Want to be able to create a market to predict anything? Blockchain has the solution for you with the project Augur and their Ethereum based prediction markets. Augur is a protocol that allows users to create their own prediction market where users can buy and sell stock in the likelihood of an event occurring. In this article, we’ll be going through what a prediction market is, how Augur works, how people can buy and sell, and some recent news for newly released application.
The key component to the Augur project is what is known as a prediction market or a market for buying and selling stocks on a future event or outcome. For example one could have used a prediction market to make a prediction about the winner of the World Cup Finals. If you thought France would win then you would have bought stock on that outcome. The more people who believed France would win the more demand there would be and the price would be higher. Those who correctly predicted France to win would then be paid for their correct prediction. That simple structure is what comprises the entirety of the Augur project.
What is Augur then? Well it’s a protocol that allows people to create those prediction markets and rewards individuals for correct positions, creators of markets (events or outcomes), and holders of the REP token. The manner in which it all works is simple.
Going back to our World Cup example, someone would correctly see that people would be interested in seeing who most people thought would win the world cup and create the predictive market for the event. Individuals can then go and buy stock in either France or Croatia winning. Then the game would be played and people would report the correct outcome to the market (France won in case you didn’t know). Those who bought the France winning stock would then profit and those who bought the Croatia winning stock would lose their investment.
I’ve used the sports analogy here twice because it’s one that most people are familiar, but in actuality any event or outcome can have a prediction market created for it. The occurrence of a natural disaster or political event, a stock stock hitting a certain price, a cryptocurrency releasing its mainnet by a certain date, or even a new feature on the next iPhone. These predictive markets can be used for anything and that insight or viewpoint of the majority can be used intelligently by businesses, researchers, or the government.
Now when creating a market a user has to pay a fee to the network and then the creator sets a fee that’s taken from the end rewards. This mechanism introduces some additional factors to take into consideration. A market creator wants to earn as much of a fee as possible from those in their market to first gain back the money spent on creating the market and possibly make some ETH in the process. From what I’ve seen the fee is set around 1% or 2% meaning in the 1% case if there are 100 shares outstanding at the time of resolution the market creator would earn the value of 1 share.
Furthermore, my examples all dealt with yes or no questions. When creating a market there is the opportunity to create multiple choice and number range markets that may be more appropriate for other types of questions like say “which one of these coins will break into the top 3 by market cap by the end of the year.”
We now know a little about creating markets and what goes into that but what about buying and selling shares. The orderbook for that is set up just like any crypto exchange with bids and asks. The price range for these can be anywhere from 0 to 1 ETH and the price is equivalent to the likelihood of that event occurring. For example 1 share may cost 0.1 ETH for our question of will France win the World Cup meaning at that time someone believes there is a 10% chance (0.1) that France will win. If you believe that there is a higher chance of that occurring then it would be smart to buy that contract and then either hold it until the resolution period or sell it once the market price is at a price of say 0.5 ETH or a 50% chance of France winning.
When the market fully resolves Those holding a correct share will be rewarded with 1 ETH per share, so in our example if you bought 1 share at 0.1 ETH your profit would be 0.9 ETH for your correct prediction. Those who made the wrong guess would lose their investment.
I’ve been talking for a while now about Augur but haven’t actually spoken about the REP token. That’s because no one needs to have any REP in order to use the predictive markets and they aren’t used when buying or selling a share, but may be when creating a market.
Holding a REP token grants the user the privilege of being a reporter. A reporter in the REP system is someone who simply reports the outcome of some event whether that’s the final of the World Cup or the price of a stock on a given date. If an individual is listed as the designated reporter for a market and fails to report, or doesn’t do any reporting for a couple of weeks their REP is redistributed to those in the market who have been. When creating a market the creator of that market can list themselves as the reporter or they can choose someone else.
What’s going on with Augur at this time? Well, a lot really. Augur had its official launch July 19th of this year and has been cranking out weekly reports over on its Medium page. One of the coolest bits about Augur is that it was recently featured in the magazine The Economist. With full release and the application up and running Augur is in full marketing and media awareness mode.
Augur’s co-founder Joey Krug was recently on the Unchained podcast to help spread awareness of the project and Mr. Krug will be one of the judges at a hackathon at ETH San Francisco. A roadmap had been released for Augur back in summer 2017 but with full launch already out I would recommend to keep your eye on the Medium page and Twitter account for any future plans and events.
REP is currently trading at a price of $19.83 or 0.00285 BTC or 0.07 ETH. The circulating supply of the token is 11 million and given those numbers the market cap of the project at this moment is $218 million. Daily volume for the token was $10.7 million.
Augur is traded across several exchanges with the most popular being Bithumb. Bithumb offers a KRW pairing for the token and the pricing on that exchange is vastly different then everywhere else. 1 REP is worth around $120 on Bithumb while on Binance and LAToken (the 2nd and 3rd highest volume exchanges for REP) 1 REP is worth $20. If you’re so inclined to purchase REP and become a reporter I would encourage those of you who can to purchase it on the exchange where you can get the best price.
Binance — https://www.binance.com/
LAToken — https://latoken.com/
Please see the following links to learn more about Augur:
Website — https://www.augur.net/
Twitter — https://twitter.com/AugurProject
Reddit — https://www.reddit.com/r/Augur/
Medium — https://medium.com/@AugurProject
Augur is one of the few projects we get to look at that has already launched and that launch has already made waves. Many people boil down Augur to a glorified betting platform and while I understand that’s how the majority of people will be viewing and using the platform there is opportunity for use in more elegant ways. At this point Augur will need to attract users to its platform. I have no doubt that there are those outside of crypto that would use Augur in a heartbeat if they knew it existed. As I see it, the challenge for the team moving forward will be to craft seamless onboarding solutions to acquire users in the crypto community and outside of it.
Thank you for reading today’s article! This is my final article for this week and my previous ones covered Bibox and The Abyss! I will be updating my schedule for next week on Sunday so stay tuned for next week’s line up. As always follow me on here or on Twitter @thant1194 or on InvestFeed @thant11 in order to stay up to date on all my articles as I release them. I am not associated with Augur team, I am a user of their application, and am not a holder of their token. Thank you again for reading. I have to return some video tapes.
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