Persuasion Markets: A Manifesto

Why opinions are the internet's next big native market

Persuasion Markets: A Manifesto

To work in crypto in 2025 is to constantly face both the ideological OGs of the space and the arbiters of all that is trad shaking their heads at you, telling you in despair:

Everything you do is fake.

Those coins you mint? Fake money. Those votes that whales control onchain? Fake governance. The airdrop-hunters shilling your protocol? Fake users. The token price manipulated by market makers? Fake valuation. The protocols you operate with a single sequencer? Fake tech.

What’s worse—much worse—is the extent to which the different sides of the industry have internalized such critiques. The nerds call out the degens for farming protocols with fake activity. The degens call out the influencers for trying to manipulate markets with fake hype. And the influencers call out the nerds for building fake tech whose only traction is in even faker market manipulation.

Of course, on the most obvious level, everyone is right. This is why, in the midst of this crypto pandemic of fakeness, the thoughtbois yearn for the real: real users, real world assets onchain, real economic value (REV).

Crypto, like so much of tech right now, is in its Pinocchio era: a one-time form of parody finance from the era of financial nihilism that now, oh so desperately, wants to be a real boy in the eyes of the financial institutions that legitimize money as real.

It is a necessary shift. An overdue one. A respectable one. To survive, crypto of course has to excise the parasite of market manipulation and imaginary traction that has consumed it for the past five years.

But there’s a risk, too: a risk not just that we’ll lose the cypherpunk values that got us here, but the fun of what was, essentially, toy money. For part of the point of parody finance was to point a finger at legitimate finance and indict it, too, as fake. After all, it takes a courageous denial of reality to pretend that a “real” financial system subject to the whims of wealthy foreign lobbyists, manipulated on behalf of bankers, and backed by the debts of money that can only exist if we print it—that this “real” financial system is any less fictional than some frogcoin your stoner cousin is minting in his mom’s basement.

This is the point I’m trying to make here. Sure, both crypto and tradfi are fake because they deal with the human construct that is money. And yet…

The job of crypto at every level, from blockchain validators to governance votes to memecoin markets, is to let people turn fiction into reality by deciding what is legitimate—what is real. And this has been, in fact, crypto’s entire promise from the start: that social consensus can take the place of an imperial military in backing currencies to decide what’s valuable and what is not.

The term for this is what I call a persuasion market.

***

Here’s what I mean:

A persuasion market is, simply put, a market where you can get paid for registering your opinion—so that you’re incentivized to persuade others of your case for them to back you.

For example, Vitalik has been writing for over a decade about futarchy—the notion that the best way to decide outcomes is to bet on them and build market consensus by convincing others of your beliefs with tools like Butter.

That’s a Persuasion Market.

On Noise, you can trade perps on the mindshare of projects. When you speculate, you’re incentivized to persuade others of a project’s value to build its mindshare.

That’s also Persuasion Market.

Similarly, with the launch of Upside and Opinions.fun and Poll.fun, you can access social prediction markets to voice your opinion.

Again: Persuasion Markets.

Persuasion markets are an incentive tool to let anyone in the world monetize and drive the most important currency of the 21st century: attention.

Widen your lens just enough, of course, and everything is a persuasion market. Bitcoin has value because it has a community that persuades others it has value. So does Tesla. So does the US Dollar. And quite often, so do prediction markets that depend on voters aligning on an official outcome that can settle a market.

What I mean by Persuasion Markets here, however, is something that hasn’t existed before: a way for people to earn by making subjective decisions beyond the price of a token. For example, this is the Vote-and-Earn model we use at JokeRace:

To understand the benefits of a Persuasion Market, it’s easiest to compare to a traditional Prediction Market, where people trade positions on whether they think an event will occur:

1. Objectivity. Prediction Markets are designed for objective outcomes; Persuasion Markets are designed for subjective outcomes. In a prediction market, you make a financial bet on who will win an election. In a persuasion market, you put your money where your mouth is to elect the winner yourself—and earn if you’re right.

