What Is Augur?
Augur is a decentralised prediction market which can forecast the outcome of an event based on the 'wisdom of the crowd' principle. With this method, information collected from the crowd is averaged into the most realistic possibility and therefore the most probable outcome. Correct predictions are rewarded by the network, while incorrect reporting is penalised - this incentivises truthful reporting.
The Augur aims to revolutionize prediction markets, and, in doing so, changing the way people receive and verify 'truth'. The main idea is to make more accurate predictions by large groups of people, rather than a small team of experts.
Augur is also the first major decentralised application (Dapp) developed using Ethereum , and represents a major proof of concept for this underlying technology. Decentralisation ensures that Augur cannot be censored by governments that deem prediction markets as gambling, whilst ensuring the sustainability of the application. This decentralised nature ensures honesty in reporting the outcome of events, using crowd wisdom to cancel out individual frauds.
Augur's crowdsale raised more than 2,000 BTC and 100,000 Ether on its first day. It ran from 17 August 2015 until 5 September 2015. The platform is currently in beta phase.
The backbone of Augur is tradable tokens called Reputation (REP). The total amount of Reputation is fixed at 11 million coins when it was launched in August 2015. The tokens give the right for individuals to report or weigh in on the outcome of events. It can be earned by people who provide truthful reports.
Additionally, people who submit correct predictions are also awarded a portion of the winnings whereas people who report against the consensus (untruthfully) will lose their REP tokens and earn nothing. Furthermore, the more REP a user has, the more value or trust is assigned to that person's input.
In other words, Reputation tokens are gained and lost depending on the reliability of users votes with the consensus. The Augur Team released an infographic to explain how the Reputation tokens work.
What Predictions are Used For
People can set up events in any topic and buy shares for the possible outcomes of those events. Ether and bitcoins are accepted in the platform. The algorithm will then work with the crowdsourced information and provides top predictions based on consensus. Once the event is concluded, the funds associated with shares of the correct outcome are distributed to 'winners'.
Augur can be used beyond mere betting platform. Joey Krug, co-founder and lead developer of Augur said that the platform 'could be used by farmers in Argentina to hedge against weather cycles or by Chinese traders who are unable to access the US stock market', and even suggests that 'prediction markets could be used by doctors to more accurately diagnose patients.'
Prediction markets are not new concepts, but it's highly decentralised nature means that Augur is somewhat unaffected by limitations set by regulations.
A bond posted by anyone to have an Open Market re-adjudicated by every reporter. If the consensus remains the same when the market is resolved, the Appeal Bond is paid to reporters to supplement trading fees.
If the final consensus is different than the one appealed when the market resolves, the Appeal Bond is doubled in value at the expense of reporters that reported in opposition to the consensus and sent to the Appeal Bond poster.
When a chain of transactions splits into two seperate time-lines due to irreconcilable disagreement. When a Fork Bond is posted towards an appealed market this conensus disagreement creates a time-line in which the original consensus is valid and another where it is not.
This duality should eventually collapse as the invalid fork rapidly loses all value. This collapse of activity and value is monitored by the Augur system to autonomously select the honest fork for Open Markets.
Early Resolution Bond
A bond paid by anyone to request a market be resolved before its expiration date. It is returned to the poster if the next consensus from reporters is anything except “Market is not ready for early expiration,” which results in the bond being paid to the reporters.
A bond posted by anyone to have the reputation history fork in order to contest the consensus that resulted from an appealed markets re-adjudication. In the first fork of reputation, reputation is adjusted as if the previous consensus is correct. The fork bond is distributed respectively to all reporters that committed to this consensus.
In the second fork of reputation, the fork bond is returned to the bond poster. In addition to the standard 20% penalty, all reporters that committed to the previous consensus pay a penalty of X\%\ of their reputation holdings where X is the percent of all reputation spent on the Fork Bond.
Getting Started With Augur
Augur is a decentralized open source prediction market, in Augur you will be able to make a prediction on anything and users will be able to buy or sell shares in that prediction based on whether they think it will happen or not, this could be anything from the weather, to the winner of an election.
It is effectively betting however the price of each contract will add of to $1 so if the chance of an outcome happening was even money the contract would cost 50 cents each and you could buy or sell as many as you wanted. The price of a contract will also automatically adjust based on the number of contracts being bought or sold.
