In four words or less: Blockchain Based Prediction Market
Augur (REP) is a decentralised oracle and prediction market platform built on the Ethereum blockchain. Augur allows participants to bet on anything. As long as the outcome can be verified in the real world, users can create a prediction market for anything from an election, to a sports game or the weather. Unlike traditional betting markets, no single party sits in the middle, allowing for lower fees. With Augur, the creator of a prediction market designates a reporter to vet the outcome. The reporter puts down a deposit of REP tokens, which they lose if they incorrectly report the outcome. The reporter is compensated through fees. Users can buy and sell positions in particular predictions, priced according to the likelihood the market attaches to each outcome.
Properties of Augur:
Augur aims to create a prediction market based on the “Wisdom of the Crowd” the idea that the average prediction of enough people is more accurate than a small number of experts. Augur is the largest and most complex application deployed on Ethereum. It’s developers took two years to launch its BETA product due to this complexity. The REP token is an Ethereum-based asset, which launched on the Ethereum mainnet in the summer of 2018. The REP, or Reputation token, has a fixed supply of 11 million, all of it in circulation. The REP token is used to create marketplaces and pay for outcome disputes. Augur also uses Ethereum for trading and betting. The platform is open-source.
What problems does Augur solve:
Augur gives anyone the ability to create a prediction market. Companies can get insights into what the market thinks, users can monetise their knowledge, or hedge against catastrophic events like natural disasters, market crashes, and geopolitical upheaval by betting that the event will occur.
Adoption and Penetration:
The Augur digital asset REP is tradable through some of the largest exchanges. However, the distributed app for creating prediction markets and placing bets is used sparsely. On some days, Augur’s distributed app has less than 50 users, and growth is still to happen for this project. However, the Augur team have stated they expect slow and steady growth and have not yet done any marketing.
Risks and Limitations:
The biggest risk for Augur is the need to grow the real user base, which is extremely small. The appeal of the distributed app is also uncertain, as user-generated marketplaces without moderation may turn to betting on controversial events, such as the death of public figures. On a positive note, the Augur project is one of the few ICOs to launch a usable product.
The additional risk for REP comes from market speculation, which sees the price fluctuate significantly. REP has moved above $100 during the boom of the crypto market, and has fallen back again to pre-boom levels. The Augur start-up also may see its funds dwindle, as it sold all of its Ethereum immediately after the ICO, at extremely low prices back in 2015.