Interview With Jeremy Gardner of Augur
Recently, I had the chance to ask cofounder Jeremy Gardner a few questions about their upcoming platform built on the ethereum network Augur – a decentralized prediction market capable of harnessing the wisdom of the crowd. Check out what Jeremy had to say about Augur’s current crowdsale and what problems the technology can help solve.
Travis: Augur has been described as a decentralized prediction market using the wisdom of the crowd. What kinds of predictions do you see Augur being used for in 2-5 years?
Jeremy: Beyond standard prediction market applications (such as political elections), I believe Augur has the potential to displace the entire polling industry. So whether you want to find out what the best selling car brand or music album will be in 2016, or determine the winner of an upcoming election, it’s likely Augur will be the tool to use. Furthermore, the open-ended nature of the software means that financial tools like decentralized insurance and global stock markets can eventually arise.
The amount of potential for this platform never ceases to boggle my mind. The driving factor for what Augur can achieve is a matter user capture (how many folks we can get onto the platform.) That being said, if our crowdsale is any sort of indicator, this tool is well on its way to revolutionize the way we think about prediction markets.
Travis: Reputation, which is capped at 11 million units, can be seen as a sort of currency within the Augur system. How exactly will reputation holders be able to ‘referee’ and make money from the various markets?
Jeremy: Reputation (REP) is what makes Augur the most meritocratic cryptoeconomic/blockchain system in existence. REP serves as a sort of score attached to a user’s address, and allows those who own it to report on the outcome of events. Correspondingly, in order to maintain consensus in the network, every eight weeks, REP holders must report on a selection of prediction markets on Augur that have closed in that reporting cycle.
Reporting is an incredibly intuitive process: the REP holder is presented with a market, such as “Hilary Clinton will be elected president in 2016.” They then select “yes” or “no,” depending on what the outcome of the election was. If the person forgets to report, or votes against consensus, they will lose part of their REP. The lost REP is then redistributed to those that reported truthfully.
For providing this essential service (without REP, Augur would require third party, and centralized, oracles), reputation owners receive a distribution of the trading fees that are collected on every trade. Thus, as the system grows, and more and more predictions are made, the more trading fees reporters receive. Assuming Augur scales, this will become an incredibly lucrative proposition.
Travis: Your team is launching the crowd sale via purchase with both bitcoin and ethereum. Do you plan on porting directing to the bitcoin network once sidechains and other technologies become available?
Jeremy: Without a doubt. Despite some uncommon misconceptions about Augur, we are a group of diehard bitcoiners. We wrote our whitepaper as an outline of how to build Augur as a fork of Bitcoin Core. However, as we moved forward, we realized such an undertaking was impractical, and that Ethereum was a much more suitable platform for our endeavor. However, as soon as sidechains are made practical, Augur will be bitcoin-compatible. That has been, and always will be, our plan.
An important sidenote, however: I don’t think anyone that has closely examined our system truly believes that floating cryptocurrencies (i.e. bitcoin or ether) will be the primary tools for casting predictions on our system. Unless the prediction’s expiration occurs in a matter of days, no one, except the most bullish of blockchainers, would want to compound the risk of the prediction their making with the volatility of a floating crypto. Instead, we expect the primary means of wagering to be with stablecoins. There are several Ethereum-based implementations underway, but current stablecoins (under a very loose interpretation) can be seen as Tether or NuBits.
Travis: What are some of the biggest challenges your team faces approaching your Winter 2015/16 launch?
Jeremy: First and foremost, we want to establish the best possible line of communication with regulatory agencies. We understand that we are operating in an area of cutting age technology and unprecedented legal territory. The way the law has been written and interpreted today works in our favor (hence why we are undertaking this initiative). However, what happens in the future is unknown. Thus, we are taking a proactive approach to helping regulators understand and appreciate the power and democratizing potential of this blockchain technology.
Furthermore, we must undergo a series of rigorous security audits in order to ensure that our system has no gaping, or minor, flaws that could undermine the platform. It’s important to keep in mind that once a decentralized system has launched, the beast is out of the cage, and there’s no going back. So the system has to be as close to foolproof as possible.
We’re additionally doing some work to improve scalability and the user interface of the platform. We should have a beta around Christmas that gives a much more comprehensive sense of what Augur will look like at launch.
Travis: As I understand, reputation holders will lose power as they report less regularly and less accurately. Does this mean I can never go on a vacation again?
Jeremy: Not at all! First of all, reporting periods are a month long. So unless you’re working at an investment bank or in Congress, you’re probably going to be able to find a period of an hour or two, six times a year, to report on event outcomes. It’s really not particularly effortful.
Secondly, a huge perk of being built on a programmable, smart contract-based blockchain, is that there are a lot of cool ways to alter the system in ways that are more amenable to users. What I mean by this is that you can give access to your REP’s reporting abilities via a smart contract, without any fear of the person reporting for you running away with it. (The only concern would be the person reporting for you doing so incorrectly, or dishonestly, causing you to lose REP.) But if Augur works, I guarantee that for-profit businesses built around the platform will provide insured custodial services in the case that you need to step away from reporting for a few months.
Travis: Thanks for taking the time to speak with us Jeremy.
Jeremy: My pleasure.
Be sure to check out Augur’s official page for all the details and up to the minute developments of the crowdsale.
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