Overview of Augur
What do you think about predictions market? If you have ever engaged in online betting or seen the show “who wants to be a millionaire”, then you’d agree that sometimes you lose, and sometimes you win. And really, this is what crypto trading and most events in life are all about.
You expect the price of a coin to go up, so you take a position now. You expect it to drop because of some news, so you sell now; sometimes your predictions may be correct.
Augur is an interesting project trying to decentralize the predictions market with the help of blockchain. Built upon the Ethereum blockchain, Augur is a trustless and decentralized predictions market platform that harnesses the “Wisdom of the Crowd”. Think of it like the “Ask the Audience” option on who wants to be a millionaire game show. The crowd is hardly ever wrong.
With such a system, casual and experienced traders can speculate on a wide array of future events, from whether it rains between 8am – 10am tomorrow, to whether Donald Trump gets re-elected in 2020. The model is quite simple – predict correctly and win money, do it incorrectly and lose money.
Bonus Tip #1: While the idea of a prediction market sounds like a gamble, it goes beyond that. Some circles will refer to it as “analysis”.
What is Augur Trying to Do?
Traditional prediction markets seem to be doing fine the way they are, I mean nobody is complaining. However, these markets are centralized and restricted. Certain individuals may decide to manipulate the outcome of the market.
Augur does not depend on centralized servers; therefore, it is not prone to server malfunctions and third-party manipulations. Also, literally any question or event can be placed on the platform to be wagered upon.
Bonus Tip #2: Unlike other projects, the transactions fees on the platform are determined by its users. And at such, may be lower than what’s available on other trading/betting platforms.
How Does It Work?
As you already know, Augur is a prediction market platform that pays people for correct predictions on world events. Creators of markets and holders of Augur tokens (REP), get rewarded after every event. The platform follows a four-stage mechanism which includes:
- Creation of market
- Real-time reporting
- Payouts and settlements
Users are allowed to create markets based on factual real-world events such as the examples given above, or whether North Korea will shut down their nuclear program in 2020, for example.
Once a market is created, trading is initiated and other users can buy shares in those outcomes. At the end of the event, the network determines the outcome. Traders can then close their respective positions and get rewarded accordingly. If you purchased shares in the correct outcome, you make profits; otherwise, you lose.
In general, Augur is an interesting project to look out for. Although I don’t gamble, I’ll like to see how crowd wisdom is applied on a larger scale to real-life events.