UNIT I

Introduction: Introduction, basic ideas behind block chain, how it is changing the landscape of
digitalization, introduction to cryptographic concepts required, Block chain or distributed trust,
Currency, Cryptocurrency, How a Cryptocurrency works, Financial services, Bitcoin prediction
markets.

Basics of Blockchain
“A blockchain is a continuously growing list of records, called blocks, which are linked and
secured using cryptography.” The concept is introduced by Satoshi Nakamoto 2009
Block:-
Blocks are the basic containers of information in a block chain. They contain transaction
data.Once added to the block chain, a block cannot be changed.

Block

Block chain:-
 Block chain is simply a data structure where each block is linked to another block in a time-
stamped chronological order

 It is a distributed digital ledger of an immutable public record of digital transactions.

 Every new record is validated across the distributed network before it is stored in ablock.

 All information once stored on the ledger is verifiable and auditable but not editable .

 Each block is identified by its cryptographic signature.

 The first block of the block chain is known as Genesis block

Figure 1.1.All blocks are cryptographically link together

Why Is It Called Block chain?
A block is a record of new transactions. At the point when a block is completed, it’s added to the
chain. Bit coin holders have a system key as the private password to the location on the chain, this is
where their ownership is recorded. Crypto-currency advocates like distributed storage without a
middle man. You needn’t bother with a bank to confirm the exchange of cash or take a cut of the
exchange.

How Block chain Works

How does a transaction get into the block chain

Before a transaction is added to the block chain it must be authenticated and authorized. There are
several key steps a transaction must go through before it is added to the block chain. Today, we’re
going to focus on authentication using cryptographic keys, authorization via proof of work, the
role of mining, and the more recent adoption of proof of stake protocols in later block chain
networks.
Benefits of Blockchains

Benefits of Blockchains Over Traditional Finance

 Trustless: The block chain is immutable and automates trusted transactions between
counterparties who do not need to know each other. Transactions are only executed when
programmed conditions are met by both parties.
 Unstoppable: Once the conditions programmed into a block chain protocol are met, an initiated
transaction cannot be undone, changed, or stopped. It’s going to execute and nothing – no bank,
government, or third party – can stop it.
 Immutable: Records on a block chain cannot be changed or tampered.
 Decentralized: No single entity maintains the network. Unlike centralized banks, decisions on the
block chain are made via consensus. Decentralization is essential because it ensures people can
easily access and build on the platform.
  Lower Cost: In the traditional finance system, you pay third parties like banks to process
transactions. The block chain eliminates these intermediaries and reduces fees, with some systems
returning fees to miners and stokers.
 Peer-to-Peer: Crypto currencies like Bit coin, let you send money directly to anyone, anywhere in
the world, without an intermediary like a bank charging transaction or handling fees.
 Transparent: Public block chains are open-source software, so anyone can access them to view
transactions and their source code. They can even use the code to build new applications and
suggest improvements to the code. Suggestions are accepted or rejected viaconsensus.
 Universal Banking: Anyone can access the block chain to store money; it’s a great way to protect
against theft that can happen due to holding cash in physical locations.