Users will also be able to report on outcomes this will earn them reputation and dependant on how much reputation an individual has will depend on how accurate their outcome reports are. Augur is built on the Ethereum blockchain as it will run on smart contracts, there is also talk that it will run alongside the Bitcoin blockchain so that both Ether and Bitcoin are tradeable within Augur.
What is Reputation ($REP)?
Reputation is the token behind Augur, and can be thought of as the “score” of an individual participant within Augur. Reputation is not an investment, but rather a tool necessary to make Augur work. The vast majority of Augur participants will never hold, see, or need to use Reputation. However, it’s extremely important to understand how Reputation works in order to fully grasp the Augur platform.
Reputation tokens are limited to a fixed supply of 11,000,000, of which 80% was sold in our public token sale last year for a collective ~$5,300,000. Those who hold Reputation are expected to report accurately on the outcome of randomly selected events within Augur every few weeks.
If holders fail to report accurately on the outcome of an event, or attempt to be dishonest – the Augur system redistributes the bad reporters Reputation to those who have reported accurately during the same reporting cycle.
It’s important to note that you do not need Reputation to use Augur. Reputation is only used by reporters to report on the outcomes of events. Regular participants making bets on the platform will use Ether, or any other Ethereum sub currency. We hope to see the utilization of stable-coins in the future for settlement of markets.
What are the benefits of owning $REP?
By owning Reputation and participating in the accurate reporting on the outcomes of events, you are entitled to a portion of Augurs market fees. Each Reputation token entitles you to 1 / 22,000,000 of Augurs total market fees.
The more Reputation you own and report correctly with, the more in fees you will collect. The Repulator Calculator made by an Augur community member will give you a rough estimate of expected earnings.
How do I purchase $REP?
If you missed out on purchasing during the token sale, you can still get your hands on some REP. Reputation is now sold on a number of third party crypto exchanges and markets, including Poloniex, Kraken, Bittrex, Gatecoin, and ShapeShift.
Please be careful and weary of OTC trades in Slack groups, Bitcoin forums, etc. It’s suggested to purchase through an exchange for the increased safety of your trade. If you are looking to purchase a large amount, it’s recommended that you get in contact with an Augur team member and we can help point you in the right direction.
How do I safely store my $REP?
It is highly recommended that you store your Reputation in an offline, cold storage solution. Please do not leave large crypto holdings on centralized exchanges. Nor should you have a backup of your private key in your email, on your desktop, in your Google Drive, etc.
The Ledger Nano S is a great hardware wallet solution, supporting all ERC-20 Ethereum token types. Your Reputation will be safe on one of these. We hope to have Augur support Ledger integration, meaning you can participate on Augur without ever having Reputation leave your Ledger.
How To Get A Augur Wallet?
Anyone that has a Reputation Token. Reporters vote on the outcomes of Augur prediction markets that have reached their expiration dates in order to resolve the market. Reporters lose reputation tokens if they report false results and are paid for their labor with market trading fees. Reporters lose up to 20% of their reputation tokens if their reports conflict with the final consensus.
Reputation Token (REP)
A tradable asset numbering 11 million tokens whose possession makes its owners the reporters of Augur’s platform. Each token entitles its owner 1/22-millionth of all market trading fees in return for faithful reporting on market outcomes. Below is a guide to REP tokens.
Augur has an internal digital token called Reputation that traders and market creators don’t need to know about or use. Demand exists for the token because ownership is the only way to obtain half of the fees on the Augur platform. A limited supply exists of 11 million due to mathematical proof of ownership and a consensus of honest transaction validators.
Ownership of Augur reputation grants the right to be paid in exchange for providing information to Augur. Ownership of Reputation is conditional and will be confiscated if you fail to show up for work or report information that conflicts with the final consensus. Each reputation token you own grants you a 22 millionth of all fees on Augur.
Reputation comes with a limited scope of work requirements. At the start of a reporting period markets are assigned for you to report on. You are required to report on all markets assigned before these 30 days end. Failing to report on some markets will have a chance of fining you up to 20% of your reputation.
Afterwards there will be a 29 day reveal period. To fulfill your obligations for the reveal period you must simply log in once during these 29 days. There are no other work obligations. If you choose to take a vacation, your reputation can be moved to the dormant state. Once dormant your rep cannot report, cannot earn trading fees, and is not subject to redistributions.
Reputation has the following traits:
- Can be sent between anyone’s accounts.
- Balance is independently determined by Augur.
- Total quantity of 11 million created and distributed upon system launch in accordance with the original terms of the 2015 crowdsale.
