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Augur: Decentralized Prediction Market

To answer our questions about the future, gamblers and betters can use Augur, an online decentralized prediction market. They allow people to buy and sell predictions like they would with shares on the stock market. Essentially, they incentivize people with valuable information to create more accurate predictions about the future. Gaining the knowledge from the “crowd” is known as crowdsourcing. Although it is illegal to gamble on commodities that require a license, there are some workarounds. Prediction markets can limit bet sizes, number of traders, or be structured for non-profit research purposes. Augur decentralizes prediction markets by shifting legal responsibility to the betters. This means any user can create a market and wager an opinion. Holders of REP are tasked with verifying the outcome and are incentivized to make honest reports. If one holder was disputed to be dishonest, they would lose their REP tokens and will forfeit their share of the winnings.

A REP, which stands for a reputation, is a tradable token where Augur set the total value to be fixed at 11 million. The people who buy REPs are the reporters and submit their reports on the outcome after a month of the event taking place. Truthful reporting is rewarded. Augur uses blockchain technology which is the database for underlying cryptocurrencies. The medium for exchange is cryptocurrency which uses cryptography to verify transfers of funds, and store approved transactions in the blockchain which is accessible to every node(person) in the network. One of the most famous companies that uses cryptocurrency is Bitcoin.

The advantage of using an open sourced prediction market is the phenomenon called “the wisdom of the crowd”. Thousands of individual predictions averaged out usually can give a fairly accurate prediction for an event to occur or how long a trend will exist. The collective prediction is called the current shared price, which is the best bet. By decentralizing the prediction market, infinitely more markets can be created and people can start predicting the future with better accuracy. Wouldn’t you like to know if a “democrat would win the next presidential election”, or if “Tesla will go bankrupt by the end of 2019”? These and hundreds more of your political or economic questions can be answered precisely using Augur’s open-sourced protocol.


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