Elements of blockchain
A complete blockchain incorporates all five elements:
 Distribution. Blockchain participants, connected on a distributed network, operate nodes
(computers) that run a program to enforce the business rules of the blockchain. Nodes also keep a
full copy of the ledger, which updates independently when new transactions occur.
 Encryption. Blockchain uses technologies such as public and private keys to record data securely
and semi-anonymously. During the process of creating a Bitcoin wallet, for example, the
blockchain generates an address for the participant that is visible to all network participants but
provides pseudonymity.
 Immutability. Completed transactions are cryptographically signed, time-stamped and
sequentially added to the ledger. Records can’t be changed unless all participants agree to do so.
Such an agreement is known as a fork.
 Tokenization. Value is exchanged in the form of tokens, which can represent a wide variety of
asset types, including monetary assets, units of data or user identities. Token use can be
programmed via smart contracts. Tokenization, or the creation of tokens, is the way a blockchain
represents and enables trade via digital business assets.
 Decentralization. No single entity controls a majority of the nodes or dictates the rules. A
consensus mechanism verifies and approves transactions, eliminating the need for a central
intermediary to govern the network. Decentralization — and its inverse, centralization —
comprises three core elements: technology, economics and decision making. Each can be adjusted
to vary the manner in which governance is applied to the ecosystem.
 Ledger :- A ledger is a channel's chain and current state data which is maintained by each peer on
the channel.
 Smart Contract: - Software running on a ledger , to encode assets and the transactions
instructions (business logic) for modifying the assets.
 Peer Networks: - A broader term overarching the entire transactional flow, which serves to
generate an agreement on the order and to confirm the correctness of the set of transactions
constituting a block.

How it is changing the landscape of digitalization

Blockchain digital transformation idea is simple enough to digest. It allows distributed nodes
to connect with each other without the need for a centralized authority. Digital ledger is what makes
it possible where security, immutability, and transparency are the top three benefits.
Blockchain technology is revolutionizing the landscape of digitalization in several significant
ways. Here's how it is changing the digitalization landscape:
Decentralization and Trust:
Blockchain introduces the concept of decentralization, where data is distributed across a
network of computers rather than being stored in a central authority. This decentralized nature
eliminates the need for intermediaries, such as banks or third-party service providers, for verifying
and recording transactions. By using consensus mechanisms and cryptographic algorithms,
blockchain creates a trustless environment, ensuring transparency, immutability, and security of
data.

Secure and Immutable Transactions:

Blockchain technology provides a secure and tamper-resistant framework for conducting digital
transactions. Each transaction is recorded in a block and linked to previous blocks in a chronological
chain, creating an immutable ledger. This feature ensures transparency and integrity, making it
extremely difficult to alter or manipulate data retroactively. Consequently, blockchain technology
has the potential to eliminate fraud, reduce errors, and increase the trustworthiness of digital
transactions.

Smart Contracts and Automation:

Blockchain platforms often support smart contracts, which are self-executing agreements with
predefined rules and conditions. These contracts are automatically enforced by the blockchain
network, eliminating the need for intermediaries or manual interventions. Smart contracts enable
automation of complex processes, such as supply chain management, financial transactions, and
asset transfers, leading to increased efficiency, cost savings, and reduced reliance on intermediaries.

Improved Data Security and Privacy:

Blockchain employs cryptographic techniques to ensure data security and privacy. Data
stored on the blockchain is encrypted, and access to information is controlled through public-private
key pairs. This approach enhances data protection and reduces the risk of unauthorized access or
data breaches. Additionally, blockchain allows users to have greater control over their personal data,
as they can choose to disclose only the necessary information, maintaining their privacy rights.
Supply Chain Transparency:

Blockchain technology is transforming supply chain management by providing end-to-end

transparency and traceability. Through the use of blockchain, stakeholders can track and verify the
movement of goods, verify product authenticity, and monitor the conditions under which products
are transported. This level of transparency helps in reducing fraud, ensuring ethical sourcing, and
improving overall supply chain efficiency.

Tokenization and Digital Assets:

Blockchain enables the tokenization of real-world assets, such as real estate, art, or
commodities, by representing them as digital assets on the blockchain. These digital assets can be
divided into smaller units, allowing for fractional ownership, increased liquidity, and easier
transferability. Tokenization opens up new investment opportunities, creates new business models,
and enhances the accessibility of traditionally illiquid assets.

Cross-Border Payments and Financial Inclusion:

Blockchain technology has the potential to transform cross-border payments and improve
financial inclusion. By eliminating the need for intermediaries and reducing transaction costs,
blockchain-based systems can facilitate faster and cheaper cross-border transactions. This can
benefit individuals and businesses, particularly in underserved regions, by providing them with
access to financial services and enabling participation in the global economy.

