What is Augur and why is it cool?
Augur is a decentralized prediction market built on Ethereum. Think of it like a market place where you can bet on future events, like the outcome of the 2020 US Presidential Election. The benefits of this are 2 fold. First, Augur is a peer-to-peer prediction market place with all the benefits of a decentralized system, such as censorship resistance, lower fees, reduced trust reliance on a third party, and more. The second benefit is a little more technical.
To understand this benefit, you first have to understand one aspect of smart contracts. Smart contracts cannot reach out to the internet and look up a piece of data like regular computer applications can. The smart contract can only access data within transactions on the network, or call other contracts. Even if a smart contract could look up a piece of data, how could we know for sure that we can trust that data is correct? Augur solves this problem by acting as an oracle, which just means an entity that brings data on to the blockchain. Users report on the outcomes of events, such as the US Presidential Election and the data is written to the blockchain so that other smart contracts can read that data.
We know we can trust that the information has been reported correctly because the users are incentivized to report correctly. Augur users are paid in Augur tokens (called REP) for reporting correctly, and lose REP tokens for reporting incorrectly. Augur elegantly shifts trust from individuals to incentives. There is also a system to resolve big errors in the event that the reporting system goes wrong.
So, as a user, you can make money with Augur by making bets on future events and getting them correct, or by simply reporting knowable events which will be written to the blockchain and later consumed by other applications. Imagine a smart contract for personal insurance that pays a farmer based on the amount of rain over a particular month. Augur could have a market where users report the total rainfall for that month, which can be consumed by the insurance contract to know whether to pay the farmer or not. This is just one simple example.
“We want to launch slowly…The idea is to sort of start with “training wheels” and slowly remove them over time as the system proves to be secure.”
–Joey Krug, Founder
Augur initially raised $5.2 million dollars in the token sale in 2015, back when the price of Ether was around $1, meaning they have a rather large runway. Based on their latest development roadmap post, we have a pretty good idea of what the product will look like at launch:
You will be able to make markets that have the following formats:
– Simple yes or no question (e.g. Will Kanye win the 2020 election?)
– Range of number values (e.g. How many votes will Kanye get in the 2020 election?)
– Categories (e.g. Winner will be: Trump vs Hillary vs Kanye, etc.)
There will be a dispute resolution system. It’s somewhat technical, read more here.
We also know the tentative schedule before launch:
-Security Audits (we are here)
-Code Bug Bounties
-Bug Bounty Prediction Market Release
-Augur Lite release with a maximum amount of shares outstanding / open interest in the markets (meaning only a small amount of money can be locked up in them). Alternatively, make it so users can only deposit a maximum amount, say, 5 ETH.
-Full Augur Release
The Augur team prefers a slow rollout and there are no firm dates. As founder Joey Krug stated in their latest post, “We want to launch slowly…The idea is to sort of start with “training wheels” and slowly remove them over time as the system proves to be secure.” It’s a very sensible approach in such a nascent space. We look forward to Augur proving out Ethereum’s utility and being a key building block that other apps will leverage to do cool things in the Ethereum ecosystem.