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