Prediction markets are fascinating financial instruments which have proven to be accurate at making predictions on things like the outcome of elections, geopolitical events and sporting events. But in our heavily regulated financial world, they are the subject of much controversy. In 2013 for instance, a well-known US prediction market, Intrade, was forced to shut down following a civil suit filed by the CFTC. While some people consider prediction markets to be a useful tool for society, others consider them to be a form of gambling, which is one of the reasons why they have been met with such resistance in certain countries. A purely decentralized prediction market would operate outside the scope of the regulated financial world and be resistant to censorship and outside intervention. We’re joined by Joey Krug, Co-Founder and Core Developer at Augur, a decentralized prediction market built on Ethreum. The project, which was initially meant to be a Bitcoin sidechain, has ported to Ethereum and is currently in beta on the Testnet. Users can forecast real-world events, such as the outcome of the US election, and earn profits if they are accurate in their predictions. Reporting on events is crowdsourced using a consensus-based system similar to proof-of-stake. Topics covered in this episode: How prediction markets work The controversy around prediction markets The Augur project and what it is trying to achieve The evolution of Augur The different components of Augur Reporting on events and the reputation token Security, attack vectors and how they can be mitigated Augur’s business model The ethical aspects of prediction markets Augur’s structure and governance Episode links: Augur Augur Git Repo Augur Docs EB139 – Martin Köppelmann: Gnosis – The Ethereum Prediction Market EB97 – Paul Sztorc: Truthcoin & Prediction Markets, From Information-Overload To Crowd Intelligence EB98 – Robin Hanson: Futarchy, Prediction Markets And The Challenge Of Disruptive Technology EB141 – Ralph Merkle: Revolutionizing Democracy Using DAOs This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/143

Legendary scientist and cryptography pioneer Ralph Merkle joined us to discuss his recent paper on DAOs. Merkle examined how the voting mechanisms in today’s democracies are flawed and how a decentralized, transparent DAO making decisions using prediction markets could create more efficient democratic systems. Topics covered in this episode: Merkle proofs, Merkle Roots and his early forays into cryptography Blockchains as living organisms Why DAOs will be subject to a Darwinian evolutionary process Why voting is flawed and we need new governance methods to save democracy The concept of a DAO democracy How prediction markets and futarchy would help govern a DAO democracy Episode links: Ralph Merkle DAO Democracy Paper [PDF] Ralph Merkle's Homepage Ralph Merkle's Wikipedia page EB98 - Robin Hanson: Futarchy, Prediction Markets Tim Urban: Why Cryonics Makes Sense Alcor - Life Extension Foundation This episode is hosted by Brian Fabian Crain and Meher Roy. Show notes and listening options: epicenter.tv/141