Cryptography in Blockchain
Cryptography is a way of securing data against unauthorized access. In the blockchain,
cryptography is used to secure transactions between two nodes in the blockchain network.
There are two main concepts in blockchain – cryptography and hashing. Cryptography encrypts
messages in the P2P network while hashing helps secure block information and link blocks in the
blockchain.
Cryptography primarily focuses on ensuring the safety of participants, transactions, and security
against double-spending. It helps in securing various transactions in the blockchain network. It
ensures that transactions can only be obtained, read, and processed by the individuals for whom the
transaction data is intended.
Role of Cryptography in Blockchain
Blockchain is developed with several different cryptography concepts. The development of

cryptography technology supports the limitations of further blockchain development. In the

blockchain, the main use of cryptography is to protect user privacy and transaction information and
 ensure data consistency. It plays a key role in maintaining the security of the public network, so it is

suitable for maintaining the integrity and security of the blockchain.

What Is Cryptography in Blockchain

Cryptography is a technique or protocol that secures information from any third party during

communication. The word is composed of two Greek terms, the term Kryptos meaning “hidden,”

and Graphein, meaning “to write”.

Some Terminology Related to Cryptography:

 Encryption: Converting plaintext to a random sequence of bits.

 Key: A certain amount of information needed to obtain the information of the cryptographic

algorithm.

 Decryption: The inverse process of encryption, converting a random sequence of bits into plain text.

 Cipher: A mathematical function, i.e., a cryptographic algorithm, that converts plaintext into

ciphertext (a random sequence of bits).

Features of Cryptography
 The intended recipient and no one else can only access the information on a blockchain.

 Information cannot be changed while being stored or sent between a sender and the intended

recipient without the addition of new information being noticed.

 The information creator/sender cannot later retract his desire to send information.

 The sender’s and receiver’s identities are verified. Additionally, the information’s origin and

destination are verified.

Applications of Cryptography
Here are some of the many applications of cryptography in block chain:
 1. Password Encryption: Cryptography is most commonly used in computer security, especially for

creating and storing passwords. A user’s password is hashed and compared to the previously

saved hash when they logged in. With this method, the passwords are encrypted, preventing

unauthorized users from reading them even if they gain access to the password database.

2. Crypto currencies: Digital currencies like Bitcoin use encryption to secure transactions and

thwart fraud. Intricate algorithms and cryptographic keys protect these transactions, making it

nearly impossible to tamper with or counterfeit transactions.

3. Internet Security: Web browsing security is given using cryptography. It protects users from

listening in on conversations and man-in-the-middle attacks. The Secure Sockets Layer (SSL) and

Transport Layer Security (TLS) protocols use public key cryptography to encrypt data exchanged

between the web server and the client, creating a secure communication channel.

4. Online Authentication: Another major use of cryptography is for authentication. This could be

for logging into a computer, accessing a bank account, or using a secure network. Authentication

protocols use cryptographic techniques to verify the user’s identity and that they have the

necessary access privileges to the resource. The storage and verification of electronic signatures

also work based on cryptography.

5.End-to-End Encrypted Conversations: Cryptography also helps in securing two-way

communications such as video chats, instant messages, and email. Even with simple encryption,

the message is guaranteed only to be viewed by the intended recipients. But, End-to-end

encryption offers consumers a high level of protection and privacy and is frequently employed in

messaging apps like WhatsApp and Signal.

Types of Cryptography
Basic cryptography technologies can include two types of encryptions:

 Symmetric-key Cryptography

 Asymmetric-key Cryptography
 Symmetric Key Encryption

This type of cryptography focuses on a similar key for encryption and decryption. Most

importantly, the symmetric key encryption method is also applicable for secure website connections

or data encryption. Also referred to as secret key cryptography. The only problem is that the sender

and receiver exchange keys securely.

