Polymarket voters just verifiably got scammed after the UMA Oracle went rogue.
4 min read
I have covered a number of Polymarket scam accusations on this sub, some arguably a scam, some user errors, but there has always been one underlying principle. UMA is a centralized oracle and they will do whatever Polymarket tells them to do. In this edition of Polymarket scam accusations, we are looking at a new question, but what if UMA actually goes rogue?
What you need to know about Polymarket – It’s a prediction betting market most popularly on Polygon, where users wager on real world events with USDC. The real world can be complicated and not always fit into the black and white confines of the “established rules” on the markets, as such this creates a lot of space for scam accusations to develop.
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As this post is mostly about UMA, lets dive in. UMA is the “Decentralized” Oracle for Polymarket one of their most important utilities is deciding the outcome of contested markets on Polymarket. Here’s how it works:
A Polymarket user puts up money to propose an outcome -> other polymarket users can dispute it by putting up money -> if disputed users can again put up money to propose an outcome -> other polymarket users can again dispute it by putting up money -> If it gets disputed 2x it goes to UMA to resolve before a Final Outcome of the market on Polymarket can happen.
UMA token holders can stake their tokens and then vote on the controversial markets with the weight of their vote equal to the amount of tokens they have staked. Now the thing about UMA is that similar to most web3 governance protocols it’s a full blown Plutocracy. In this case only two unique UMA token holders are needed to reach an agreement and resolve any polymarket clarification how they see fit..
If you want to read a slightly deeper look into UMA – I’ve written about it on a previous post here.
Obviously there are some glaring red flags with this model: Two UMA whale token holders independently control the outcomes of markets and can trade and profit on the outcomes that they determine. This creates an incentive to resolve controversial markets in a way that might not exactly match reality to increase the profit on those markets.
This has long been countered by Polymarket making “clarifications” on extremely controversial markets – where they tell UMA how to vote, and UMA (previously) has always fallen in line with a clarification. Largely because if Polymarket abandoned UMA it would be death knell to the UMA token, so going against Polymarket is a bad idea for these whale token holders.
Example of a clarification:
Now that we know the details let jump into the actual market and scam that just happened.
The market was “Ukraine agrees to Trump mineral deal before April?” In the middle of March this market was proposed yes and disputed, two separate times so it went to UMA to vote.
Polymarket issued a clarification saying no deal was made and that this market should resolve no, against the proposed resolution.
Now what always happens in a market like this is UMA votes no, just like Polymarket tells them to do. However in this instance one of the two whales along with other UMA token holders decided to go rogue against reality and Polymarket and resolve this market contrary to yes.
https://vote.uma.xyz/past-votes
As a result Polymarket has stated they will honor the UMA vote as is their dispute process and resolve their market, yes.
Now you might be thinking, wait what isn’t this a scam? UMA voted for a resolution that didn’t match reality because one of the two whales that controls the outcome went rogue? Now Polymarket is scamming the bettors who placed money on a resolution that didn’t match the actual reality? The answer is yes.
The market in question had over $7M in volume and everyone who bet on the actual reality of the market lost money.
In a rare case Polymarket has even acknowledged that the market resolution was unfair but they stated they’re not able to pay out $7M in refunds and as such everyone who lost money is out of luck.
So… What now? I don’t know, but if you bet on the market and lost money you verifiability got scammed.
submitted by /u/GabeSter
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