School of Business and Management Department of Accounting 196 Department of Accounting Stablecoin in Hong Kong Supervisor: Allen HUANG / ACCT Student: CHOW Yik Hong / QFIN Course: UROP 1100, Summer Prediction markets, platforms where participants trade contracts linked to future occurrences, have garnered increasing interest for their capacity to consolidate information into pricing. These markets resemble gambling as participants wager on outcomes; however, many scholars contend they fulfil a unique function: forecasting real-world events by leveraging the “wisdom of crowds”. For instance, the Iowa Electronic Markets (IEM), one of the earliest real-money prediction exchanges, has accurately predicted U.S. election results with remarkable precision (e.g., within ±1.5 percentage points of the vote share one week prior, surpassing contemporaneous opinion polls by ±2.1 points error). The efficacy of such markets prompts significant enquiries: In what ways do prediction markets diverge from conventional gambling? How is blockchain altering these marketplaces and drawing new participants? Stablecoin in Hong Kong Supervisor: Allen HUANG / ACCT Student: LUO Yongwei / MAEC Course: UROP 1100, Summer This report examines three interrelated dimensions of blockchain and cryptocurrency research, all anchored in economic incentive dynamics: (1) financial applications and mechanism design (e.g., DeFi, ICOs, payment systems) as carriers of incentive rules; (2) economic incentives shaping stakeholder behavior (e.g., fee structures) as direct manifestations of these rules; (3) regulatory frameworks and market standardization as tools to correct misaligned incentives. By synthesizing findings from 11 academic papers, it identifies key methodological differences in addressing incentive failures. The report highlights urgent research gaps, including the optimization of DeFi protocols, the balancing of privacy with regulatory compliance, and the mitigation of systemic risks in centralized exchanges. It concludes with actionable solutions, such as adaptive fee mechanisms and cross-border regulatory coordination, to foster sustainable innovation in the crypto ecosystem.
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