PancakeSwap, a multichain decentralized exchange (DEX), has partnered with Allora Network to launch an artificial intelligence (AI) powered Prediction Market on Arbitrum.

The new Prediction Market will feature AI-driven price feed data sourced through PancakeSwap’s new decentralized AI network partner, Allora.

Through Allora’s machine-learning capabilities, PancakeSwap users can forecast Ether (ETH) price movements on Arbitrum (ARB).

In an interview with Cointelegraph, Chef Gyoza, Product Manager at PancakeSwap, explained the decision to collaborate with Allora:

“Over the last 3 years, models built by the Allora Labs team (formerly known as Upshot) have effectively produced price predictions for more than 400 million assets with a 95-99% confidence for the most accurate predictions.”

Related: DEX adoption needs greater capital efficiency — PancakeSwap product lead

How it works

Allora’s AI price prediction models will predict the likelihood of the price of different crypto assets rising or falling, which users can then predict with or against.

The payout process is guided by the AI’s accuracy, adjusting over time according to the AI’s performance as users make predictions on the Prediction Market.

Gyoza summarized the new Prediction Market, saying:

“PancakeSwap users will be able to follow or oppose the AI’s prediction. With the AI’s performance and record in our tests achieving close to 65% accuracy, users will have to choose when to oppose the AI, which will naturally have higher odds.”

Related: PancakeSwap integrates Zyfi for gas-free DeFi trading

Preventing exploitation

On the topic of the potential for market manipulation and users exploiting the new Prediction Market feature, Gyoza added:

“Users can track all round history, price feed history, and AI prediction history via a history tab on the prediction page. All results are also settled onchain via our prediction v2 contract.”.

Gyoza explained that the AI prediction is only issued after rounds are locked, preventing manipulation “as users do not express directional positions.”

As a new market feature, Gyoza expressed PancakeSwap’s opinion on the influence the Prediction Market could have on liquidity and volatility on the platform:

“At the moment, we don’t think that it’ll influence the market to a large extent as it's still a nascent product. However, we believe that with Allora as a partner, we can expand the predictions to many other markets, both on and offchain.”

Related: AI-powered DeFi platform introduces token mints by placing orders

PancakeSwap turns to AI

PancakeSwap recently announced that it is gearing up to launch CupcakeHop, an AI-powered portfolio management tool developed by Bril Finance.

This new tool, set to debut in August, is designed to offer tailored investment strategies and real-time risk management to a wider audience. 

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