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How Augur works and what is the purpose of a prediction market


Augur It is a prediction market that, especially in these times of the Coronavirus, could be very useful: but how does it work?

Predict or prevent spreading a contagion and reacting correctly by filtering the noise of misinformation, incompetence, and the spread of supranational sources is not easy and never will be. How could technology help us in the future?

Thanks to a concept related to collective psychologyA very useful way to obtain information about a future event is to send the question to a large number of people.

This means that, in most cases, the average opinion of the crowd is much closer to reality than the opinion of an expert.

How does Augur work?

At the end of the article, we will briefly describe the features of the new Augur version 2 (v2) that is currently being released.

Although there will never be the presumption of predicting the future or solving problems as delicate as a pandemic, let's try to understand what the Augur project and how it could be useful in similar cases:

  • Augur is a protocol for the creation of what is defined as “prediction markets”, markets capable of using the oracle function within a specific context.
  • Augur is an architecture of contracts written in Solidity capable of interacting with the Ethereum blockchain and combining the theory described above to create a platform that can be used by everyone in a secure and decentralized way without an intermediary.
  • Augur is a platform Where anyone can create a market for a future event, regardless of the event itself, seed funding and liquidity must be available.

The creators of the prediction market, or more simply of the bet, receive a monetary incentive from the rates generated by the market itself, since users buy and sell stocks related to the event being monitored.

It is not a new idea, prediction markets have been around for some time, but Augur is the first to decentralize.

Needless to say, thanks to Ethereum, it is not necessary to trust a central authority to report the result of the events inserted in the blockchain, the immutability of the data will be guaranteed.

With Augur, thousands of owners of REP tokens They will verify this result, making manipulation or error practically impossible.

Augur and its 4 parameters

There are many internal functions and a plurality of parameters, but we can simply summarize four fundamental points to understand the system in its assumptions:

  1. Assuming the value of each "share" (bet) amounts to one euro or one dollar, if a negative market share is worth 50 cents and if a positive share is worth 50 cents, there is a 50% chance that the event will agree with The system is true or false.
  2. If it is proven that the event has been confirmed, the shareholders who have given a positive answer to the question related to the event will receive one euro or one dollar for each share entered.
  3. The market price of a share during a trade is an estimate of whether an event is likely to occur.
  4. Users are not required to lock a price until the event occurs, as the shares can be freely traded within the Augur code until the last moment indicated as the maximum time by the creator of the predictive activity.

To analyze a practical application, one could, for example, imagine betting on a disadvantaged political candidate.

  • A user can buy shares for the alleged loser in the electoral round at a cheap price, for example, 10 cents;
  • As the campaign progresses, the opposition candidate loses the electorate due to a legal problem;
  • The price of that stock will certainly increase given the movement caused by the emergence of new evidence;
  • It is now possible to sell the stock at a higher price, say 60 cents, with a profit of 50 cents per share sold.

After the elections, thousands of users will report the result using the Augur token (REP), which means that the outcome of the event is not reported by a central authority, but by a large group of people participating in the Augur system.

Augur platform

The Augur ICO

According to the technical document, the distribution of tokens is as follows:

  • 8.8 million, 80% of the 11 million tokens produced, were sent to investors during the ICO.
  • 2.2 million tokens, 16% of the total, were distributed to the team and consultants,
  • 0.44 million, 4%, to the Forecast Foundation, a non-profit organization that is formally responsible for managing the project's maintenance, improvement, and promotion of the platform.

During the Initial Coin Offering, Augur raised 19053.92000 BTC and 1176816.43 ETH, for a total of USD 5,318,331.63 (average exchange rates in the last 24 hours after ICO).

The proceeds from this ICO will be used primarily to finance the development of Augur beyond its initial release.

ICO Augur distribution

The Augur Foundation

Markets and bets on Augur are created by individual users of the Augur protocol. But in order to direct the launch of a decentralized platform without a real owner in the early stages, it was necessary to establish a base.

The Foundation is comprised of a group of developers and technology professionals passionate about the potential of decentralized applications.

The Foundation does not administer or control, nor can it control, what markets, bets or actions people execute and create in the Augur protocol.

People who create a market using the Augur protocol must ensure that they comply with all the laws, rules and regulations of the local jurisdiction in which they reside.

Augur protocol markets are generated and established using Ether (ETH).

The fees in the Augur protocol go directly to the market maker and REP holders who report and question the results.

The Foundation does not receive commissions for shares, transactions, created markets or income generated by the use of the Augur protocol.

Augur Version 2

The launch of the new version is very close, in recent days, 501 problems have been closed on GitHub and only 61 remain open.

This is what the new version will look like:

  • New interface: The entire commercial application has been redesigned from scratch and is available in desktop and mobile versions. Higher speed and easier interaction;
  • Limits removed: no upper limit on the bet amount. There are no general limits or limitations on the platform as a whole.
  • DAI (USD) Betting: DAI is a stable currency tied to dollar value. 1 DAI equals 1 USD;
  • Better Odds and Lower Commissions – Augur's commercial rates are the lowest available (~ 1%) with no withdrawal fees;
  • Community debate: Augur v2 offers a social experience, with a chat and comments present on the portal. Augur is managed and owned by its own user community;
  • Universal Access – No matter who or how much money a user earns or where they are, they can always access Augur on the Ethereum blockchain.

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