2. Oracles. Prediction Markets require oracles adjudicating the objective truth in order to resolve the correct outcome that happened offchain: in the case above, you need an oracle attesting who won the election. Persuasion Markets don’t require oracles because they resolve themselves. You don’t need someone to attest who won the election because it’s determined onchain.

3. Liquidity. Prediction Markets require the creator of the market to provide liquidity so users can trade their positions over time. In a persuasion market, users themselves can provide the funds themselves when they buy positions. For example, voters in an election can buy votes with their funds going into a rewards pool that pays out everyone who voted on the winner. Effectively, the election can self-fund, and the creator of the market doesn’t need to deploy capital.

4. User-Generated. Because prediction markets require liquidity upfront, the prediction market platform itself traditionally needs to launch the contest. Since persuasion markets don’t need this capital, however, anyone can whip one up for free. In the example above, anyone can create an election without worrying about liquidity or oracles.

While it may seem that Persuasion Markets are a new iteration on Prediction Markets, they’re actually fully complementary products for different use cases. For example, anyone could add a Prediction Market on top of a Persuasion Market: if you run an election where people vote on the winner (Persuasion Market), you could add a market on top where people bet on who will win (Prediction Market).

In that dubious future where everything is onchain, Prediction Markets just become derivatives on Persuasion Markets. That’s a win for both sides, as it offers even more incentive to participate in both—and the Prediction Market can now resolve fully onchain, without need for an oracle. And this can all happen permissionlessly thanks to the magic of programmable money.

***

Another way to understand Persuasion Markets is that they solve for the real trilemma of crypto—the trilemma of misaligned users.

I alluded to this trilemma at the start. The nerds want to make money that’s predictable (ie MEV extractors and chain founders). The degens want to make money that’s unpredictable (ie airdrop farmers and memecoin traders). And the influencers want to make money by making public predictions that help sway the masses to follow their trades (KOLs and content creators).

Each of these groups tends to view the others as prey: despising them for their vulnerabilities even while counting on them to eat. The nerds count on degens to move liquidity in bulk from which they can take a predictable fee on infra. The degens count on the influencers to pump their bags. And the influencers count on the nerds to deploy new tech and tokens that they can get paid to shill.

What results is the kind of altcoin cycle we’ve seen for years at this point, as each party aims to extract from the other without any underlying belief in a project to uphold its value.

To put that another way, crypto markets are traditionally based on the circular logic of pure mimetics: a token price is just a representation of people speculating on whether they think people will speculate on the thing they’re speculating on. When people stop believing that others will speculate, they stop speculating themselves, and the whole thing crumbles. It’s the story of nearly every altcoin, memecoin, and NFT. There is no there there, and the degens, nerds, and influencers all know it.

But what if they could speculate on people’s beliefs? And what if speculation itself could be an incentive mechanism to surface and proselytize conviction? Here, the degens could take positions with conviction that can yield maximum rewards (more on this in a bit). The influencers can persuade others to buy their position by sharing their conviction. And the nerds could use game theory to figure out the optimal position that speaks to the conviction of the crowd. You see my point.

In a well-designed persuasion market, it is not market makers who earn the most, but those with the most conviction.

Another heuristic to understand this is that there is a magic formula to onboard retail:

Speculation + Social Consensus = Successful Crypto Apps

The degens stand on one side here (speculation), the influencers on another (social consensus), and the nerds wait in the wings to provide liquidity for successful use cases where they work together.

What’s significant is that each side dies without the other.

Speculation alone goes to $0 as a pure ponzi: we’ve seen this countless times in memecoins, NFTs, ICOs, and altcoins.

Social Consensus, by contrast, can last for years without ever making more than $0 in the first place: we’ve seen this too, countless times, in governance and DAOs.

But what happens when you combine them?

In The Social App Thesis, I argued that financial incentives are the best acquisition tool—and worst retention tool—known to mankind. Social incentives, meanwhile, no longer can bootstrap acquisition in an era where half-a-dozen social platforms dominate: this is why there have been no major new social apps since TikTok was founded a decade ago. But they provide one of the best retention tools there is.

