Gondor Financing $2.5 million: Building DeFi infrastructure for prediction markets, introducing leverage and lending features

Forecasting markets are rapidly growing, but the core issues still remain unresolved. Capital is locked, yields are inaccessible, and they are difficult to function as effective hedging tools. However, based on the prediction market DeFi protocol Gondor announced the completion of a $2.5 million pre-seed funding round, attempting to rewrite the financial infrastructure of prediction markets by utilizing lending and leverage services to improve capital efficiency.

Gondor Completes $2.5 Million Funding Round to Address the Financialization Needs of Prediction Markets

Recently, Gondor announced the completion of a $2.5 million pre-seed financing, with investors including Prelude, Castle Island Ventures, Maven11, and supporters from the Polymarket ecosystem. This funding is closely related to the launch of its public beta, aiming to build the core financial infrastructure that prediction markets have long lacked, such as “lending and leverage” tools to enhance capital efficiency.

Currently, on Polymarket, bets remain idle until event settlement, which can take several months, resulting in quite limited market liquidity. As Ethereum co-founder Vitalik Buterin once said: “Prediction markets are unappealing for serious hedging because they do not generate yields.”

In response, Gondor’s vision is to become a prediction market-like platform similar to Aave, enabling existing betting positions to be transformed into usable financial assets and even generate yields. This could introduce more diverse capital allocation strategies.

Can prediction markets also be collateralized for borrowing? Gondor can amplify APY through position cycling loans

Gondor’s core technology treats Polymarket’s Yes/No positions as ERC-1155 tokens and uses them as collateral on Morpho for lending.

Users can link and transfer their Polymarket positions to Gondor, making them eligible as collateral. They can then borrow up to 50% of the collateral value in USDC, which is directly deposited into their Polymarket wallet and can be immediately re-invested into the market to increase exposure.

Gondor plans to launch a testing version soon, implementing a cyclical loan strategy similar to traditional DeFi protocols called (Loop), aiming for a maximum 2x leverage to achieve higher efficiency.

This is a functionality that prediction markets have never been able to realize before. The team also plans to introduce 4 to 5x leverage strategies next year.

Returns and Risks Coexist: Liquidation, Volatility, and Market Depth Are Major Challenges for Gondor

Of course, introducing leverage also amplifies the inherent volatility risks of prediction markets.

When collateral value drops to a 77% LTV, Gondor will activate its liquidation mechanism. Instead of directly selling the user’s position on Polymarket, it uses “Yes–No pairing” hedging to exchange back to 1 USDC, reducing delays and slippage.

Additionally, Gondor has implemented multiple risk control measures, including supporting only high-liquidity markets, setting market exposure limits, gradually closing markets nearing settlement, and setting dynamic interest rate caps on borrowing.

Nevertheless, the risks brought by leverage will not disappear, especially in prediction markets with insufficient depth and susceptibility to manipulation, which raises further concerns.

(Prediction markets Polymarket recruiting internal market-making teams, running casinos and acting as bookmakers?)

Gondor’s 2026 Blueprint: Cross-Collateral Mechanism and Improved Pricing Model

Currently, Gondor employs a “single-position isolated margin” model, calculating risk independently for each market. The upcoming version, Gondor V1, plans to introduce cross-collateral mechanisms and more precise pricing models, increasing capital efficiency while reducing liquidation risk.

Once successfully implemented, prediction markets will step into the next phase of financialization, allowing more capital and institutional players to participate with diverse funding strategies.

This article Gondor Raises $2.5 Million: Building DeFi Infrastructure for Prediction Markets, Introducing Leverage and Lending Features First Published on Chain News ABMedia.