A recent paper argues that settling prediction market contracts in Bitcoin could provide advantages over using stablecoins by retaining Bitcoin exposure. Despite the volatility associated with Bitcoin, the author, Fedor Shabashev, suggests that it can offer better economic outcomes for users. Currently, many prediction markets use stablecoins, which can lead to opportunity costs for Bitcoin holders missing potential value appreciation. The paper discusses methods for liquidity bootstrapping in Bitcoin-based markets, such as cross-market making, leveraging existing stablecoin liquidity, and utilizing automated market makers. However, challenges like volatility exposure, risk perception, and complicated user interfaces remain significant hurdles. Settling in Bitcoin could be beneficial for long-term events or markets within regions facing unstable fiat currencies. Yet, while the theoretical framework presented is compelling, practical implementations and real-world data are still lacking, indicating the need for careful design to mitigate risks.

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