Vitalik Buterin: Paying Interest on Ethereum Prediction Markets Could Unlock Massive Hedging Demand

On August 25, COINOTAG reported that Ethereum co-founder Vitalik Buterin posted on Warpcast highlighting that mainstream prediction markets “do not pay interest,” a structural shortfall that diminishes their attractiveness for hedging. He emphasized that participants effectively relinquish a guaranteed 4% annual return in USD when allocating capital to non-yielding prediction positions, reducing risk-adjusted appeal for institutional and retail market participants.

Buterin indicated that addressing the absence of yield — via integrated on-chain yield mechanisms or novel instrument design preserving annualized yield — could unlock new hedging applications and drive higher trading volume and liquidity. Market developers are consequently prioritizing enhancements to capital efficiency and product-level risk controls to support broader adoption.