In other words, you need both. You need speculation to draw users. And you need the social consensus of people sharing their opinions together to build the retention of a genuine community. People need all the benefits of web2 platforms with the web3 unlock: the ability to earn.

And this is what Persuasion Markets solve.

***

At this point, however, you would be right to have some questions.

Isn’t voting with money just a form of plutocracy that lets the wealthiest players hoard power over the poorest?

And how can you incentivize people to vote on their convictions when the system benefits picking the wisdom of the crowd?

These are the questions we’ve been working through for the past year at JokeRace. So for the remainder of this piece, I’ll discuss a very specific implementation of Persuasion Markets we’ve built at JokeRace that we call Conviction Markets.

Very briefly, here’s how it works:

• Anyone can buy as many votes as they like for any entry in a contest

• The price per vote increases exponentially every minute

• The rewards self-fund: your funds go into a rewards pool for voting on the winners (minus 10% platform fee)

• In addition, contest creators can seed funds into the rewards pool as well

• Vote on the winner(s), and claim your share of the rewards pool

I’ll run through some of the implications momentarily, but let me make a few immediate notes about plutocracy and conviction.

• First, and most importantly, without payments or allowlisting, voting processes online are broken because they’re botted. This is, in fact, the exact problem that blockchains themselves tackled by making people pay in gas, and it’s a solution that can extend to all kinds of voting processes on the internet (liking, upvoting, etc)—while letting people earn as well for curating the internet. As with blockchains themselves, paying both solves a problem (botting) and enables a new incentive (earning).

• The system has a tax of 10%. This means it is not worth it for whales to dump a million dollars on an entry in a contest that has $100 of liquidity because they would lose $100k in fees while incentivizing other whales to put in a million dollars to vote against them. They should only put in as much money as the minnows (in this case, no more than $100) to benefit. This effectively means whales should enter late in a contest when liquidity is high and risk is low, to support early-conviction voters.
  

• The more conviction you have early, the more you can earn—for two reasons. First, you can buy votes for cheaper to get a greater share of the rewards. There is no limit to the multiple on how much you can make if you vote before the final minute. If people continue buying votes throughout the contest, you can earn from all of them. (Again, it is not in whales’ interest to buy votes early. If they succeed in swaying a market, they’re still paying a 10% tax that’s quite probably greater than the liquidity they can earn; but more likely, they’ll fail by incentivizing voters to vote en masse against them.)
  
  And second, voting early lets you signal potential winners so others are encouraged to vote for them too. In short, voting early helps persuade others to help you win. This is an advantageous position for retail with strong beliefs who are willing to take on higher risk and return before winners are clear.

• Because voters are incentivized to vote early, they also will start funding the rewards pool early when they buy votes. That will increase the funds in the rewards pool, which will in turn will draw more voters to earn. As the liquidity in the contest continues to mount, it should set off a flywheel drawing bigger and bigger sums of capital to compete—ultimately bringing in whales.

• Indeed, whales are better off entering at the end, when votes are expensive and signal is clear: that is, when they can take on lower risk for more certain returns, and just as importantly, can calculate how much liquidity to offer in order to reliably earn on their beliefs. The price curves lets different players with different risk profiles all enter and earn according to their strategy.

• Only the whales have enough capital to meaningfully move votes at the end as well. But by deploying larger sums of capital, they help subsidize earnings for the early voters, who might command a similar share of the rewards for a fraction of the price. Effectively, while the whales can still have a strong say, doing so means redistributing their economic power to minnows who earn a far greater percentage-return.

I don’t want to pretend I have perfect answers here, and a lot of the theory needs to be tested by practice.

But a successful market in crypto is one where whales earn low returns on low risk with giant sums of capital to subsidize early retail adopters who stake high risk on returns to stand up for what they believe.

And that is exactly what a Conviction Market is.

***

I appreciate Vitalik’s essays on how Persuasion Markets (Futarchy) can incentivize *better* decisions, but that’s not exactly my interest. I’m interested in how Persuasion Markets can incentivize better games that generate engagement and attention and social relationships, similar to a Poker Table.

For example, let’s say you threw a demo day and let viewers vote on their favorite projects. Now that they can earn by picking the winner, they’re incentivized to learn about those projects, evaluate them, and share them with others.

