Prediction Markets

Basics

On Knew The News, user submit questions, and other users make predictions about what they expect to be the outcome.

Those question are called "markets" and the predictions which the users make are so-called "positions". Using virtual money, users trade predictions: They buy stakes on outcomes, and sell if they change their mind.

Whenever the outcome of a question emerges, trading of predictions is stopped and all open positions are evaluated. Predictions on the correct outcome will be awarded with virtual money, based on the value of the option at the moment the prediction was made.

History

Prediction markets actually have a long and colorful lineage. Betting on elections was common in the U.S. until at least the 1940s, with formal markets existing on Wall Street in the months leading up to the race. Newspapers reported markets conditions to give a sense of the closeness of the contest in this period prior to widespread polling. The markets involved thousands of participants, had millions of dollars in volume in current terms, and had remarkable predictive accuracy.

Further reading: "Prediction markets" on Wikipedia

The Knew The News Way

Origin

The main idea of Knew The News is derived from the former Hubdub prediction market, which was closed at the end of April 2010.

It's basic outlines where:

1. The platform is absolutely free
2. Any player may contribute in creating questions
3. Playing is simple and fast

The development on the foundations of Knew The News started immediatly after Hubdub's closure, and has the goal to become one of the leading, most innovative, reliable and reputable platform, while still adopting just these basic principles and offer an even easier, and also more extensive gameplay.

Gameplay

Playing Knew The News is (and will always be) absolutely free. The only prerequisite is that the user has to create a user account to login to the website.

The user makes predictions on questions with the goal to receive a reward in return. The basic way to predict is to "put money where your mouth is", eg, buying stakes on the options from which the user assumes that they represent the most likely outcome.

But there are various strategies of how the user can play the game most successfully; some of these are assembled on the Hubdub forum at Getsatisfaction.com.

Making Predictions

The main aspect of the game is to make predictions on news events. If you do so successfully, you can easily increase your virtual wealth and climb up the leaderboards.

The following describes how this works:

1. Find an interesting topic

   

   To find topics, you can browse by category, tags or simply page through the activity/publication/suspension sorted question lists.

   Alternativly, just select a question from the Knew The News homepage.

2. Analyze the question

   

   If you are confident that you can predict what will happen on a specific question, open up the question details page. You will find a list of prediction options describing various outcomes on each question, just below the background description text. Chose the option which matches your intent best.

3. Chose your wager

   

   Depending on how confident you are about your prediction, and how much cash you have available, select an amount from the dropdown associated with the option which you think represents the correct outcome of the question.

   Note how the dialog promptly shows the return (to win) in case the question is settled on the option you chose. Keep in mind though, that if the question is settled on any other option, the money you staked is lost.

4. Make your prediction

   

   Press the "Predict!" button

   Congratulations, You just successfully bought a position on the question!

   The list of open positions you hold on the question is automatically updated.

5. Regrets?

   You changed your mind? You ran out of cash? No problem!

   Your prediction will be visible on the "Open Positions" tab on the question, as well as on your personal profile page, from where you can cash-in (sell) your prediction.

   If you chose to cash-in, the money will be returned, decreased by a 10% cash-in fine which applies to prevent users from trying to manipulate the question.

Question Creation

This page should give you some insight in the process of creating questions on Knew The News.

1. Introduction

   The questions on Knew The News are user generated, and any user is welcome to contribute his own questions.

   Technically, creating questions - or "markets" as many like to name them - is a straight forward procedure: Hit the "Create Question" link on top of the page and simply fill in all fields of the dialog. The dialog will detect any errors and will only allow you to submit complete and correct questions.

   To transform an idea into a Knew The News question is the most challenging part.

   But: No one will be banned from the site just because he created a question which isn't easy to settle!

2. Basic Knew The News market question considerations

   1. You have to find a topic which will have a near future development. and you have to determine what kind of development could happen; what would be reasonably imaginable.
   2. You need to set an initial likelihood of each of these possibilities.

3. Step 1: Simple, known events

   Many upcoming events, like matches in sports or awards in entertainment, results in business, elections in politics, are well known upfront. In these cases, the second part is easy as well: There is a limited set of possible outcomes.

   Many questions of this type are already provided by Knew The News, they are generated and eventually settled in an automated way.

4. Step 1: Unknown events

   More challenging is the creation of questions where the event is not that clearly known in advance such as in developing stories. Like to ask for the result of political confrontations. To line up all possible outcomes isn't possible at all in various occasions, and therefor an option like "other" should be included. Additionally, one has to be very cautious to keep the options mutually exclusive, which means that they may not overlap and each of the options must be settleable exclusively if a certain event happens.

   It is very important in such cases that the settlement details contain the exact circumstances which qualify for the settlement of each of the options. Keep in mind whether you phrase the question as being event-based or time based: The first kind of questions will settle on in case the event actually happens, and the suspension of the question is adjusted so that the question stays open as long as possible. The latter kind of question simply settles on the suspension date of the question. Best practice is to explicitly mention an intended event based settlement in the settlement details.

5. Step 2: Initial likelihood

   Third part is, in many cases, the hardest. And to be honest: Nobody can exactly say at what percentage a certain outcome may get real. Therefor, you should simply go by what you think is reasonable, and think about it this way: At what percentage value would I be uncertain to buy or to sell? That would be the obvious best case: The option would not be over- nor undervalued.

6. Getting started

   To get started, you can use bookmakers as an inspiration. One of those which I like much is PaddyPower, from Ireland. Additionally, you could visit an bookmakers aggregation site, like Oddschecker.com to get an overview on a broad range of non-sports betting questions. Each of these could also be a Knew The News question.

   And what is best: The hardest part, determining likelihoods, is already solved by them. The only thing we have to do is to convert their odds (either in decimals or in fractions) into percentages. This can easily be done using a little Excel spreadsheet.

   Whenever you create a question, please be sure to know the (few) question creation rules Knew The News defines for question creation.

Getting Help

Often, details about question creation or predicting are not perfectly clear. In case of doubt, or to get any assistance in playing Knew The News, you are of course welcome to contact Knew The News directly through the Contact page.

You might probably have some questions which are already covered in the Frequently Asked Questions.

And in case you need some advice in how to increase your net worth, and your cash balance, you should consider reading the Wealth guidebook.

In addition, you can freely ask any of the Super Users on the site through private message.