Augur: Uber for knowledge

Augur’s REP sale ends on Oct 1st at 12pm EDT.



As I have already bought some REP, it is against my economic interests for you to buy some. Despite that, I do believe that Augur is worth funding and that buying REP has a positive expected value, though with substantial downside risk. If you are interested, I encourage you to read more about Augur and make your own decision. Caveat emptor.



What if we had Uber for knowledge?

It’s trendy in Silicon Valley to describe startups as “Uber for ______.”



Generally it conveys a marketplace where consumers can make on-demand purchases of a good or service provided by part-time producers. Often, there is a sense that this is a true win-win, because those producers (like an Uber driver) have spare factors of production (eg, a car and leisure time) that they choose to use rather than waste.



A large and liquid prediction market is Uber … but for knowledge. It allows anyone to get the best forecast humans can make by making use of the “spare” knowledge that resides in people’s brains but otherwise often goes unused.

While “Uber for knowledge” is somewhat tongue-in-cheek given the trendiness of the phrase, the analogy holds up pretty well.



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Prediction markets have often focused on predicting elections or sports contests.

Historically, prediction markets have been quite accurate. Both categories are good for prediction markets because there is lots of data available to help assess the accurate probability of any outcome.



Augur could revolutionize Wall Street.



Imagine if a bank or insurance company could hedge risk by simply starting a prediction market. Instead of paying a few eggheads with spreadsheets (who may or may not get it right) and/or spreading the risk around to other insurers, they could simply take a position in a prediction market.

For example, an insurance company with lots of exposure to Florida hurricanes could choose to create a market “Will Florida experience 2 or more hurricane landfalls from category 4 or 5?” Then, the insurance company can take a long position – if there are multiple category 4 hurricanes, then their position will increase in value, which should offset the cost of having to pay out the insurance claims for damages caused by the hurricanes.



If the forecast in a prediction market is incorrect, experts have an opportunity to make money by buying or selling (just like in the stock market) until the prediction market accurately reflects the probabilities.



Much of what Wall Street does is acting as a broker to connect hedgers with speculators/investors. If Augur is a cheaper, faster, and more accurate way to hedge risk, then Wall Street will need to evolve.



Why Augur?



What is great about Augur is that it is decentralized. That means that it should be safer than any centralized exchange. It also means that it is less vulnerable to the capricious whims of a regulator, just because he or she gets up on the wrong side of the bed that morning.



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How is it decentralized?



Augur is built on Ethereum, which is a distributed database with technology similar to Bitcoin. With Ethereum, developers can use a Turing Complete programming language to build decentralized applications on the Ethereum blockchain.



To shut down Augur, you’d need to shut down Ethereum. That means shutting down thousands of computers around the world across many different national boundaries and legal jurisdictions.

Will Augur change the world?

Maybe. As far as I can tell, the Augur team is very devoted to their mission and has the brainpower to figure out the technical challenges. UX and marketing could pose obstacles to success.



I hope Augur does change the world. I purchased REP, because I believe that prediction markets can be an cheaper and more accurate way to obtain predictions by utilizing otherwise unused human expertise.



Having better information about the future? That can only be a good thing.