The Data Encryption System (DES) is a popular symmetric key cryptographic system. A

cryptographic algorithm uses an encryption key to encrypt data, which must be made available. The

person entrusted with the secret key can decrypt the data. Examples: AES, DES, etc.

Features of Symmetric-key Cryptography:

 It is also described as secret key cryptography.

 Both parties have the same key to keep the secret.

 It is suitable for bulk encryption.

 It requires less processing power and faster transfer.

Source:
 Asymmetric Key Encryption

This encryption method uses different keys for encryption and decryption. This encryption

method uses public key and private key methods. This public key method helps completely unknown

parties share information like email ID. The private key helps to decrypt the messages and also helps

in verifying the digital signature. The mathematical relationship between the keys is that the private

key cannot be derived from the public key, but the public key can be derived from the private key.

Example: ECC, DSS, etc.

Features of Asymmetric-key Cryptography:

 It is described as public key cryptography.

 It is often used for symmetric cryptography secret key sharing.

 It requires a long processing time to execute.

 It plays a significant role in the authenticity of the web server.

Blockchain Or Distributed Tust

Blockchain technology is often referred to as a "distributed trust" system because it enables
trust to be established and maintained in a decentralized manner across a network of participants.
Here's an explanation of the concept of blockchain as a distributed trust system:

In traditional systems, trust is typically established through the presence of a central authority or
intermediary that validates and verifies transactions. However, blockchain technology eliminates the
need for a central authority by utilizing cryptographic techniques and a distributed network of
participants.

A blockchain is a decentralized ledger that records transactions in a series of blocks, which are
linked together in a chronological chain. Each participant in the network maintains a copy of the
entire blockchain, ensuring that no single entity has control over the system.

Distributed trust in a blockchain is achieved through the following mechanisms:

Consensus:

Blockchain networks utilize consensus algorithms to establish agreement among participants

on the validity and order of transactions. Through consensus mechanisms like proof-of-work (PoW)
or proof-of-stake (PoS), participants in the network collectively validate and verify transactions,
preventing any single party from tampering with or manipulating the data.

Immutability:

Once a block is added to the blockchain, it becomes extremely difficult to alter or remove the
information it contains. Each block in the chain is linked to the previous block through cryptographic
hashes, forming a chain of immutable records. This immutability ensures that transaction history is
transparent and tamper-resistant, building trust in the integrity of the data stored on the blockchain.

Cryptography:

Cryptographic techniques, such as encryption, digital signatures, and hash functions, are
fundamental to the security and trustworthiness of blockchain systems. Encryption ensures the
confidentiality of data, while digital signatures provide authentication and non-repudiation. Hash
functions verify the integrity of data by generating unique identifiers (hashes) for each block or
transaction, enabling participants to detect any changes to the data.

Network Consistency:

Every participant in the blockchain network has a copy of the entire ledger, making it difficult
for any malicious actor to manipulate the data without the consensus of the majority. This distributed
nature of the network ensures that the data remains consistent across all participants, establishing trust in
the system.

Blockchain's distributed trust model has implications across various industries and applications, such as
finance, supply chain management, healthcare, and voting systems. It provides opportunities for
increased transparency, efficiency, and security, fundamentally transforming the way trust is established
and transactions are conducted in the digital era.
Cryptocurrency
Cryptocurrency, also known as crypto, is a type of online payment method that can be
exchanged online to purchase goods and services. It is much similar to real-world currency, but it
does not have any physical appearance. It is encrypted, transparent, and decentralized digital money,
which is based on blockchain technology. There are approximately 5000 different types of
cryptocurrencies, among which Bitcoin and Ethereum are the popular ones.

Cryptocurrency has various features, such as:

o It has a limit to how many units can exist, such that bitcoin has 21 million limits.
o It performs easy verification of transfer of funds with the help of hashing algorithms that
verify each transaction.
o It is independent of any central authority or a bank.
o The new units can only be added after certain conditions are met.

