Hey traders! Welcome to another issue of Above the Fold, our chronicle of what’s new with Manifold Markets.
With Manifold loans, the first M$ 20 you invest in any particular market is automatically loaned out to you. This means you can keep trading even when you’ve run out of M$! These loans are interest-free, and are automatically repaid when the market gets resolved or you sell your shares.
Why did we implement loans? Scott thought it was a good idea A few reasons:
First, this makes it more attractive to invest in long-term markets. Before loans existed, it was hard to justify putting your money into a market which wouldn't resolve for a while. Even if you were very confident that a 50% market would resolve to YES in 10 years, doubling your money over 10 years only represents a ~7% yearly rate of growth. It'd be much easier (and more psychologically rewarding) to make that much on markets resolving in weeks or days.
We weren't seeing a lot of investment in long-term markets... but those have some of the most interesting and important questions for the world to know! Traders shouldn't have to choose between contributing useful information to long-term markets and being able to take profits in short-term ones.
Second, we wanted to allow users who ran out of money to be able to continue participating in a small way. One pattern for our novice traders would be to sign up, dump all their money into a single market, lose it all, and then never come back. Now, with loans, a bankrupt trader can begin building back their portfolio from scratch, without needing to put in real cash.
Finally, loans bring us closer to a long-requested feature: free commenting! Now that your balance no longer decreases when you add a comment, there should be less friction in contributing your thoughts about any particular market. We take trivial inconveniences very seriously and are always thinking about how to reduce them.
That said, there are a few possible downsides with the way we’ve implemented loans:
Loans may make balances feel less "real"; an important function of prediction markets is that the currency you wager feels valuable, but if you can always borrow more, then you may no longer think carefully about your beliefs before betting.
Relatedly: a float loan cap of M$ 20 may anchor you into always betting M$ 20 because it feels free. For markets to be accurate, traders need to size bets according to how certain they feel; if everyone always wagers M$ 20, our markets turn into polls.
A flat loan amount for everyone means that newer traders are on a more equal playing field compared to experienced ones. This means that long-term markets may have relatively less “smart money” involved, leading to less accuracy.
There may be unintentional side effects of this change to our monetary policy:
As with any new feature, loans should be considered an experiment on our path towards making prediction markets accessible to all. Loans will continue to evolve based on your feedback; weigh in with your thoughts (and bets) on this Manifold market!
We’re currently testing out private Manifold instances for teams. Many organizations have sensitive information that they don’t want to show to the public, but still want to discuss internally and form accurate predictions around. If this sounds like something you’d want for your team, sign up for the waitlist here!