🤔 What is Augur ?
Augur is a decentralized platform to create and bet on outcomes of a future event.
💡 Tokens used in Augur
- Stable coins: Stable coins like USDC and DAI are used to buy bets.
- REP:
- REP token is not a currency. It is not required to place bets(stablecoins are used to buy bets).
- It is Augur’s reputation token. It is used for:
- Create a market.
- Dispute outcome of market.
📝 Origin of Enjin
Jack Peterson and Joey Krug founded Forecast foundation to develop Augur in 2014. The team raised $5.5 million by selling 8.8 million REP tokens during initial coin offering in 2015.
Augur was launched on Etherium main net in 2017.
👴 Founders
- Jack Peterson:
- Jack earned his Bachelor of Science (B.S.) in Physics and Genetics at The University of Georgia in 2007 and Doctor of Philosophy (Ph.D.) in Biophysics at the University of California, San Francisco in 2012.
- He worked as Maths instructor at Oregon state university and freelance software developer at Tinybike interactive before founding Augur in 2014.
- Joey Krug:
- He briefly attended Pomona College and studied computer science before dropping out in 2014.
- After leaving college, Krug worked as a game developer at Dark Paradise Studios. Later he founded MariPoS.
- In August 2014, he co-founded Augur and is part of the core development team.
- He also works as co-chief investment officer of Pantera Capital, a cryptocurrency-focused hedge fund. Krug is also advisor to crypto projects such as TIon, 0x, doc.ai, and Numerai.
😌 What problems does it solve ?
Humans have been betting for thousands of years.
However, the prediction markets still faces 2 major problems:
- Requirement of a trusted third party to maintain and operate the system.
- A truthful judge to report and endorse the result of the bet.
Augur uses blockchain to establish trust and record truth, removing the need for a trusted honest third party:
- Augur is a peer-to-peer platform. No third parties are involved, which usually take a large cut as trading fees for making and maintaining the market.
- Anyone can create a new market for any event that will have a well-defined outcome. People from anywhere in the world with an internet connection can place bets on the outcome of the event.
- Augur can also be used to hedge risks. People and organizations can buy shares of the unpleasant outcome to protect their downside.
- Gambling is illegal in most parts of the world. Augur is a decentralized protocol that cannot be censored. People can use it to make and bet on prediction markets.
- Most news channels are biased and have hidden agendas in forming public opinion about upcoming events. One can get a truer picture of actual probabilities of the outcome of the upcoming event by checking Augur where people’s opinions are backed by actual money.
🤖How does it work ?
Players in the ecosystem
Various participants in the Augur ecosystem are:
- Market creator:
- They create a market for an event that will happen in the future.
- They provide initial liquidity(order book) to the market.
- They also set fees that will be paid by users betting on the events.
- They also need to lock REP tokens and specify the reported who will report the outcome.
- Bettors:
- They buy shares of the outcome they feel is more likely to occur.
- They are rewarded in case their prediction turns out to be true.
- However, shares of outcomes that did not happen turn worthless after the event takes place. Holders of these shares lose their initial investment.
- Reporter:
- The reporter designated by the market creator reports the outcome within 3 days of the event taking place.
- REP Holders:
- REP holders can stake their REP tokens to raise a dispute in case they do not agree with the designated reporter.
- In case of dispute, all the other REP holders report the correct outcome.
- REP holders truthfully report the correct outcome because otherwise their REP tokens are slashed in case their response is different from the consensus.
- REP tokens of dishonest voters are distributed among honest voters
How the process works ?
- Market creation:
- Market creator makes the market for an event.
- He provides initial liquidity by minting equal number of shares for event occurring and not occurring.
- Initially, the price of both the share is .5 cents.
- Market creator sets a fee that will be paid by bettors for buying the shares.
- He also has to specify who will report the outcome of the event and deposit REP in a no-show bond.
- Trading:
- Bettors buy the share of the outcome they feel is more likely to occur.
- As a result, the share price of more likely event increases.
- Overall, the market prices of the share of the outcomes represent their probabilities of occurring.
- Event happens
- Reporting:
- Designated reporter reports on the outcome within 3 days of event taking place.
- In case the designated reporter does not show up, any one can report the outcome and claim REP tokens deposited by the market creator in no show bond.
- Participants can stake REP tokens to raise dispute in case they do not agree with the reported outcome.
- In case of dispute, other REP holders vote on the correct outcome.
- REP tokens of dishonest voters(whose response does not match the consensus) are distributed among the honest reporters as reward.
- Participants can keep escalating the dispute by staking additional REP tokens and a similar voting process takes place again and again.
- The Augur universe splits into two(one in which the event occurred and one in which it did not) when the stake for dispute reaches 2.5% of the entire REP supply.
- In this case, all the REP holders have to migrate their REP tokens to the universe they feel represents the true outcome.
- All the market activity and value migrates to honest universe because:
- Why would participants stay in a universe in which reporters do not report the correct outcome?
- Early migrators are rewarded with additional 5% REP tokens if they choose the universe which has the consensus.
