The decentralized Ethereum-based prediction market; Augur recently got listed on Coinbase, and has made waves back in the past when it handled more than $1.6 million in Ether volume during the US Mid-term elections. If you haven't heard about Augur before, or simply need to know more about it - this is the guide for you.
What is Augur
Augur is a prediction market that utilizes the collective prediction of the masses. The philosophy behind Augur lies in two things; democratized access to prediction markets and the power of crowd wisdom. It may be possible to use Augur to; "see the future" by creating a market and have people participate it in the thousands.
What is a prediction market? A prediction market is an exchange-traded market created for the purpose of trading the outcome of events. The prediction market has existed for many years but has been inaccessible to the public.
What makes Augur outstanding is its decentralized nature - Augur is not a single website. Every interaction on Augur is broadcasted and stored in the Ethereum Blockchain. It would be nearly impossible to shut down the Augur platform or block access to it - which means all predictions and bets will always be there once it's made.
What can you do on Augur?
Long story short, you can:
1. Place bets on predictions (and make profits if you're right!)
2. Create your own predictions and let others bet on it (earn fees as others place their bets)
Want to know how to get started? Keep reading on!
What is needed
Augur is an Ethereum Decentralized Application (Dapp), which to interact with you'll need to have the Metamask wallet (Chrome, Firefox & Opera). For the uninitiated, Metamask is the must-have wallet for you to interact with the Ethereum blockchain. It stores your Ether, is your identity on the blockchain, and connects your wallet to Dapps so you can interact with it.
There are two ways to access the Augur market; either via Browser or the Augur Full Node App on Desktop. On the Augur market you'll be able to either (i) place your bets, or (ii) create a prediction market yourself. If you only want to do betting, all you need is some Ether in your Metamask. To create a prediction market yourself, you'll need Augur's token - REP.
The REP token
The Augur platform's token is called Reputation (REP), an ERC-20 token. The reason it's called Reputation (REP) is that, it's literally what it means - for any action that uses REP, you stake your reputation to it. Losing and gaining REP is a direct result of your interaction with the Augur platform.
REP can be used to:
1. Create a prediction market (Refundable. REP token is a guarantee that you will not create malicious/useless markets that does not add value.)
2. Dispute an outcome
3. Purchase participation tokens
You can obtain REP by:
1. Purchasing it from exchanges
2. Reporting on a bet
3. Disputing an event and be correct
Withour further ado, let's head on to see how to interact with Augur! In this guide we'll show you how to place bets and create markets in a step-by-step manner.
How to bet/create a market on the Augur prediction market
I will be connecting directly to the Augur Network via the Augur Web App (Reminder: you need Metamask!). Alternatively, you can also download the Augur Desktop App. I prefer the Web App for simplicity's sake but if you prefer using the Full Node, you can expect ~10 - 15 minutes waiting time as it syncs as a light node while the Web App simply uses public nodes.
Betting on a Prediction
Your scope of betting isn't just limited to Cryptocurrency. Politics, the Earth, everything goes!
Once you're in Augur, you'll see a long list of predictions that you can bet on. For example, "Will the earth still exist at end of April 26th?" has three different outcomes:
No, 33.33%
Yes, and the Sun won't, 33.33%
The percentage beside each outcome represents the possibility of something happening based on what the Augur protocol knows. In this guide, we'll use the "Ethereum Price at End of April" as an example.
It's a tad messy and intimidating for sure, but let's take it one step at a time! For any given outcome, there will be an Order Book, where people can place orders to bet on their intended outcome. If your bet has a taker, it will be fulfilled and you will be betting against each other. If I place an order of 5 ETH on "Yes", someone else must also put 5 ETH on "No" in order for the bet to happen.
If you believe that the price of Ethereum indeed will between $50 - $500 at the end of April 2019, you may put in an order for that (Buy to bet yes, Sell to bet no). Based on the orderbook (see below), you can either fill someone else's order (partially or full) or put in your own order at a different price.
I think that Eth will be between $50 - $500 by the end of April 2019, so I will be taking up one of the sell orders to bet 0.108 Eth on "Yes".
Click on Confirm Buy and Metamask will prompt you to interact with the blockchain. And that's it! My order is completed and it will be shown under "My Positions" in the trade page.
Creating a Prediction market
While there are currently more than 150 different markets across various categories available to bet on at the time of writing, there'll be times where you can't find anything interesting to bet on. And that's when you create a prediction market yourself!
Remember how we mentioned that you could make a profit here by creating prediction markets? That's called the "Creator Fee". You define the % you wish to take amount once a market is complete. There is also another thing to note, called the "No-Show Bond" which is where Augur's Reputation token, REP comes into the picture.
To prevent users from creating markets in a spammy manner, Augur requires a certain amount of REP tokens to be "tied" to a market which is refunded once the market concludes in a satisfactory manner where there is a definite answer and has 0 disputes.
Alright, now that's out of the way let's get started on how we can create a prediction market!
On the left navigation bar of the main page, click on "Create" to proceed to market creation.
For this tutorial, we'll create a prediction market of "Will Bitcoin be above $20,000 at the end of June 2019?". It's worth noting that in terms of Market Creation, the Augur team has done a terrific job in creating an easy to follow UI. We'll run through them briefly for clarity purposes in this guide.
The steps to create a market, briefly are:
2. Set your Question - (BTC Price @ 1st July 2019)
3. Set Category (Cryptocurrencies) and Tags (Bitcoin)
4. Market Type - Yes/No, Multiple Choices, Ranges
5. Resolution Source - CoinGecko's Bitcoin price chart
6. Designated Reporter - Who will proving the results?
For practical purposes and dispute avoidance, the obvious choice for us would be to set CoinGecko's Bitcoin coin page as the Resolution Source.
In the next step, you will be given a choice to add some liquidity to your prediction market. This gives an incentive for others to bet on your market.
As a market creator, you will need to stake a fixed amount of REP token as a No-Show Bond. This Bond will be returned to you if the designated reporter shows up to confirm an outcome once the prediction market enters the Reporting Phase (1st July for our market!).
Once you've confirmed all the details to be correct, click Submit and you're done! Augur will interface with your Metamask app to prompt the transaction.
And voila! You've just created an Augur prediction market! While most of the prediction markets on Augur currently pertains to cryptocurrencies, it is possible to see bets on just about anything in the future. Feeling starstruck? Bet on Ariana Grande! Is the earth flat? Bet on the Earth. Politics? Got you covered with a bet on Donald Trump with over 400+ Ether in betting Volume.
Closing Thoughts
There is more to creating an Augur prediction market other than being a blockchain-powered bookmaker and collecting the market maker fees. For one, it is now possible to "Trade" on markets previously unavailable to the masses. It is also possible to hedge create a market that can act as a hedge position. A researcher may also tap into crowd wisdom by creating a prediction market and using the market depth as a way to "consult the Blockchain Augur".
The Augur Protocol represents a democratization of markets to the masses. With the blockchain, anyone can make a bet of any kind so long as it falls within the Augur terms of Use. Augur uses "The Wisdom of the Crowd" to accumulate predictive data and report event outcomes. The Augur platform's team members are experienced with predictive markets and have been iterating on their product for more than two years. They're also always on on the lookout for bug reports and suggestions - follow their development on their Medium page!
Market Research Analyst at CoinGecko and cryptocurrency fan since 2014. I like to geek out about things in the crypto space. You can read some of my stuff at kristiankho.com. Follow the author on Twitter @Kristian_Kho
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