On March 30th of this year, I wrote an article about Augur, and how I believe it is undervalued. It has been my most read article to date. Shortly thereafter life happened, and I was unable to devote much time to writing about cryptocurrency projects.

So let’s pretend that I am the Rip Van Winkle of cryptocurrency, that I went into a coma shortly after writing that article, and I am just now emerging from my long 9-month sleep. Has anything changed? Is my opinion of Augur different?

Ho Li Shit. The events of these past 9 months are insane, all in ways that support the thesis that Augur is THE crypto project to back. Let me explain.

In my original article, I cited several reasons why I think Augur will succeed. My opinion is only bolstered on these fronts:

I was excited because Augur will benefit from the success of the cryptocurrency space as a whole- new fiat into the space=money that can be used to gamble/predict/invest on Augur. At that time I absolutely gushed that the total market cap of cryptocurrencies had reached 25 BILLION!!!! Since waking up from my long sleep. . . yeah, the market cap sits at 500 billion. . .and counting. Multi-trillion valuation on the space is not unrealistic. More on how this will affect Augur’s valuation below. Scarcity: No change on this front. Augur issued 11 million tokens, and this will always be the most that exist. Thus, anything that adds value to the system will result in an increase in the value of the tokens.

(Edit: this is not entirely true- the total supply could increase by 5% in the event of a fork, but this would be distributed proportionally to Rep holders. So the total number could go up, but this would not be deflationary since Rep holders who participate in the fork receive the additional Rep) Need for Stablecoin- when I wrote the original article, I mentioned that one challenge that Augur will face is the volatility of cryptocurrencies. If a person makes a bet denominated in Eth or BTC, they are betting on the outcome of the event, but in the meantime, if ETH or BTC dramatically rises or falls, then effectively they are also betting on the value of the underlying cryptocurrency. At that time I noted that another crypto project, Maker, was working on creating a stablecoin, a coin that will be pegged to a $1 value, while remaining decentralized.

Well, today is the day that becomes a reality. Maker is releasing their stablecoin, Dai. This is truly a monumental day for the cryptocurrency world, and partly why I chose to write this article today. A functioning stablecoin will play an integral part in many different projects, Augur especially.

New Developments and Challenges

Augur has faced some challenges along the way. Their code had been written in Serpent, and after undergoing security audits it was determined that the language itself contained some risks that would not allow safe deployment of a finished product. The bad news is that this resulted in the need to rewrite the code in Solidity. The good news is that the rewrite is done, and the compiler portion of the code has since undergone a new audit, and was found to have no concerning flaws or vulnerabilities. The smart contracts will be audited shortly which is great news.

The team has onboarded multiple new employees, including a team to help on the UI which is still a work in progress. Making the UI work correctly with the underlying smart contracts and blockchain architecture, while being aesthetically pleasing and having a functional orderbook is, I believe, one of their biggest remaining challenges.

The team and community were jointly successful in creating enough interest in the project to merit Augur having its own Stack Exchange listing. In doing so, Augur joins an elite group of crypto projects that have reached this milestone, including Bitcoin, Ethereum, and Monero.

Of note, one significant change that has been made is the fee system. One of Augur’s main premises has been that the fees charged by other gambling sites or other prediction markets have been exorbitantly high, and Augur’s goal has been to offer similar services with very low trading fees. Originally the fees were going to simply be 1–2% of every trade, splite evenly between market creators and reporters. However, the team found that such a system would have some vulnerabilities, and have adjusted accordingly.

In a nutshell, the new system still allows market creators to choose any fee they like, and their fees will be separate from reporting fees. These fees will likely trend downward as the cost to create a market is minimal, and competition will put downward pressure on the rates market creators choose.

The major change is that reporting fees are only charged when traders exit their positions. These fees will be somewhat dynamic, depending on how much open interest there is. The stack exchange has some more detailed discussion of this, here, here, and here.

Interestingly, this new structure also allows for a way to valuate Rep. Some discussion (using somewhat outdated numbers for Eth values etc) on the stack exchange here. In summary, estimate what you think the open interest (amount of money tied up in bets) will be on Augur at any given time, and multiply that by 5. Then divide that by the 11 million existing tokens to find what the value of a single Rep token would be for that level open interest.

For example, at level of open interest of $250 million dollars, a drop in the metaphorical crypto bucket (which is again sitting at 500 billion and growing), Augur should be valued at $113. For an aggressive estimate of 1.5 billion open interest, rep would be valued at $681.

I don’t know what the open interest will be; no one does. I just know that I’m not selling my tokens while they are valued in double digits, and likely not while they are in the low triple digits!

I will end with one piece of information that I want to be clear is pure speculation and rumor- there has long been whisperings about Rep being added to Coinbase as they look to add to the number of tokens they offer. A true investor and believer in the project such as myself should not care about this; Augur should be valuated on it’s merits alone. However, listing on Coinbase will bring attention to the project, and potentially help expand the future user base. This is huge.

Disclosure: I am long Rep

BTC 1AX3C7zwMnjz7GfNvkJs3VfhnQnTBgJCuc

Eth 0x152C25504Ac57ef00694d5B0aB2dee1c48a17cdb