Buzzing Meaning Interpretation: The Essence of Prediction Market Market Making and Challenges of Emerging Platforms

While prediction markets are becoming a hot spot in the cryptocurrency industry, emerging projects like Buzzing are appearing one after another. However, many participants do not fully understand what these projects truly mean or the significance of surviving in the market. In fact, understanding the fundamental difficulty of prediction markets and the advantages of leading platforms is key to deciphering the future of this field.

What the Liquidity Subsidy System Means for Market Structure

Polymarket invested approximately $10 million in liquidity subsidies as of November 2025, having previously contributed over $50,000 daily. This highlights how challenging it is to build liquidity in prediction markets. Currently, Polymarket requires a subsidy of $0.025 for every $100 traded on average.

Kalshi has also launched a similar liquidity subsidy plan, investing at least $9 million. This indicates that the strategy is not merely about lowering participation barriers but is a fundamental survival strategy for the platform. In 2024, Kalshi leveraged regulatory advantages by signing a market-making agreement with Susquehanna International Group (SIG), a major Wall Street market maker, significantly improving liquidity conditions.

These data points reveal that market-making in prediction markets is not an “easy profit” business for anyone. Even if the formula Yes + No = 1 is technically innovative, the economic incentives built on top of it reflect a harsh reality.

Understanding the Fundamental Difficulty of Market Making

Participating in market making and building liquidity is not just about lowering entry barriers; it’s an economic challenge of whether one can profit. Compared to AMM markets like Uniswap V2, the difficulty of market making in prediction markets is inherently much higher.

In AMM markets, price fluctuations cause impermanent loss, which can be offset by trading fees over time, allowing for relatively passive market making. In prediction markets, this is not the case.

Let’s consider Polymarket specifically. In a basic binary market with a real-time market price of $0.58 for YES, you can place a buy order for YES at $0.56 and a sell order at $0.60. This is essentially the same as placing a buy order for NO at $0.44 and a sell order at $0.40. After placing these orders, four scenarios may occur:

1. Both orders remain unfilled
2. Both orders are filled
3. One order is filled, and the market price remains within the original order range
4. One order is filled, but the market price moves further away from the remaining order

In low-frequency attempts, different situations can lead to different profit or loss outcomes. However, in real-world environments, continuously operating with inertia generally results in losses. This is because prediction markets are closer to order book models of CEXs than to AMM liquidity pools.

Fundamental Differences in Operating Mechanisms

AMM market making involves depositing funds into liquidity pools, which automatically adjust prices. Conversely, order book market making requires continuously placing buy and sell orders at specific points and adjusting prices dynamically in response to market changes.

Operational requirements differ greatly. In AMMs, you can deposit tokens within a price range and then leave them be. In order book models, active and ongoing order management is essential. Continuous price adjustments based on market changes demand advanced expertise and quick decision-making.

The risk structures are also contrasting. AMM market making mainly faces impermanent loss risks, earning profits from pool fees. Order book market making faces inventory risk in one-sided markets, with profits derived from bid-ask spreads and platform subsidies.

The Reality of Profits Demonstrated by Buzzing Founder Luke

Buzzing founder Luke (@DeFiGuyLuke), based on market experience, estimates that Polymarket market makers can expect a “profit of about 0.2% of trading volume.” This indicates that substantial trading volume is necessary to generate meaningful revenue.

To sustain profits as a market maker, one must seize as many profit opportunities as possible and avoid inventory risks. This requires deep understanding of market structures, comparing subsidy strength, volatility ranges, settlement times, and judgment rules, and tracking market price movements more accurately and swiftly based on external events and internal fund flows.

This is clearly beyond the capacity of most ordinary users. Long-term success in this area is difficult; only professional players who can accurately track market changes, quickly adjust orders, and execute effective risk management can operate sustainably and truly profit through their expertise.

Challenges for Emerging Projects

Prediction markets are currently a hot startup sector, with many new projects emerging one after another. However, the challenges for new entrants are extremely serious.

Polymarket is valued at $8 billion, having received a $2 billion investment from ICE, the parent company of the New York Stock Exchange, and reportedly planning further funding rounds exceeding $10 billion valuation. Kalshi has also completed a $300 million funding round at a $5 billion valuation. Both platforms hold substantial capital.

Funding readiness and regulatory hurdles serve as effective defensive barriers for these leading platforms. Polymarket has obtained regulatory approval, and Kalshi has partnered with industry-leading market maker SIG. How can new projects directly compete with these leaders?

Haseeb Qureshi, a prominent analyst at Dragonfly, recently predicted that “prediction markets are rapidly evolving, but 90% of prediction market products will be completely ignored and gradually fade away by the end of 2026.” This suggests a very strong leader effect in the prediction market field.

The Future of Prediction Markets: Differentiation Between Leaders and Challengers

Many expect a proliferation of prediction market platforms and dream of profiting from past successes. However, this may be unrealistic. As leading platforms continue to provide sustained subsidies and deepen partnerships with regulators, the space for new projects to compete is limited.

If you truly want to bet, focusing on established leaders like Polymarket and Kalshi is more practical than chasing emerging platforms. Some new projects have strong backing from major sponsors, which could generate profits, but not all will succeed.

Ultimately, market making in prediction markets is not an easy way to make quick profits. It requires advanced expertise, rapid response capabilities, and effective risk management. Competition among platforms favors those with capital strength and regulatory advantages. Understanding these factors is essential for making wise decisions about entering the prediction market era.