Augur (REP) Decentralized Prediction Markets Will Be Extremely Difficult to Stop from Existing

The Managing Director and Founder of Autonomous Partners (ASP) , Arianna Simpson, on Thursday 23rd of May 2019 via Twitter spoke on the prediction market and the cryptosphere. Arianna, one of the pioneering crypto investors, stated that the prediction market “is of the most fascinating yet poorly understood areas” of DeFi (Decentralized Finance).

In a thread of tweets she stated:

“2/ Prediction markets are exchange-traded markets with the purpose of trading on the outcomes of future events. Events can be anything where the results can be objectively verified, like sports games, political elections, horse races, price fluctuations of commodities, etc.

3/ They rely on the collective wisdom and info of a group, and allow participants to place bets on the probability of specific outcomes, where the value of a bet directly reflects the probability of an outcome occurring – @AriannaSimpson, May 23, 2019″

Types of Prediction Markets

She further stated that people trade in these markets, in which the “value of a contract” changes based on a future result.

Three common types of prediction markets where listed by Simpson:

  • Binary
  • Scalar
  • Categorical

She also noted that these prediction market has been around prior to gaining the current popularity in the cryptosphere, stating HSX (Hollywood Stock Exchange), one of the pioneering digital prediction markets, as an example.

With regards to decentralized prediction markets, Simpson stated that Augur and Gnosis are one of the “few main platforms”. She further described Augur as an Ethereum based decentralized market.

Stages of a Prediction Market

Arianna Simpson outlined the four progressive stages of a prediction market :

  1. Creation
  2. Trading
  3. Reporting
  4. Settlement

Adding that anyone can create a prediction market based simply on current events.

“14/ The outcomes of Augur’s PMs are chosen by users who hold Augur’s native Reputation token (REP), used for reporting and disputing the outcomes of events. These users stake their REP on the actual observed outcome and receive settlement fees from the markets in return.

15/ REP plays a central role in Augur’s operations, but is not used to trade in its markets. After the event on which a market is based has occurred, the outcome is determined by Augur’s oracle and traders can close out their positions and collect their payouts.”

Fully Automated Augur

In addition, the stated that the predictive markets were centralized before Augur, which catered for market outcomes, ledger maintenance as well as payouts.

However, with the emergence of decentralized networks, which have “removed many of the risks of self-interest and corruption”. Augur developers have zero control over any outcome or functions, as the system is “fully automated”

“18/ Augur still has a lot of challenges ahead ( low liquidity across most markets, hard to use UX, etc), so many folks are building on top of it. @veil built on top of Augur to offer a better experience – but recently forked 19/ One of the toughest issues facing PMs is their murky legal situation: some jurisdictions consider it gambling, while others view is as options trading.”

In conclusion, the ASP Managing Director said that the prediction markets are an “interesting way to tap the wisdom of the crowd” and that decentralized prediction markets will be “much tougher” stop.

See the full Arianna Simpson's Twitter thread here

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