent, but they need to make no effort to be considered excellent.

What of this insane ramble about croissants then? Well I was prompted by this from Marc Andreesen who was attempting to be amusing.

Zack was telling us all the high brow ways we might go about generating ideas, it might work. Much more likely though if you spend 12 hours per day on Reddit, you will generate far more. Why? Because it’s a bit of a cesspit, people are often incredibly rude (and anonymous). For your idea to survive on Reddit it needs to be good or it will be ridiculed. It is the Marseille of the internet.

So when considering the birth places of ideas or investments I wonder, how hard did it try to get where it was? Was the idea born in a truly robust crucible?

Andreessen was only half joking, there actually is no substitute for 12 hours per day on Reddit. If you are specific, if you can tolerate the bad language and the behaviour of the outer reaches of internet society, then you will learn a great deal about your chosen topic.

Is there a Reddit page for croissants? I hear you ask. Absolutely there is https://www.reddit.com/r/Croissant/ . A vibrant global community of 1,800 croissant lovers sharing bakes and ideas.

Very probably a good place to find the best croissant in the world.

IMF and Power

This week the IMF released a new report about the power consumption of two entirely different industries “crypto and data centres”. It called for new taxes on bitcoin mining and artificial intelligence because of their carbon footprint.

Whatever they think, AI is going to consume a whole lot more energy than any bitcoin mining will and it will likely be even more than the IMF prediction. Lumping them together is disingenuous though. It is done because people perceive bitcoin mining as a “bad thing” and AI as a “good thing” (generally). So the narrative has to become ‘crypto and data centres’.

“One Bitcoin transaction requires roughly the same amount of electricity as the average person in Ghana or Pakistan consumes in three years. ChatGPT queries require 10 times more electricity than a Google search, due to the electricity consumed by AI data centers.”

Both statements are false. This is such total nonsense it is barely credible. If I undertake a bitcoin transaction now, by the time you finish reading this the incremental energy use of the transaction will in fact be zero.

On the IMF website things are rather different.

Where is the discussion about people in Pakistan getting access to more power? It is not that bitcoin uses too much, Pakistan is poor because they use too little. Where is the discussion about how we push AI out across the globe because it gives everyone a level playing field of potential knowledge. It is an absolutely incredible tool that will (at first) bring the poorest nations up most quickly. Nobody in Africa can afford to build the Library of Alexandria, but they can afford Chat GPT which happens to be a lot more useful.

We need more power (which frankly is very exciting because it suggests progress is accelerating). I’m not suggesting we burn a load of coal, I’m just saying that if you want to lift people from poverty, however you do it, you need more power.

Euro-Trash

And finally……. I’m going to do what the ECB does to Bitcoin.

It is, prima facie, true that in 2023 carbon emissions at the ECB went up a lot, 75% in fact. The reason is that travel was still not really viable in the comparator period of 2022, so it just did not happen. The return to relative normality in 2023 meant YoY increases were huge.

It’s in their own report which I extract below. It’s also true that they have done a good job in decarbonising their operations overall. Direct emissions have nearly gone altogether.

If the ECB were honest in their own appraisal of the European economy, or bitcoin v Euro, I would be inclined to salute their substantial reduction from the pre-covid comparator period (2019). It has nearly halved. This is one of the very few targets that the ECB has set itself that it will actually meet.