Decentralized Prediction Markets and the Blockchain… Checking Out Augur (REP)

[Augur (REP)] is a prediction market platform that rewards you for correctly prediction future real-world events.

The benefit of prediction markets is that they offer the ability to incorporate disparate information to provide predictions on future events.

And with Augur you can make money by trading virtual shares on the outcomes of real-world events.

The economic theory for the ideas behind prediction markets can be credited to Austrian economists Friedrich Hayek and his article “The Use of Knowledge in Society” and Ludwig von Mises and his book “Economic Calculation in the Socialist Commonwealth.”

Accurate prediction markets are based on the economic theory of Efficient Market Hypothesis, which states asset prices fully reflect all known information. Likewise, prediction markets take information from a wide variety of people and yield more accurate results than individuals.

In other words, prediction markets take advantage of the ‘Wisdom of the Crowd.’

What makes Augur unique as a prediction market is the fact it is decentralized. Built on the Ethereum blockchain, Augur is open to all and censorship resistant.

The results are also crowdsourced, unlike in centralized prediction markets in which one party determines the final market outcome. That’s where Augur’s REP token comes into play. Thousands will report on market outcomes using a consensus based system and the token called REPutation. Called reporters, they basically act as an oracle in the software.

Once consensus is achieved, Augur then pays out the winning side of each bet. It also pays out half of all fees to participating reporters, with the amount paid based on the percent of REP you own.

There’s a fixed supply of 11 million REP tokens, with 80% distributed in the token sale and the rest going to the team, advisers, and the Forecast Foundation.

Right now the Augur platform is in beta. If you’re interested in checking out you can sign up through the website. When the official launch date is, I’m not sure, but according to this they continue to get closer.

Ultimately, Augur plans on being more than a decentralized prediction platform, it wants to be a decentralized financial system.

The picture below gives us a good idea where Augur fits in the crypto ecosystem.

Right now I don’t own any REP tokens but I’m considering making an initial purchase. There’s a fixed number of tokens and decentralized trustable information is valuable. Plus, the markets they’re going after are huge, meaning so it the potential.

Next time I’ll be taking a look at Gnosis. What do you think of Augur and decentralized prediction markets?

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