Augur's Real Use Case

Week 2:

My inspiration for this week’s blog post is tied to the event of the week: the Super Bowl. Being Canadian, I align more so with the Grey Cup than the Super Bowl, however I understand the magnitude of the event. Having been surrounded by teammates vehemently advocating for the Pats moneyline this week, I took a look at the first blockchain based prediction market: https://www.augur.net/

I first learned about Augur this summer through an investment thesis published by a member company of the Chamber of Digital Commerce- Multicoin Capital. They are an investment manager focused on digital assets. Augur is a prediction market built on the Ethereum platform. It uses its native token, REP, as a utility token to participate in the network and incentive users to report accurate outcomes of events. While I don’t entirely see the benefit of a blockchain in this instance, it does cut down on the cost of middlemen, which can be up to 16% on Fanduel. Cost cutting is certainly helpful for the network, but I am not entirely sure it is enough to incentivize users to buy Ether to then convert into REP and use the Augur platform. From the most bullish perspective, I could eventually see wide scale adoption in prediction markets not just for gamblers, but for tracking the price movement of assets. This would open up the possibility of a international derivative markets that provide more sophisticated avenues for investing in digital assets, such as short positions, options contracts, and futures contracts. While potentially bringing in more investors, it opens up the market for potential manipulation that must be monitored accordingly.

I hope to learn more about the token economics of the Augur model, however my impression is that relying on independent contributors to run the successful operation of the network is intriguing, yet highly risky. Only time will tell how effective the network is before it hits critical mass to exploit the network effect. The economic incentive for users to report market events and lose their token stake for inaccurate reporting seems logical. However, the project seems to be overestimating the number of users it can attract. For example, they cite weather forecasting as one of their biggest markets. I do not reasonably expect many people to be interested on wagering money on tomorrow’s precipitation.

Like many digital assets, REP has followed BTC’s lead in terms of price movement, as it peaked around December at $107 a coin and sits marginally above its ICO levels at $14. Spoiler alert: Multicoin Capital has since sold off their position in Augur. As far as its prediction tonight's’ game, it has the Pats at 55%, so I am hoping for that the power of open source prediction models will pay off on the Pats moneyline.

Enjoy the game,

Craig

EDIT: Pats Moneyline!!!!!!!!!