In the past, prediction markets have generally been centralized, and the optimal way of aggregating trades has been through the use of a physical ledger. However, it should be understood that centralized prediction markets come loaded with innate risks and limitations. For example, they not only restrict global participation, but also require traders to place their trust in a third-party operator.
This is where Augur (REP) comes in. It is designed to be a trustless, decentralized prediction market platform that allows casual and experienced traders to speculate on a wide array of future events. The functional model is quite simple — correct forecasts are rewarded with money, while incorrect predictions lose money.
However, what really sets Augur apart is that it allows for customer participation at extremely low/nominal cost. The only major expense incurred is a small compensation fee paid to the market creators, as well as to users who report on the outcomes of the events.
Overview of Augur
- Completely open-source
- Future compatibility with BTC as a sidechain
- All markets are created and controlled by users (unlike most gambling platforms).
- Potential to eliminate biased prediction data from the internet
- Total supply of 22,000,000 REP.
Augur does not make use of centralized servers, and hence is not prone to any risks involving third-party hackers or server malfunctions. Additionally, the platform allows for the placement of wagers on literally any question imaginable. For example, a bet can be placed on whether James Harden will win the 2018 NBA MVP award, or whether Donald Trump will be re-elected to the oval office in 2020.
It should also be mentioned that all of Augur’s transaction fees are determined by its users. Thus, the overall processing costs incurred when using this platform are vastly lower than those of other trading/betting platforms.
While in the past we’ve seen certain individuals manipulate centralized markets (since one person is in charge of the outcome), Augur employs a proprietary consensus system that makes use of thousands of participants reporting on the outcome of a single event. What’s more, this platform makes use of its own native currency — REP — thereby severely reducing the risk of fraud.
Lastly, let’s talk about internal transactions. All of the funds are stored and transferred via smart contracts. This eliminates issues related to counterparty risk and allows for the instant transfer of money. Withdrawals and deposits are streamlined and can be done with the simple click of a button.
How Augur works
Here’s a simplified working model of the Augur prediction platform, courtesy of the Augur whitepaper:
From a technical perspective, Augur markets make use of a four-stage progression mechanism that includes:
- Market creation
- Real-time reporting
- Payouts and settlement
Users have the ability to create a market that is based upon a factual “real world event”. As soon as the market is created, trading is initiated and all users can access and freely make use of the market. After the event has concluded, the Augur Oracle determines the outcome of the event. Traders can subsequently close out their respective positions and receive a remuneration based on the same.
The Augur oracle is an intuitive prediction module that allows key data sets to easily migrate from the real world to the blockchain without relying on a trusted intermediary. In fact, the Augur platform is designed to serve as the world’s first decentralized oracle.
The Augur Reporting Flowchart (courtesy of the Augur whitepaper)
Augur makes use of a native token called REP. This currency will be essential for both the market creator as well as the reporters associated with a particular wager.
Market outcome is based upon a consensus derived from individual reporter participation. Thus, if a reporter’s report of a particular outcome does not concur with the consensus that has been reached by other participants, the Augur AI automatically redistributes the REP tokens of that reporter with the rest of the reporters whose reports were correct.
The History of Augur
Augur is a US-based company that has been active in the crypto domain since 2015. In the past couple of years, Augur has dramatically increased in popularity due to its intuitive betting platform that enables seamless forecasting and trading. The first iteration of the Augur platform was released in June 2015 on the Ethereum testnet, and the first beta module was made available in 2016. The final release, according to the official company whitepaper, is due out in the first quarter of 2018.
Augur Beta Snapshot
In terms of its user interface, Augur.net has a pretty basic design. Upon clicking on the Augur Beta tab, users are presented with an app environment that is quite simple yet intuitive.
The market performance of REP is quite noteworthy, as in 2017 alone the price of a single coin rose by over 2,000%. However, this is in no way an indicator of its future performance, as there still exists an extreme level of volatility within the crypto domain.
REP token two-year performance chart (courtesy of CoinMarketCap)
We can see that the value of 1 REP in January 2016 was a meager US$2.08, but by December of 2017, its value had risen to a staggering US$93.80.
The Final Verdict
With the incorporation of blockchain into various online trading platforms, Augur has the potential to act as the ideal medium for promoting user participation within the prediction market sector.
Additionally, with the meteoric rise that REP has seen in the past year, it would come as no surprise if REP established a strong position on the top 50 cryptos list of 2018.
If you’d like to start investing in Augur, REP trading pairs are currently being offered on Binance.