Now let’s say you threw a debate and let viewers vote on the winner. Again, they’re incentivized to watch and engage in the debate in order to earn. Make it big enough, and you can have Shark Tank and The Bachelor onchain with better incentives to watch.

Finally, let’s say a project threw a contest on what tokens to list, or products to feature, or chains to integrate. Again, there’s incentive for *anyone* to learn about these, evaluate them, and join their communities.

The contest becomes a distribution mechanism for everyone to build attention.

This is the real point of Persuasion Markets: to incentivize anyone to give attention to the things they care about. In theory, I can incentivize anyone to care about anything. In practice, however, the winning persuasion markets will incentivize people to spend more time on the things they’re actually interested in. For example, if I run a demo day or dating show and let anyone vote on the winner, people are more incentivized to spend time learning about the options and debating them with friends—to turn a personal interest into a social activity.

And this is the secondary point: these markets incentivize anyone to persuade others of their choice. They create a social game. Indeed, as prices increase exponentially while money pours in throughout a contest, positions will change, and players will have to evaluate their options thoroughly in collaboration with each other to pick the best entries to win. The game gets more dramatic as it goes on.

Traditionally in crypto when variables get complex, the best thing to do is create a bot to snipe and arb. But I don’t think that’s quite the case with Persuasion Markets. The best thing to do is to persuade other people to share your beliefs—or oppose them.

What I’m trying to get at here is something crypto has failed to learn over and over.

If people are going to continue speculating onchain, they need to be able to have fun doing so by building teams, earning status, and making friends.

***

This is a personal one for me.

In early 2022, I created a game called The JokeRace for people to vote on bad jokes. People had to vote on 2nd place to earn, which meant that they needed to work together to get others supporting and opposing them in order to win. The point was to make a game mocking governance at the time while trying to solve its key issue: nobody wanted to vote.

My theory was that voting typically scorned collaboration because of some unquestioned Western belief that voting should—for some reason—represent the sacrosanct, private view of an individual. I thought that sounded deadly boring, and I thought it would be fun to fuck it up. I suspected that a community can never get strong as a monolith, which has nothing to do but support the leader; the real way for it to grow is to incentivize sub-groups to form up and compete in team sports. We’re a tribal species, after all.

And it worked. The game ran for six weeks, until the site hosting it deprecated the feature, and it went viral on crypto twitter at the time. But most importantly, it spawned the creation of communities that all rallied together each week to win. And I realized that the best way to create a community is not to create a community at all, but to create a structure that incentivizes others to form their own.

All of that depended on the ability to reward voters, and it’s a feature we haven’t been able to replicate—until today.

And this is the ultimate point of Persuasion Markets. The three major successful crypto apps—Polymarket, Hyperliquid, and Pumpdotfun—have all done two things. First, they’ve created new markets of new users engaging in behaviors that didn’t exist at scale before. And second, they are constructivist truth mechanisms for markets to arbitrate what is true. Or if you prefer that simply: they let their users long (speculate on) vibes (social consensus) to earn.

My hope is that Persuasion Markets are the next step of longing the vibes—to curate the internet as a social experience that can earn value for those who determine what’s valuable online. My hope is that they’ll return us to the thing that made the internet exciting in the first place: the emergence of whole new communities of values-aligned people taking interest in learning about niche topics they can nerd out on together.

My hope is that they won’t simply be the best way to earn online, but the most fun.

— David Phelps, June 5 - July 18, 2025

Special thanks to Daisy Alioto, Ria Bhutoria, Nader Dabit, Sarah Drinkwater, Mathijs van Esch, Annika Lewis, Yuan Han Li, Andrew Hong, Natasha Hoskins, Shuyao Kong, Austin Marrazza, Siobhán McCaffery, Packy McCormick, Vaughn McKenzie-Landell, Peter Pan, Will Price, Jakub Rusiecki, Jess Sloss, Kinjal Shah, Seyi Taylor, Mteam, Linda Xie for feedback—and to the entire jk labs team for iterating on this design and actually bringing it to life.