- Settlement:
- The price of share of outcome that actually happened becomes equal to 1 dollar. Whereas, price of share of outcome that did not occur becomes 0.
⚙️ Demo
How to create and place bets on Augur 👇
How to use REP 👇
🏛️ Governance model
- Augur is not governed by any DAO.
- Augur team also does not control or upgrade Augur protocol.
- Its governance structure is similar to Etherium, where the only means to upgrade the protocol is through a hard fork.
Forecast foundation
- It is a non-profit which was set up by Jack Peterson and Joey Krug to develop Augur in 2014.
- It raised $5.5 million by selling 8.8 million REP tokens during initial coin offering in 2015.
- The foundation also retained 4% of REP tokens for funding future development.
- However, the foundation does not own Augur. It does not receive any fees from the use of the platform.
- They maintain the open-source version of code and work on future developments. However, users are not forced to use the upgraded version.The actual upgrade takes place just like Etherium: hard forks.
🤑 How much money does Augur have for future development ?
- The team raised $5.5 million by selling 8.8 million REP tokens during initial coin offering in 2015.
- Forecast foundation also retained 4% of REP tokens for funding future development.
- The team does not have any other source of funding or a profit model.
👍 Tailwinds
- Rise of online gambling:
- The number of gambling sites and online bettors is increasing. Google trends result for “online gambling”:
- First mover advantage:
- It is one of the oldest crypto projects which has undergone a number of bear markets.
- Network effects: More number of bettors will attract more market creators. More market to bet on, will attract bettors. This positive feedback loop has the potential to cause exponential growth.
Controversies
Matthew Liston filed a lawsuit against founders and initial employees of Augur. The lawsuit states that they committed acts of fraud, breach of contract and trade theft that left him empty-handed without a stake in an initial coin offering (ICO) and bound to a broken settlement agreement that ignored him as a co-founder.
Liston is seeking $38 million in general damages and $114 million in punitive damages for a total of $152 million in collective damages.
Matthew Liston 👇
😨 Risks and challenges
- The team launched Augur in 2017. However, since then it has not been able to get widespread adoption. There are hardly any market and liquidity to trade.
- Augur does not have a DAO. Forecast foundation works on developing new updates however, the actual upgrade takes place by a hard fork – like Etherium. This slows down the development and decision-making process., which is a necessity for a new project, still under development.
- Its founders and initial team have moved on and have started working on other projects:
- Jack Peterson now works full-time as a scientist at INDY labs 👇
- Joey Krug cofounded Eco and works as Co-chief investment officer at Pantera Capital 👇
- There are thousands of sports betting sites and gambling events taking place all over the world. However, they have not made any partnerships till now !
- Development, raising funds and building community would have been much easier if the team has formed Augur DAO to govern Augur.
- Augur native token REP would have been much more valuable if it was used for buying bets instead of Ether and stablecoins.
- Prediction markets are strictly regulated by governments all over the world. They will also try to regulate or ban Augur platform and delist REP tokens from exchanges.
- Augur is built on Etherium, which is a public blockchain. Governments can easily track blockchain transactions and punish citizens using Augur for gambling. A project like Augur should have been built on an untraceable blockchain.
- Project like Augur might take years to build and mature. The team does not have any ongoing source of revenue. They might lose interest in developing Augur once their funds run out.
- Augur is built on Etherium smart contracts. This exposes it to risks and challenges outside its control.
- Users can use Augur to create any type of betting market. It is also possible for users to create a betting market for someone’s murder. This could motivate someone to commit the actual crime for monetary benefit.
💰 Tokenomics
Augur team distributed REP tokens as follows during ICO 2015:
- Public sale: 80%
- Founding team & Forecast foundation: 20%
Token Inflation
REP token does not have any inflation because all of its fixed max supply of 11 million, is already in circulation.
Demand pressure
Token’s price increases due to demand pressure.
Demand pressure on REP tokens will come from:
- Market creators: They will acquire REP tokens to stake in no show bond required to create a market.
- To raise dispute: Users have to acquire and stake REP tokens to raise a dispute over an outcome.
- Report: Users can also stake their REP tokens and report outcome in a dispute to get compensated for their work.
- Speculators: They will acquire REP tokens in hope of future price appreciation.
Market opportunity
Online gambling is a multi-billion dollar market growing every year.
REP token is not equivalent to owning a share of gambling company. However, it is used for maintaining and resolving disputes in the Augur ecosystem. Number of disputes, reporters and market creators needing REP tokens will increase as it captures more and more market share.
🧐 Indicators to watch out for
- Number of markets created is reducing:
- Volume on Augur markets is decreasing:
- Their Youtube channel is not growing:
- Their Twitter growth is slowing:
👋Final remarks
Public figures can use it to voice their opinion. A person is much more credible if he creates a market and bets real money where his mouth is.
After all, Augur is a gambling platform and gambling is an addiction. Like any other tool, Augur also has the potential to cause more harm than good to society if it gets widely adopted.
😊 Do further research
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