“Doubt is unpleasant but certainty is absurd" -Voltaire Grab your coffee or boba. It's time to talk Augur and prediction markets.



If you're more interested in trading, feel free to skip to the last section where I share my trading updates and New Hampshire predictions 🔥



Antifragile Augur vs. (Fragile) FTX





After hearing some hype around FTX last few days, I finally gave it a peek. It’s a centralized derivatives exchange that lists cryptocurrencies and recently added contracts on the 2020 U.S. presidential election. There's a narrative floating around Crypto Twitter that FTX will somehow overtake Augur and become what "Augur was supposed to be." It's not hard to see where this notion comes from. It appears that in just a few days since their launch, FTX's election contracts have already drawn over a million dollars in open interest. And this is despite being KYC-ed and closed off to folks in the U.S., EU, and other regions. This hints at the demand around 2020 election outcomes, including the Democratic Primary, which I’ve argued is a dream market for Augur. I’m skeptical of FTX in the long run, but I think it’s likely that, along with other centralized players, it will “win 2020.” That is, offer the most liquid markets on this year's election cycle. I think that Augur’s biggest competitors in the short term will be centralized, even if they don’t pose a long-term competitive threat. Centralized, custodial things are easier and faster to build. And at first, they are easier to use. Augur’s greatest UX limitations stem from the fact that it is decentralized. For example, transactions are costly and slow, since they are running on "early day” Ethereum. These limitations will evaporate...but it'll take a while. Couple these realities with the fact that Augur hasn't moved fast enough to fully capture the election cycle, and things look more bullish for the likes of FTX...in the short term. But what about the long run? Augur is more radically decentralized than almost any project in crypto. I see this as the core, meta feature that enables the killer features that end users actually care about. Nobody cares about “censorship resistance” or “decentralization,” but they do care about open access, no limits, low fees, and not having their funds disappear…and these features are not possible or sustainable on a closed, censorable platform. At least it's not possible to have *all* these killer features at the same time. For instance, if you impose trading limits, you can open access to more jurisdictions and vice versa. But the winner in the long run will need all of these essential features. The radical decentralization of Augur informs every decision on how it is built. For example, a common question I get, even from some of the most informed investors in this space is, "why doesn’t Augur use a centralized stablecoin like USDC?" The reason is that if you’re building a protocol that may be used for derivatives or betting markets, you need something (more) decentralized like DAI, where funds cannot be frozen by a centralized entity. A prediction market protocol must be decentralized in order to be accessible anywhere, to survive long enough to succeed, and — this may be the most overlooked point — to attract a talented dev community. A centralized platform may fool some end users in the short run, but it won’t fool serious devs. Talented devs will build on things that are open and cannot be shut down. This creates a level of trust for builders that can never be achieved on a centralized platform. When you combine this trust with the trifecta of Open Source (anyone can access and build on Augur's code base and API) + Open Equity (anyone can get a stake in its success via REP) + Open Data (all transactions visible on Ethereum blockchain), you have the raw ingredients for a renaissance of dev and entrepreneurship activity. All this activity makes Augur more accessible and powerful, drawing yet more dev activity in a virtuous cycle. This is a big part of why I think it’s critical to ship v2 as soon as possible. It will be much easier to build momentum and establish a beachhead at the dev (and user) level during the 2020 Election Cycle. I believe that a flourishing dev ecosystem is one of the most powerful moats that can protect Augur from its real, long-term competition: other *decentralized* protocols. There’s no credible competition to Augur today in the decentralized PM space, but that could change.



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Trading Updates + New Hampshire Predictions



My main PredictIt position remains Bloomberg longs in a number of Super Tuesday states, which I wrote about here. These shares have risen 2-3x in the span of just a few weeks. I expect it will be time to start closing these positions in the next week or two but am holding for now while keeping a close eye on things. There's a lot of momentum right now for Bloomy, and the markets are mostly shrugging off the negative press today. The fact that this Bloomy baggage is coming to light weeks (rather than days) before Super Tuesday and on the same day as the first primary election, may actually be bullish for Bloomy, as this stuff was going to come out eventually anyway. Then again, maybe this is just my confirmation bias. Moving on to other trades... back in early December, when Biden had a convincing lead in PredictIt's Dem Nomination market, Sanders was at 19% (he's now at 48%), and Warren was level with Buttigieg, I wrote about why I was long Bernie and Buttigieg. Bernie turned out to be a great trade, while Mayor Pete was directionally right but with bad timing. He declined for a couple months before spiking again after Iowa. Heading into NH, I've closed out my Mayor Pete longs. I expect Bernie's odds to spike a bit higher into the 50s, but I think they're nearing overpriced territory. If Mayor Pete stages a surprise N.H. victory tonight, that will flip things...but I don't expect that. I think Bernie will win, but the biggest story that will move the needle in the markets will be Klobuchar outperforming expectations, hitting either 2nd or a close 3rd, ahead of both Warren and Biden. Of course, this is just a prediction and we'll see what happens!





From Poyo's PredictIt Discord



Friendly reminder: this is just a look at what I'm up to, not trading advice. I probably have no idea what I'm talking about here.



Say Hi Thanks for reading, guys. Feel free to say hi with any thoughts or questions, and I hope you have a great rest of the week. Happy predicting,

Ben