a16z Crypto: AI-Based Judgment Mechanisms May Solve Prediction Market Scalability Bottlenecks

Odaily News a16z Crypto published an article titled "How AI 'Judges' Can Expand the Scale of Prediction Markets" (What to do when prediction markets fail). It points out that the biggest challenge facing prediction markets is not "pricing the future," but determining what actually happened. Similar issues frequently arise in small-scale events as well. Faulty or opaque settlement mechanisms can undermine market trust, liquidity, and the accuracy of price signals. The industry suggests introducing large language models (LLMs) as judges for prediction markets, including committing rules to the chain, resisting manipulation, enhancing transparency, and strengthening neutrality. For example, during contract creation, specific LLM models, timestamps, and judgment prompts could be encrypted and recorded on the blockchain. Traders can understand the complete decision-making mechanism in advance. Model weights are fixed and cannot be easily tampered with, reducing the risk of cheating. The settlement mechanism is public, auditable, and free from arbitrary human rulings. The AI judgment mechanism can significantly improve the settlement efficiency and scalability of prediction markets while ensuring transparency and fairness.