Prediction Markets and Aether United

At Aether United, we’re building an eSport team where decisions are made based on a prediction market. It will work like this.

Person A wants Aether United to win more games, so he opens up a market for the question: “Will New Player A win more games with Aether United then Old Player B by December of 2017?”

If more people bet on Yes, then Player B is replaced with Player A. If Player A outperforms B, then those that bet Yes will get a return. If it turns out that Player A performs worse than Player B, then the No voters will get a return.

If more people bet No, then Player B stays and everyone gets their money refunded.

By doing this, we hope to be able to aggregate knowledge from a wide variety of people and use crowd wisdom to make better decisions. However, this is just the beginning. Aether United is only a test platform for larger uses of prediction markets. If Aether United succeeds, then it is very possible that these markets can be implemented to help get rid of fake news. For example, if news was released that said “Iraq has weapons of mass destruction”, a market could be made that asks, “Will WMD’s be discovered in Iraq by X months?”

Crowd Wisdom

By aggregating crowd wisdom, news can be fact checked and determined to be true or false. Of course, this isn’t perfect and there will be false positives or negatives, but it will be much costlier for organizations to try to sway public opinion through false information.

In addition to validating news, prediction markets can also help in governance decisions. But before these dreams are made into a reality, prediction markets have a number of challenges that need to be overcome. I’ll be discussing some of these in a future article. If these challenges are solved, then democracy and governance can be drastically changed for the better.