Crypto in Cryptocurrency
Crypto is used for cryptography, which is a technique of encryption and decryption for
secure communication between two parties. The cryptography technology usually uses a
computational algorithm such as SHA256, a public key, and a private key.

The public key is shared with everyone, and a private key is like the digital signature of the user.
A general bitcoin transaction occurs in the below steps:

 The first step is the user has the transaction details, which means to whom bitcoin needs to be
shared and how much.
 The transaction is passed through the hashing algorithm to validate the transaction. In
bitcoin, the SHA256 hashing algorithm is used.
 The output of hashing algorithm goes to the signature algorithm with the user's private key.
This uniquely identifies the user.
  The output of the above step is distributed over the network for the people to verify the
transaction. The transaction is verified using the sender's public key, and those who verify it
are known as minors.
 After the verification, the bitcoin is added into the blockchain, which cannot be reversed.

Advantages of Cryptocurrency
Last several years, cryptocurrencies are being more popular among the public because of their
several advantages over paper money. Some of these advantages are given below:

1. Fraud-Proof
One of the important advantages of cryptocurrency is that it is fraud-proof. When a cryptocurrency is
created, all the user's confirmed transactions are saved in the public ledger. The identity of coin
owners is kept encrypted. Hence there is no chance for a fraudulent transaction.

2. User ownership
Since the cryptocurrency is decentralized, the user owns it. No, any government or bank has any
control over it. There is also not any electronic cash system.

3. Easy transaction
In the traditional economy system, for doing any type of business or deal, there is always a
lot of transaction fees applicable that we need to pay for each transaction. Apart from this, there are
also various paper works, brokerage fees, commissions, etc., users need to pay. But when we use
crypto currency, all these things are removed; as for any transaction, there is no middle man. Every
transaction is performed between one to one within a secured network. This one-to-one transaction
makes it easier and more transparent than the traditional one.

4. Confidential Transactions
When we perform any transaction in a traditional transaction system with either cash or
credit, each transaction is recorded in our bank history. It means each transaction data remains with
banks.

5. Instant Settlement
The easy use of cryptocurrency is making it more popular among people. For starting any
transaction, we just need a smart device such as a Mobile phone, internet connection, and instantly
we will become our own bank to make online payments and transactions.

6. Identity theft
In cryptocurrency, it is ensured by the ledger that all transactions performed between digital
wallets can calculate the accurate balance. This public ledger is also known as a "transaction
blockchain." Blockchain technology makes secure digital transactions through encryption and
"smart contracts" that make the entity virtually unhackable and immune to fraud.
How does Cryptocurrency Works?
Cryptocurrencies are decentralized systems that work on blockchain technology.
A cryptocurrency is a medium of exchange that is digital, encrypted, and decentralized. Unlike other
currencies such as U.S. Dollar or the Euro, there is no central authority involves that manages and
maintains the value of a cryptocurrency. Instead, managing and maintaining tasks are broadly
distributed among cryptocurrency's users via the internet.
The working phenomenon of cryptocurrency transaction is given below:
 One user or sender who wants to send funds to another user starts the transaction.
 In this, each transaction is represented as a block. And this block is forwarded over the
blockchain network.
 This block is validated by the users of the chain, and once it is verified as a valid transaction,
a block is added to the chain.
Each transaction is encrypted and contains a unique set of keys, and whoever has those set of keys,
he can only own the amount of cryptocurrency.