- Divisible by 10^18.
- Grants owner voting power on market resolutions.
- Power proportional to stake to vote on development decisions of Augur.
Reputation can decrease for the following reasons:
- Committing to an outcome that differs from the final outcome of a market.
- Failing to report on assigned markets while reputation is in an active state.
- Purchasing a fork bond.
- Sending reputation to another address (including, but not limited to, trading it through a cryptocurrency exchange).
Reputation can increase for the following reasons:
- Committing to an outcome that is the same as the final outcome of a market when others did not.
- Reporting on assigned markets when others did not.
- Posting and winning a fork bond.
- Receiving reputation from another address.
The role of a reporter is to report on the outcome of expired markets for the purpose of revaluing the remaining shares. Explained below are the costs benefits and general strategy for reporters.
- Opportunity cost of owning reputation.
- Labor cost of reporting on markets.
- Financial cost of failing to report on assigned markets.
- Financial cost of reporting against the consensus from other reporters.
- Decreases in the market value of Reputation.
- Decreases in the market value of currencies used for fee payout.
- Fees for reporting on markets.
- Financial reward for reporting on markets when others do not.
- Financial reward for reporting in agreement with consensus when others do not.
- Increases in the market value of Reputation.
- Increases in the market value of currencies used for fee payout.
- Quickly make determinations of market outcomes.
- Report on all markets assigned.
- Report in agreement with the consensus of other reporters.
- Support the growth of the Augur customer base.
- Convert income to currencies that do not decrease in value.
The last 24 hours of the Reporting Period. When the Appeal Period begins the Augur platform runs the reported data through analysis and determines the current consensus for each expired market. During the appeal period the consensus outcome can be contested by anyone willing to post a contesting bond.
Each time a consensus is appealed, a new consensus is obtained from a more reliable and more expensive source. The first appeal increases the number of reporters to every single reporter.
The second appeal ignores reporters and instead determines consensus using market forces. If a contesting bond is not paid to a market during this 24-hour period the consensus most recently determined becomes the final consensus.
The first 30 days of a Reporting Period. During this time reporters are required to log in and submit encrypted reports about the markets they are assigned.
An additional outcome option given to all reporters to choose if none of the outcomes defined by the market creator are verifiable.
A tradeable asset numbering 11 million tokens whose possession makes its owners the reporters of Augur’s platform. Each token entitles its owner 1/22-millionth of all market trading fees in return for faithful reporting on market outcomes.
The 29-day period after the Reporting Period. At least once during this period every reporter must briefly log in to decrypt the reports they submitted.
Limit Order - A request to automatically buy or sell shares as long as the price is equal to or better than the limit you specify. For example: “I predict this event has at least an 80% chance of happening, please buy any shares selling at less than 80%” OR “I predict that this event has less than a 40% chance of happening, so if anyone is buying shares for more than 40%, please sell my shares to them.”
Stop Orders - An order type which includes a specific trigger price which delays the entry of the order until the specific trigger price is met or exceeded. Once the trigger price has been reached by a trade, your order will be executed. For example you’re thinking: “If the odds fall below this much, I will no longer think my prediction is valid, so please sell my shares” OR “If the odds go above this much, I will be confident enough in my prediction to buy these shares”
Trader - Anyone who buys or sells shares in a prediction market. Traders make profit by selecting markets they are more knowledgeable about than the average trader. They trade shares in these markets based on their expectations about event probabilities.
How To Buy Augur?
Kraken Trading Augur Reputation Tokens (REP)
Kraken is pleased to launch support for trading Augur Reputation Tokens (REP). The Augur team expressed their excitement for this important step in the overall Augur launch, saying
We all know that Kraken is one of the top exchanges in the space. This is more important: we are personal fans of the overall Kraken trading experience. We use Kraken, we trust Kraken and – this true – even Joey Krug’s mom uses Kraken! We are elated that they’re featuring REP trading on their platform. We predict that trading of REP on Kraken will be strong. – Augur team
Built on Ethereum, Augur is a decentralized global platform for prediction markets. Augur allows anyone to create, trade or monitor prediction markets on any topic.
An essential service to the markets is a decentralized oracle that reports the final outcome of events the markets were predicting and this is where REP comes in. Owning REP and storing them in your private wallet grants the right to get paid in exchange for accurately and reliably reporting on the outcome of events. Reporters need only report correctly for the markets assigned to them but receive their share of 50% of the trading fees from all Augur markets.
