Pythia: validate and tokenize your reputation as a crypto expert.
We’re thrilled to introduce Pythia, an expert validation platform for the crypto industry. Pythia’s mission is to establish a clear standard for expertise for crypto and thus help quality crypto content creators gain the attention they deserve and assist the industry in onboarding millions of people in the coming years.
Why should I care?
The problem Pythia is tackling is trivial to formulate: the crypto industry lacks a standard for expertise, which makes it hard to distinguish good from bad content. The lack of an expertise standard in turn has a number of major negative implications for the wider industry:
- Adverse selection among influencers: quality crypto content creators are drowned out by celebrity influencers and shills with larger marketing budgets and catchier slogans.
- Poor onboarding experience for new investors: new crypto investors do not know who to trust, often trust the wrong people, and, as a result, get burned.
- Extreme market cyclicality: celeb influencers and shills have a short-term outlook and only post content during bull markets, exacerbating the naturally occurring market cycles.
If crypto is to offer a robust alternative to TradFi and Web2 more broadly, it needs address solve this blind spot. As an industry, we must ensure that the best people in the space get the most attention and drive the industry in a positive direction.
Social trading and vanilla prediction markets: why existing solutions fail to address the problem?
The industry shortcoming outlined above has been plaguing crypto since inception. And several Web3-native projects have emerged over the years to address it.
Broadly, we can put the existing solutions into two categories: prediction markets and social trading platforms. However, both ultimately fall short of tackling the issue.
Social trading
Social trading platforms enable crypto content creators to share their strategies with the community and monetize them. To this extent, they grant ordinary retail investors an opportunity to easily identify the experts by looking at strategy performance. Yet the said platforms are a flawed instrument for the following reasons:
- Unsound performance indicators: social trading platforms measure competence in money earned, thus excluding content creators who are not traders from the expert category.
- Topic limitations: social trading platforms only assess competence in the context of how well one can predict prices. However, expertise is so much more than the ability to predict prices correctly.
Vanilla prediction markets.
An alternative option for crypto content creators seeking to validate their reputation and investors wanting to find real experts is what we call vanilla prediction markets.
On-chain prediction markets have been popularized by Vitalik Buterin and Martin Koppelman as a potent tool for sourcing crowd wisdom for a variety of topics. Augur, Polymarket, and Gnosis are perhaps the most well-known examples of Web3 prediction markets.
For all their benefits, standard prediction markets have so far failed to demonstrate their usefulness and establish traction. To a significant degree, that had to do with attendant regulatory issues. Augur, for example, eventually had to wind down operations due to having assassination markets on its platform.
Poor UX, namely thin liquidity and the resulting sub-optimal execution, has likewise played its part.
Most importantly, the standard prediction market platform has contributed little in the direction of developing a standard for crypto expertise hampered by major limitations, including:
- Unsound performance indicators: prediction market platforms similarly measure performance in monetary terms; this method inherently benefits people with more money who are not necessarily people who know best about a particular crypto topic.
- Isolation from the wider ecosystem: existing prediction market platforms are completely isolated from social media, especially Twitter — the chief communication medium for the crypto community. Hence, whatever rewards users gain from participation in them is ultimately meaningless and not seen by the wider community.
- Uncapped downside: prediction markets force people to put money on the line. However, in practice, the lion’ share of crypto content creators, aside from the few traders and outright gamblers, are reasonably risk averse, meaning constantly putting money on the line — which is what prediction markets require them to do — is not something there would be keen to do.
Why is Pythia the solution that the space needs?
Pythia offers users most of the benefits of prediction markets and social trading while getting rid of the unsavoury parts that preclude a large majority of content creators from participating. Pythia’s stand-out features are:
- Crypto-focus
- Free predictions
- Meaningful and fair incentivisation
- Detailed analytics on the best predictors
Let’s now dive into each of these points.
Crypto-focus.
Pythia is primarily concerned with validating crypto expertise. While other markets chase the unattainable goal of sourcing community intelligence on different topics, Pythia focuses just on identifying the best predictors in the crypto space.
These best predictors don’t have to be traders. Indeed, Pythia would allow users to predict all kinds of events, including things like product releases and smart contract vulnerabilities.
Notice also that since any conceivable statement that is an expression of an opinion can be phrased as a prediction, there is no practical constraint on what Pythia users can predict. This is a boon for non-trader crypto content creators!
