00:00Jonathan, Chainalysis is typically associated with what happens on the blockchain, where analysts want to know where certain cryptocurrencies have
00:09gone, for example.
00:10I think that's what a lot of people associate it with.
00:12How are you now using this technology or using similar technology to do surveillance of prediction markets?
00:20Yeah, thanks for having me.
00:22So if you think about prediction markets and polymarket in particular, it's one of the largest on-chain applications that
00:29does exist.
00:31And I think if you think about it, really what we see at Chainalysis is that on-chain applications, no
00:37matter what use case, can be leveraged to understand what's happening on the blockchain.
00:43And all of the Chainalysis data and models that we build actually apply to whether it's prediction markets, tokenized equities,
00:52payments.
00:53Is it all prediction markets or is it just polymarket that uses blockchain technology?
00:58Could you do this for Kalshi, for example?
01:00Yeah, so any prediction market that moves money on the blockchain and actually has matching on the blockchain and all
01:08of the settlement that happens on the blockchain, that can be understood and monitored using on-chain intelligence.
01:15And so any prediction market that is actually moving money on the blockchain to settle bets and having all of
01:24its bets actually occur on the blockchain, we can help those businesses actually understand the riskiness of insider trading coming
01:33from their prediction market.
01:34So in this case, the partnership is with Polymarket.
01:37So my question, too, is what specific data is being shared between Chainalysis and Polymarket?
01:43How granular can it get?
01:45So when it comes to Polymarket, the great thing is that actually all of Polymarket runs on the blockchain and
01:51provides the transparency that Chainalysis needs in order to be able to detect anomalies when it comes to insider trading.
01:59So every single market is on the blockchain, every single bets on the blockchain, every single winning transaction is on
02:07the blockchain and every single funding transaction is on the blockchain.
02:10And so if you piece all of these things together, you can actually build a model of insider trading detection
02:17and detect anomalies and do investigations.
02:20How effective?
02:22I assume you've been able to backtest it at this point.
02:25But what can you tell us about what you're actually finding in real time?
02:28Yeah, what we see is that there are bets where people are observing high win rates on certain types of
02:38markets or unsized winnings that can be observed on the blockchain.
02:43And some of those people are actually just lucky, normal bettors, and some of those are insiders, and those cases
02:51need to be referred to authorities.
02:53And so what we have found is both elements of uncovering suspicious activity on the market that can be referred
03:02to law enforcement agencies around the world.
03:06And we've also found people speculating on Twitter that this is an insider, this is clearly an insider, when that
03:13is indicative of just someone who's a regular bettor on the market.
03:19Okay, so prediction markets have faced a lot of criticism for allowing people to bet on tragic events, sensitive events,
03:25even talking about like an assassination market where, you know, someone can bet on the date or death of a
03:31certain given individual.
03:34It can get pretty disturbing.
03:36What is your take on this ethics of supporting a market that allows for something like this?
03:43Yeah, so what we are doing at Chainalysis is we've been supporting, you know, the markets where they are looking
03:51at, you know, things of consequence.
03:53And I think that, you know, whether we don't take a position on sort of the ethics of a particular
03:59market, and I know that Polymarket and Cauchy and others have, you know, been thinking a lot about what are
04:05the ethical constraints of the listings.
04:08But as we, as Polymarket and Cauchy list, you know, markets that have macroeconomic significance or geopolitical significance, it is
04:18incredibly important to ensure the integrity of these markets.
04:20And, you know, our partnership with Polymarket is all about how do you build that detection mechanism to ensure that
04:28those markets carry the integrity that we expect from those markets.
04:31We're seeing incredible growth in prediction markets.
04:33I mean, Vlad Tenev was on with us just in the last couple of weeks talking about that growth here
04:37on Bloomberg Crypto.
04:38And I'm wondering if how big that growth opportunity is for you at Chainalysis.
04:43Does it become a bigger product or service than monitoring crypto?
04:49Yeah, I think that when we look at the types of transactions that Chainalysis monitor, prediction markets is becoming an
04:57important market for us to pay attention to.
05:00As I said, it is potentially the biggest on-chain application of any significance across trading, across remittance, across payments.
05:12And it's really a validation that you can run very sophisticated markets and applications on on-chain infrastructure.
05:21Right. And so proving it out on prediction markets is so important for proving this out on any type of
05:26on-chain application that people are building.
05:29Hey, Jonathan, we only have 30 seconds left.
05:30IPO timing, you've been really tight-lipped about it.
05:33Chainalysis is valued at $8.6 billion.
05:35Are you going public this year?
05:37So we are in the process of just building Chainalysis as, you know, the largest and most important infrastructure company
05:45in crypto.
05:45We are not planning to talk about timelines and IPOs or anything like that.
05:51We're headstamp building the business.
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