The prediction markets will not be enabled until later (exact date not set – probably in a few weeks), so for now REP can only be transferred and traded on Kraken.
To learn more about Augur and REP visit the project website: https://www.augur.net/
What do I need to know to access my REP and send them to Kraken to trade?
Access your REP: For instructions see here http://blog.augur.net/2016/09/16/test-how-to-access-your-rep/ and here https://www.reddit.com/r/Augur/comments/55tjry/myetherwallet_prep/ (note that the wallet file is the same the key file).
Deposit your REP to Kraken: In your Kraken account go to Funding > Deposit > REP to find the address for depositing REP to your Kraken account.
Note: After the prediction markets are enabled (exact date not set – probably in a few weeks), note that REP deposited to Kraken are converted to a dormant state, meaning that it will be free from the reporting requirements. Also, REP withdrawals will be sent in the dormant state and must be activated after they are withdrawn for reporting. We have confirmed with the Augur team that there is no penalty or fine for REP held on Kraken in the dormant state (some of the Augur documentation suggests otherwise, but this documentation is out of date). However, to be eligible to earn a share of the Augur trading fees, REP first must be withdrawn and activated from the dormant state.
What Is Augur Mining?
Augur’s purpose is to democratize and decentralize finance. We’ll do this by enabling anyone, anywhere, at anytime in the world to create and speculate on derivatives at a low cost for the first time. If Bitcoin gave us decentralized currency and Ethereum brought decentralized computation, Augur will enable a decentralized financial system.
We have cryptocurrency, now we need something to use it with. As a side bonus, prediction markets give us better forecasts for the future, more direct hedging and speculation mechanisms, and finally fulfill the vision set out by Hayek and Arrow & Debreu long ago.
The first version of Augur will likely be somewhat slow and slightly expensive (think pennies and many seconds per trade), but it’ll certainly be a beautiful glimpse of what’s to come. Any new technology has higher costs in the beginning and lower costs once it’s more optimized later on.
The long term plan is to overtake all derivatives trading though liquidity and network effects, although in the beginning these limitations mean the first markets and activity on Augur will be surrounding new markets or markets that are currently expensive or limited in certain ways.
Think Chinese and Russian investors wanting to speculate on US stocks, or vice versa, people wanting to speculate on sporting events more cheaply, or people who just want to create a new market for something that doesn’t exist at the moment due to multi-million dollar startup costs for creating a new financial derivative. With augur we can remove that million and drop the cost down to “multi dollar.”
Since it’s run on Ethereum, it cuts out the middlemen and brings costs down to the economic minimum to operate things securely. On Betfair you’re paying 10%+ fees, on Augur it’ll likely be 1% or less. For the first time people will be able to trade on a censorship resistant, global trading platform without having to trust counter-parties. Liquidity will be truly global because Ethereum doesn’t care if you are from China or the US or Russia, you’re just a pseudonymous address.
Futures contracts will resolve without trusted third parties, but instead with a security model similar to Bitcoin or Ethereum themselves (vulnerable to 51% attacks, but always forkable in the event of one). In Augur’s case a fork is much more clear cut because it’s over reality, people won’t want to trade or make markets on a platform where it says Obama lost the 2012 US Presidential election. People will even be able to use leverage (using scalar markets on Augur you can effectively get leverage).
For example, a market on the price of Apple with a range of 150 to 250 is more levered than one from 0 to 300. Leverage is when for every dollar you bet your position is equivalent to some lever ratio, so 3–1 leverage means for every dollar your position goes up or down you actually lose 3 or gain 3 dollars. This is in contrast to margin, which is when you are borrowing money or shares to buy or sell. Margin with margin calls is functionally almost the same as leverage in practice.
Once 0x is out later this year or next faster trades and dark pools will be possible. 0x enables partially off chain trading so people can create, modify, and cancel orders quickly without having to post a transaction to Ethereum each time. This’ll also decrease costs for placing and taking orders in general. Dark pools being a desirable thing may come as a surprise, but big whales aren’t going to want to be moving the market by placing super large orders on the book, they’ll prefer dark pools just as they do in traditional financial markets. Proof of stake will help with faster trades as well since block times will decrease by about a factor of 3.
