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“Fundamentally, in a system in which the knowledge of the relevant facts is dispersed among many people, prices can act to coordinate the separate actions of different people.”
— Friedrich A. Hayek
The History
When people talk about prediction markets today, they often describe them as modern tools for forecasting elections, crypto, sporting events, or even the likelihood of new technologies emerging. But the intellectual roots of prediction markets go back almost 80 years, to Friedrich Hayek’s classic 1945 essay The Use of Knowledge in Society.
Markets as Knowledge Coordinators
Friedrich Hayek made a claim: markets are the best way to coordinate dispersed knowledge. Commodity prices, he argued, transmit local insights - about scarcity, demand, or opportunity - that no central planner could ever gather in time.
In spirit, global financial markets aggregate billions of individual forecasts about the future (corporate profits, interest rates, defaults, commodity supplies), so they function like giant, versatile prediction markets on topics ranging from weather to politics to corporate news.
A rise in the price of copper, for example, instantly tells producers it’s time to expand supply and consumers it’s time to economize - even if neither group knows exactly why demand or supply shifted. Prices compress countless local signals into a single, actionable number that directs actions of millions of producers and consumers across the globe.
The Limits of Hayek’s Era
But even as revolutionary as his theory was, Hayek’s vision ran into the technological limits of his day. Markets could only capture certain kinds of knowledge: things tied directly to tangible goods like wheat, oil, or steel.
What about knowledge of future events? The political analyst who sees election patterns, the engineer who knows which technology will succeed, the doctor who understands which treatment works - this knowledge remained locked away. You couldn’t trade it. You couldn’t verify it. You couldn’t aggregate it into a usable signal.
Blockchain Removes the Walls
Traditional prediction markets tried. But they hit walls: limited access, geographical restrictions, trusted intermediaries, slow settlements, and the constant need for a centralized authority to decide what was “true”.
Blockchain removes those walls. By making prediction markets open, automated, trustless, and global, blockchain finally allows outcomes to be priced in the same way as commodities are - and turn dispersed knowledge into actionable signals.
Space Brings This Vision to Life
By combining a central limit order book with multi-outcome markets, dynamic liquidity incentives, and continuous trading, Space creates the infrastructure for Hayek’s knowledge problem to be solved at scale. Not just for copper or wheat - but for elections, technological breakthroughs, market movements, and any question where dispersed human knowledge needs to be coordinated.
This is prediction markets living up to their promise: an open platform for turning scattered insights into calibrated forecasts that help individuals, institutions, and societies make better decisions, while rewarding those who are right. 