Types of Cryptocurrency
After the creation of bitcoin, there are various types of cryptocurrencies available in the
market. Below is the list of popular types of cryptocurrencies:
1. Bitcoin
Bitcoin is the most recognizable type of cryptocurrency system. As per the studies, there are
approximately more than 18.5 million bitcoin tokens available for circulation, with a capped limit of 21
million.
2. Bitcoin Cash
Bitcoin cash was introduced in the year 2017, and it is one of the most popular types of cryptocurrencies
available in the market.
3. Litecoin
Litecoin is gaining popularity day by day, and it works the same as bitcoin. It was developed by
Charlie Lee(former employee of Google) in the year 2011.
4. Ethereum
Etherum is heard in the same context as Bitcoin, but itself, it is not a cryptocurrency. Instead, it is
an online programmable platform that uses blockchain technology. It helps the developer to develop and
run DAapps within the system. Ethereum can be understood as an app store.

5. Ripple
Ripple is also a type of cryptocurrency, but it does not use Blockchain technology. It is not for
the particular user; rather, it mainly works for large companies or corporations to move a huge amount
of money across the world.
6. Stellar
Stellar is an open network, which is mainly used to store and transfer money. It is designed in a
way that all the financial systems across the world can work together over the same network. It allows to
create, send and trade all possible digital forms of money, whether it is dollar, pesos, bitcoin, or
anything. It does not charge users to use its network.

7. NEO
NEO was formally called Antshares and created in China. Its main goal is towards smart
contracts, which enable the users to create and execute agreements without involving the intermediary.
8. Cardano
Cardano or ADA is a type of cryptocurrency, which is used for sending or receiving digital
funds. It was created by Charles Hoskinson. It is the only coin that is available with the "Scientific
philosophy and research-driven approach." It means it is reviewed by scientists and programmers.

9. IOTA
IOTA stands for Internet of Things Application. It was launched in the year 2016. The main
difference between IOTA and other blockchain technologies is that IOTA does not work with blocks
and chains; rather, it works with smart devices on the internet of things.
Financial Services in Block Chain
The financial services industry is estimated to reach USD 2.6 Trillion by 2022. The global
financial system deals with trillions of dollars a day and serves billions of individuals. With such great
heights come many challenges that the finance industry has been facing for a long time.
Blockchain technology can be a possible solution to the challenges of the global financial system.
Blockchain in Finance refers to the implementation of blockchain technology in the finance
industry. The development of blockchain solutions for financial services can lead to several benefits
for the industry.
Blockchain in financial services has also led to the introduction of decentralized finance,
more commonly known as DeFi. DeFi is a form of finance powered by blockchain technology that
aims at removing intermediaries from financial services by using smart contracts.
Opportunities of Blockchain in Finance
Improving Transparency:
With blockchain, users are executing activities on a public ledger. As a result, the industry is
becoming more transparent. Such transparency can help expose inefficiencies and lead to problem-solving
as the risk for financial institutions reduces.
Simplifying Operations:
Blockchain allows financial institutions to track several parties in real-time and manage letters of
credit and bank guarantees. It simplifies operations for the merchants and the customers.
Quicker Settlement:
Cash, cashier’s cheques, and wire transfers are safe payment methods. However, one cannot trace
cash, cashier’s cheques can be forged, and wire transfers are time-consuming. Blockchain-based payments
remove these concerns for greater confidence of customers. The technology enables the real-time transfer
of funds between financial institutions, eliminating friction and fastening settlement.
Smart Contracts Enabling Automation:
Blockchain isn’t revolutionising banking with money transfers only. The technology is great for
tracking transactions with the opportunity for automation. With smart contracts, financial service providers
can track buyer payments and seller deliverables. It can also address any problems that arise during the
transaction. With such automated systems, the chance of human error reduces.
Improving Customer Experience:
Most banks have implemented blockchain technology for international payments, which helps save
time and money. Customers can also utilise blockchain money transfers to make fund transfers online
 using mobile devices. They no longer need to visit a money transfer facility, stand in line, and pay
transaction fees.
Challenges of Blockchain in Finance
While the implementation of blockchain technology comes with a plethora of benefits and
opportunities, it carries some challenges too.
Relatively New:
Blockchain is still in its development phase. It has many hurdles to overcome with ongoing
amendments. The regulators haven’t been able to catch up yet. Therefore, the government may need to frame
guidelines and policies that monitor the use of blockchain and the companies using it.
Differing Methodology:
Blockchain does not permit data alterations. While this is a benefit, it can pose concerns for certain
financial institutions that need to modify stored data. After the implementation of blockchain, companies
will have to restructure their methodology to ensure that there is no need for data alteration.
Lack of Interoperability:
Blockchains aren’t able to exchange and make use of information from other blockchains. As a
result, there is no communication between them. Blockchain networks must focus on the development of
interoperability solutions.
Affordability:
Shifting to blockchain technology is an expensive and time-consuming affair. It is because there is a
shortage of supply when it comes to skilled blockchain developers. Thus, smaller financial companies may
not want to invest along with the overhauling systems already in place.
Poor Adoption:
To facilitate smooth and quick transactions, blockchains must have widespread adoption. It is more
so in the financial sector since companies operate with each other and require a framework for all to use for
handling transactions. For instance, if a bank wants to initiate fund transfer through blockchain, every bank
involved in the process needs to have deployed blockchain technology.