While the initial version of Augur will have markets denominated in ETH (which although that’ll work fine for short term trading / markets), for longer time horizon events the volatility will be too high. You don’t want to go long “Apple” on Augur, be right about the company, and end up losing money due to Ether volatility. The solution to this is to allow markets to be denominated in stablecoins, or cryptocurrencies that are stable with respect to the dollar or other fiat money.
Makerdao is working on stablecoins, and we do actually also get part of this to some degree out of the box. On Augur you can make a market speculating on the price of ETH in USD denominated in Ether as a way to get a rough stablecoin where one side is levered long ETH and one is short ETH but long USD. Since the collateral/currency it’s denominated in is in ETH the short side is effectively the stablecoin and the long side is effectively levered ether. If Maker is out by then and live it’ll likely be a superior option though.
We’ll also need to add the capability for automatic rollovers via an additional contract; I wrote a high level interface for a contract to do this the other day. The idea behind automatic rollovers is when you’re speculating on a prediction market, say an ETH-USD one, they have expiration dates like futures markets, so you can’t just buy one side and hold indefinitely.
An automatic rollover contract would buy perhaps the “What will ETH be at the end of June?” contract. When June is over it’d sell the complete sets for June and take the remaining funds and buy complete sets for the July contract. People would actually be buying shares in this pseudo-ETF that always owned the current month ETH price market and automatically rolled over by selling the last month’s positions each month.
This would enable users to just buy one asset and hold instead of having to exit each month and buy back in manually. Compared to regular futures contract rollovers, with this type people would just be paying the complete set fees, but not losing any money due to market movements from exiting and entering a position. Based on some napkin cloth math, they’d likely be a better deal, and certainly no worse than existing futures ETF tracking error (some of the top oil ETFs over the past year had a 75% cost compared to spot price returns, crazy)!
The main remaining piece of the puzzle is to enable more transactions per second, which means using sharding and/or raiden. This is probably the hardest and furthest off. My estimates for the various pieces that’ll help with it:
- — Proof of stake (about 1 year and perhaps a 3x improvement)
- — Wasm (2 years and a 10x improvement due to much more efficient and faster contract execution times)
- — Sharding (3–5 years is my estimate and a 100x improvement)
- — Raiden (1.5–3 years and a 1000x improvement)
Once we have it though, we’ll finally have a system that could take over all of the world’s derivatives markets, and that’s pretty damn powerful.
- 1. Release a v1 (“Buffett”) according to the release schedule, it’ll be cool, pretty, and a bit expensive
- 2. Integrate 0x and release a v1.5 that allows partially off chain trading so people can create, modify, and cancel orders quickly (“0/Zero”)
- 3. Integrate Maker once out (or if not out, explain how to use / create contract for difference stablecoins) and release a v2 (“Soros”)
- 4. Add automatic rollover contracts
- 5. Release a v3 with super high transactions per second using sharding and/or raiden (“Simons”)
If Augur is to succeed it needs to be 10x better than than any existing system, and this is what is needed:
- 1. Fees lower than current options available (e.g., \< betfair)
- 2. Censorship resistant and trustless global trading platform
- 3. Ability to create your own markets
- 4. Markets that resolve without a trusted third party
- 5. Stablecoins (cryptocurrencies that are stable with respect to the dollar)
- 6. Faster trades
- 7. Higher transactions per second
- 8. Margin
- 9. Leverage
- 10. Automatic rollovers
- 11. Dark pools
Latest Augur News
Announcing the Augur Bounty Program
Augurs lead developer, Jack Peterson, gave a preview into our bounty program at his talk during Devcon3 this year. Titled “Missing links in the Ethereum development stack”, Jack went on to discuss how the Ethereum development community is in need of additional public tooling.
Four bounties were announced at Devcon3, and now two have been officially scoped out and launched live. These include the “Safe Solidity Solium Rules” and a “Portable Solidity Debugger” for 1,150 REP and 2,000 REP.
Details for each bounty can be found at augur.net/bounties.
We believe these additions to Soliums linting rules will be beneficial to anyone developing with Solidity, as well as having a portable debugger. These bounties can be claimed by anyone, as long as your PR is merged into the main projects repo. Additional bounties will be added to this page over the coming weeks.
Solidity Migration & What’s Next
The new client is about 50% complete. Our speed of development has improved since the migration. The engineering team has been growing rapidly, and we’re finding employees easier to onboard at this time in the project.
We have a rough timeline scoped out internally for everything necessary to bring us to launch. Over the coming weeks, we will share some of these broken down timelines with you, as well as updating you with our weekly development updates.