Everyone thinks they know the outcome of something before it is going to happen. Whether it be a political election, sporting event, or even tomorrow’s weather. Wouldn’t it be great if you could be paid for making correct predictions on everything from the price of beef in Hong Kong to the on-time arrival of your vacation flight?
Decentralized Predictions Market
Predictions markets already exist, and they are generally places where you can predict the outcome of an event, while also trading shares of event outcomes before the event outcome is finalized. However, because of their centralized nature, users are required to trust a third-party to correctly relay outcomes while not being manipulated or controlled by an outside source or malicious hacker.
Augur has created a predictions market that is completely decentralized, with network users providing the outcomes of events and reducing any risk of a centralized attack. Another advantage of this decentralization is it allows any user to become the market maker, setting a market for others to predict upon. This opens up the applications for Augur to an endless supply of predictions not yet thought of.
Within Augur predictions markets are categorized in three ways:
- Binary – yes/no (i.e., Will it rain in New York City tomorrow?)
- Categorical – who will win X? (i.e., Who will win the 2020 US Presidential election?)
- Scalar – how much/how many (i.e., How much money will Batman make at the box office?)
On the Augur marketplace, the value of all shares for a given event will always equate to $1. The purchase price of one share of a given outcome will directly correlate with its perceived likelihood of occurring. Meaning, if something is predicted to have a 30% likelihood of occurring, its price will be 30 cents, and if that prediction were to be correct, any user holding a share of that prediction would earn. Because Augur is a predictions market, users are offered the ability to buy and sell shares of an outcome before the outcome result is finalized, creating a liquid trading market.
The REP token is used to power the Augur Decentralized Oracle System, with users staking their REP to report the outcome of a given event. In return for reporting the correct outcome of the event, you are rewarded with a reporting fee. However, if you report the outcome incorrectly, you lose your staked REP, creating a system to incentivize users to report outcomes as they occur.
Augur is changing the predictions market by creating a democratized solution in which users are the market makers as well as the outcome verifiers. The REP token will help provide the system with the power it needs to operate, while at the same time incentivizing verifiers with profits for correctly attesting to event outcomes. As the Augur network grows, so will the demand for verifiers and REP token holders.
Dan is a freelance cryptocurrency and blockchain content writer. He has written content for startups, ICOs, financial planners, venture capital firms, and more. Previously he founded an e-commerce company that grew to $1 million in revenue and profitability in less than 3 years. Dan has a degree in Economics and Finance from Bentley University.