The markets themselves (i.e., topics concerning which Pythia’s users will be making predictions) can be proposed by anyone permissionlessly. We do, however, seek to avoid spam questions; hence the ultimate listing decision will be in our Discord. In the future, we will delegate the listing power to our community of validated crypto experts (users with a certain amount of Reputation Token).
Free predictions.
Pythia users do not wage money when making predictions. The only cost incurred is a monthly subscription fee of $7. The subscription enables users to participate in Pythia prediction markets unhindered. In the long run, we plan to make the subscription cheaper aiming at the near zero cost basis for content creators.
Now, it is all good and well to make predictions free, but how, you may be wondering, does Pythia prevent people from copying each other’s predictions?
In traditional prediction market platforms, market outcomes become more expensive, as their implied probability tends to one. This rather neat feature imposes additional costs (thus reducing the expected payoff) on people replicating crowd sentiment thus disincentivizing copying.
Since Pythia has abandoned the classic waging model, it instead relies on cryptographically encrypting user predictions. No one, not even us will know what the user has predicted. User predictions are revealed only following market resolution.
To resolve markets, Pythia leverages a dual oracle model, using Chainlink oracles for price feeds and Kleros optimistic oracles/courts for everything else. Thus, the value of the user’s predictions is protected throughout the prediction process until it’s safe to reveal them.
Meaningful performance indicators and incentives.
Here lies the most striking feature of Pythia. A properly aligned incentives program is indispensable in attracting and retaining customers. In our case, incentives also ought to be meaningful representations of expertise.
Pythia’s reward model is underpinned by the so-called “Reputation Tokens” (from now on referred to as Reputation Tokens or RTs). These are non-transferrable “soul-bound” tokens that tokenize the user’s on-chain track record of predictions.
For each correct prediction that the user has made, they receive RTs that accumulate to their NFT account on Pythia. RT is the ultimate measure of expertise. It encodes the user’s entire on-chain track record.
A key aspect of Pythia’s RTs is that users can display them on social media, initially via a link to their Pythia account. This nice property allows them to be used in a similar fashion to the Blue Checkmark — as a way for content creators to differentiate themselves from the crowd of celebrities and shills and grow their audience. This is precisely from where Reputation Token’s value derives.
Notably, other people don’t have to merely trust Reputation Tokens, as they can always verify their validity on-chain.
As a performance indicator, Reputation Token does not privilege the wealthy and levels the playing field for all content creators seeking validation.
Reputation Tokens are the main incentive for Pythia users, in the short-run at least, because:
- RTs themselves provide amazing value: they are the ultimate immutable quality benchmark for crypto content creators on social media. Having reputation tokens will mean more attention and bigger audiences, which in and of themselves amazing incentives
- Pythia, in contrast to traditional prediction markets, does not force users to wage money, meaning in the worst case scenario unsuccessful content creators’ loss is capped at $7 a month. In subsequent iterations of the the product, we expect this value be close to zero, as we continuously remove participation barriers for content creators.
In the future, content creators will also benefit from other income flows described in the upcoming section.
Detailed analytics on the best performers.
Pythia’s analytics are an additional yet crucial platform usecase. Pythia will provide detailed analytics about the best predictors filtered from raw on-chain prediction data.
There will be two beneficiaries from these analytics:
- Investors (both retail and institutional) would be able to identify the best experts in their crypto areas of interest, track their performance or even personally contact them for help.
- (Successful) content creators would be eligible for a share of the revenue stream brought by investors seeking analytics about them.
A win-win scenario for both sides!
Pythia’s vision and roadmap.
Pythia’s vision is to create a unified standard for crypto expertise and become a platform that attract the best crypto experts in each and every area of crypto, be that cryptography, trading, or mechanism design.
Thus Pythia aims to elevate the quality of content and discussion on CT and other media by helping the best content creators and most knowledgeable individuals gain the attention they deserve.
In doing so, Pythia will prepare the right conditions for onboarding millions of new users and ensuring that crypto realizes its farthest-reaching ambitious.
We are currently developing our beta version and plan to release it in the latter half of 2023. If you would like to learn more about Pythia, make sure to follow us on Twitter and Medium. We welcome all feedback, especially from crypto content creators!
We have a whitepaper to address the more technical details of our application. Feel free to check it out. We’ll be releasing more articles about Pythia in the coming weeks, so watch out!
