The article is penned by Fox Holt, Vice President of Delphy
Fake news was a term that had hardly crossed people’s minds until relatively recently. Yet the phrase has now passed the lips of almost every journalist and entered the dictionary as Collins’ word of the year.
Although not a new phenomenon, prompted by 2016’s Brexit referendum and media coverage of the US presidential election, fake news has re-entered the public consciousness. In doing so, it has raised questions about the legitimacy of some media organizations.
With increasing recognition amongst world leaders and tech giants that the problem of fake news has to be tackled, is there a viable solution?
A post-truth world
Some cultural critics argue that we’re in the midst of a post-truth world: one where reality and fabrication have become blurred beyond all recognition, and where conspiratorial rumors quickly spiral into major news stories. Social media has become a hub for distributing fake news to the masses, with networks becoming ideological echo chambers. Unsurprisingly, trust in the media is at an all-time low.
Incidents of fake news have repeatedly left their mark on economies and the opinions of citizens. Following the hijacking of the Associated Press Twitter feed which was used to falsely report that President Obama had been injured in an ‘explosion’, the stock market plummeted. This fake claim, from a seemingly credible source, resulted in the market losing over $130 billion in value.
In an almost symbiotic fashion, fake news aims to create the very sense of uncertainty that it thrives off. Take for instance the confusion over the state of crypto-trading in Korea that arose earlier in the year. In spite of an announcement, from the Korean Justice Minister Park Sang-ki, that restrictions would be imposed, news publications reported the story in two completely different lights – claiming that regulation was both a certainty and a fabrication.
South Korean cryptocurrency prices plummeted. Investors lost millions as Bitcoin’s local price dropped by over $2,000 and the shares of companies Vidente and Omnitel, which are stakeholders of Bithumb, dropped by 30%. All this due to the inability of the media to accurately report a story.
Combating fake news
Citizens, governments and journalists needn’t be victims of ‘post-truth’ rhetoric. Rather than trusting in the knowledge of a single news outlet – or the views of single experts with their own personal biases – people are increasingly turning to predictive markets such as Delphy in order to crowdsource knowledge and understanding.
Harnessing a psychological theory known as the wisdom of the crowd – a phenomenon by which large groups of people make considerably better judgements and forecasts than lone individuals – predictive markets like Delphy allow people to speculate on the probabilities of things to come; the larger the group, the more accurate the prediction. By aggregating the opinions of thousands of participants, everything from sports outcomes to swings in the stock market can be forecast with surprising accuracy. Groups of individuals, of course, aren’t always right, but in general, groups tend to be more insightful than single experts.
This is especially true with fake news. Despite having a wide reach, fake news usually only captures the attention of a minority of individuals. Often these are the most outspoken and audible – those who shout loudest in a crowd. By asking for the opinions of thousands of participants, Delphy can establish a benchmark for what is objectively true from what is false.
Although some prediction markets users may believe fake news stories to be true, their opinions are outweighed by the strength of the majority; providing the pool of people are diverse and large enough, the many will always be more insightful than the few.
Delphy has a clear use for the cryptocurrency market. In a world where the smallest news story could trigger a seismic shift in the volatile market crypto market, predictive markets could provide their users with market insights that would allow them to cut through the fake news to safely invest their money and profit accordingly.
Predictive markets in practice
To understand the application of predictive markets in combating fake news, one need look no further than the scam run by BitConnect, along with the YouTube creators who knowingly promoted it. In a Ponzi scheme that that was once valued at over $2 billion, BitConnect has now closed and those who promoted it are facing a legal challenge to recover investors’ money.
The BitConnect scandal draws attention to our misplaced trust in the expertise and wisdom of visible, powerful, and influential individuals. Had a prediction market been created on the validity of the BitConnect platform, the crowd-sourced answer would have exposed it.
Prediction markets offer no space for self-interested individuals when a judgement has been sourced from thousands of independent minds, with correct predictions being financially incentivized.
The demise of fake news
The fake news phenomenon may be unavoidable, but that doesn’t mean that society has to deal with the consequences. In being able to verify the truth behind news stories, prediction markets such as Delphy provide a newfound sense of stability for markets and society at-large that has been lacking in recent years.
In a world where truth and deceit are battling for the minds of readers and listeners, predictive markets can help accuracy triumph over misinformation.