According to the Ancient Romans, the definition of an Augur (noun) is:
a religious official who observed natural signs, especially the behavior of birds, interpreting these as an indication of divine approval or disapproval of a proposed action.
In the 21st century AD of the Cryptocurrency Era, the Augur token surprisingly works in a very similar way, but instead of relying on signs from our omnipotent and godly overlords, Augur is relying on the power of its community to make those predictions.
To start, AUGUR (REP) is a decentralized prediction marketplace that was created to act as an accurate forecasting tool and provides its users with the chance to make real profits for getting predictions right. It rewards you for correctly predicting future real-world events.
You trade actual shares into and out of real-world events. You can do things like predict who will be the next president, and then buy shares in that outcome, staking your claim on that person. As more people buy shares in a certain outcome, the price of that outcome rises while the price of other ones fall.
You choose outcomes with what is known as a REPutation token, which holders then receive settlement fees from markets. This helps to ensure honest and accurate reporting. REP tokens that don’t correspond with the resulting outcome are deemed worthless to maintain the integrity of the network.
At this time, Augur is currently operating in its Beta phase on the Ethereum platform, but it works through a step-by-step process of Creation, Trading, Reporting and Settlement.
Creation
Any participant in the AUGUR network can create there own prediction market based on a real-world event.
Trading
Trading begins immediately after the market is created, and all users are free to trade on any market.
Reporting
After the event occurs, the outcome is determined by the Augur Oracle.
Settlement
Once the outcome is determined, traders can close out positions and collect their payouts.
Augur provides a powerful predictive data medium for determining how people think when it comes to predicting outcomes. Through a phenomenon known as “The Wisdom of the Crowd”, Augur seeks to find an average prediction made by a group collective that is superior to any decision made by one individual. The Market reaches an equilibrium that reflects the overall opinion of the group.
All AUGUR funds are securely held in smart contracts, which helps eliminate counterparty risk and provide a speedy option for payment processing. The only role of AUGUR developers is to post these smart contracts to the blockchain. All compensation and fees are designed to provide a low cost solution to centralized prediction markets. Only market creators and users who correctly predict outcomes are paid.
This cryptocurrency is a solid project that caters to those of us who are interested in creating our own prediction markets and have a natural and healthy skepticism of centralized systems handling these things.
When you look at how flawed democracy and our other forms of voting are today, you begin to realize how many problems this kind of centralized voting system still has. From the need for recounts, to gerrymandering, to the Electoral college and dismissal of the popular vote, the future of prediction markets, and even voting in general, may be totally upended by blockchain and tokens similar to AUGUR.
It is a trustless and decentralized system that posts results to the blockchain and is immutable in nature. The facts can’t be changed, the data can’t be tampered with. Tokens like Augur are paving the way for a more integrity-driven voting and prediction system in the future. Check it out!
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Nice article! I do have a few questions though.
What prevents people from creating fake prediction markets about an event, where they trade on the market and manipulate the result themselves.
e.g. a person creates a market about the winner of a football game. They start trading and decide to bid on the clear loser. But then, after the game is over, even if the team lost, they say that it actually won. Then they can make a massive amount of money without making any predictions.
With it being very easy to create prediction markets, what happens when there are thousands of prediction markets based on, say, the price of Bitcoin. How does one even choose which one to use? The one that would pay out the most to them?
I’m definitely upvoting and following you!
@shredz7