Use cases of blockchain in finance

Some use cases of blockchain in financial services are:
1. Cross Border Payments
2. Lending Platforms
3. Credit Score
4. Invoice Management and Billing Solution
5. Fund Investment
6. Government Expenses
7. Political Funds
8. Financial Record Keeping
9. Stock Exchange
10. Initial Public Offering (IPO)

Prediction markets
Prediction markets in crypto are built on blockchain technology, allowing for decentralized
and trustless operations. This means that a central authority does not control the platform, and the
event results are automatically recorded on the blockchain, providing a transparent and immutable
record.

Future developments and Trends in the Prediction Market Space

Future developments and trends could change the prediction market in the coming years. Here are
some of them:
1. Increased adoption of artificial intelligence: Adoption of Artificial Intelligence: AI-enabled
predictive algorithms will become more commonplace in the forecasting industry. These
algorithms could be used to examine data and produce more precise predictions on a wide range
of subjects.
2. The use of blockchain technology: The application of blockchain technology could result in
more transparent and secure prediction markets. This could improve trust in the prediction
market’s accuracy and fairness.
3. Greater integration with other emerging technologies: To provide a more immersive and
engaging experience for consumers, prediction markets may be combined with other emerging
technologies such as the Internet of Things (IoT), virtual reality (VR), and augmented reality
(AR).
4. Expansion into new industries and sectors: Prediction markets have the potential to be used in
a wider variety of fields and industries than just banking and politics. In a few years, more
industries will use the data curated from predictive markets.
5. Regulation and legal issues: The increased interest and use of prediction markets may attract
the attention of policymakers and regulators. Because of this, new laws and policies may be
drafted to control the usage of prediction markets.
Here are a few examples of the use of prediction markets in various industries and contexts:
1. Political elections:
Predictions concerning political elections have been made using prediction markets. Iowa
Electronic Markets (IEM), a prediction market established by the University of Iowa, precisely
anticipated the outcome of the 2008 U.S. presidential election.
2. Financial markets:
 Financial market predictions have also been made via prediction markets. The Hollywood
Stock Exchange, for instance, is a prediction market where users may trade “shares” in movies
and other entertainment items.
3. Product development:
Businesses have used prediction markets to learn more about consumer opinion and forecast
the future of new product launches. For instance, Google developed a prediction market to get
workers’ feedback and make better product development decisions.
4. Climate change:
Potential repercussions of global warming have been forecast using prediction markets. The
Good Judgment Project, a government-funded research initiative, employed a prediction market
to forecast the occurrence of certain climatic catastrophes.
5. Disease outbreaks:
Using prediction markets, forecasts have been made on the probability and potential impact of
disease outbreaks. For instance, the Pandemic Risk Assessment Market (Pram) is a prediction
market that allows users to forecast the probability and potential impact of pandemics.