About 100 hours before the U.S. midterms election in November, an anonymous Augur trader spun up a throwaway Reddit account to comment on how he was almost single-handedly responsible (at the time) for the trading volume in the midterms market.

He had bet around half a million dollars worth of Ether that the Republicans would hold House majority.

From here on out, I’ll call this guy Joe Midterms, or JM for short.

By the time JM posted his Reddit comment, the midterms market was already the most wagered-on in Augur’s short history and destined to soon become its most notorious due to a subtle gotcha in market structure that sparked a drawn-out dispute process.

Much has been written on the controversy surrounding the market’s terms. But an angle that has gone mostly unexplored is why the market blew up in the first place. Why was this the first Augur market to hit a million dollars at stake? Is there anything we can glean from this on how to grow Augur and what sorts of markets might get the most traction?

I was curious about who this anonymous high-stakes trader was and why he chose Augur to place his bet. My thinking was that there are over 7 billion folks on this planet, so if we can figure out what unique traits drew this guy to be the first or one of the first persons to ever place a large bet on Augur, perhaps we can extrapolate that out to identify who Augur might appeal to most in its early days.

So I shot JM, the anonymous trader, a private message on Reddit. He got back to me with a detailed, thoughtful response and gave me permission to share his comments.

Here’s what I learned…

So first, the obvious. JM has cash and he has tech-savvy. This will eventually change, but these days you need some technical chops to trade on Augur. Your grandmother is probably not staking REP or shorting Grin derivatives anytime soon.

And while I’m a big believer that Augur will serve many people (and machines) someday, fiat on-ramping and trading fees can still be a barrier for low-stake trading. JM wrote in his Reddit comment,

I’m absolutely a fan now of Augur. I wasn’t initially since I found the UX hard and confusing. Almost gave up on it, but the lure of making an enormous amount of money was a good motivator. However if I only had a small amount of money to bet, I wouldn’t have bothered with Augur at all.

He’s also a crypto enthusiast and believer in Ethereum. Again, no surprise.

Here’s where it gets interesting. JM didn’t automatically settle on Augur. He looked into a number of betting venues and only landed on the p2p prediction platform by process of elimination.

He ruled out Ladbrokes and BetWin, two of the UK’s leading betting sites, due to betting caps of a few hundred dollars per wager. Obviously, this would not cut it for a high roller like JM.

He also checked out two other popular betting sites, sportsbetting.ag and betonline.ag, but they limit winnings to $150K a day. Not only that, but at some point, they removed odds on the midterms. He emailed them to inquire about this and they said they might open those bets up again in the future.

JM eyed some venues like 5dimes.eu that offer crypto-denominated bets, but none had odds on the midterms. Another dealbreaker.

If JM wasn’t already fed up, when he tried to place a wager on bovado.lv, he discovered that his account had been barred from making bets. In JM’s words,

I’ m not kidding, they told me the reason I was getting errors was because my account wasn’t allowed to make bets. I asked the telephone customer service person what I could do to resolve the issue and she said she didn’t know…I think that kind of poor customer service is fine when your average customer is betting 10 dollars here and there. Or putting $100 on elections. But it becomes a lot more serious when the stakes are 5 or 6 figures.

So the repeated issues he found was unavailability of markets, low betting caps, bad odds, the arbitrary closing of markets, and his account being shut down or barred from betting. The latter issue particularly spooked him. In his words “[the] last thing I wanted was to make tons of money and not have access to it.”

JM reserved some special profanity that I won’t repeat here for Ladbrokes, which shut down his account due to inactivity. At least they had a stated reason though, unlike bovado.lv, which offered no explanation for closing his account.

So it’s no surprise that JM ultimately settled on Augur. No betting limits, no custody of funds, no risk of a market being shut down or of getting blocked from trading. In short, you don’t need to trust anyone.

And in place of dismal customer service, you get a friendly user community on the likes of Reddit and Discord happy to answer any questions. Another perk on Augur is that, provided sufficient liquidity, you can exit your position at any point rather than being locked in. A trade is far more flexible than a bet.

JM also told me that he follows political Twitter and I got the impression that he is libertarian-leaning, though he didn’t state this specifically.

Putting this all together, we start to have a portrait of the type likely to make large (political) bets on Augur:

Tech-savvy

Has sufficient funds such that current fees are not a barrier

Into crypto and likely owns Ether

Has high-conviction, contrarian views for which no markets currently exist or for which current markets have significant limitations e.g., low betting caps, poor odds, or unreliable management

Skeptical of centralized control and prefers a trustless betting platform

Interestingly, the last three traits tend to coincide among politically-minded libertarians. They tend to be into crypto, not like centralized control, and have contrarian views.

In driving liquidity, contrarian is a major perk since it makes it far more likely there will be folks interested in the other side of the trade. If you have even one contrarian making a large bet, you’ll probably have numerous folks lining up to take the other side of the contract. But the reverse isn’t true. If someone takes a conventional position, it may be hard to find someone interested in the opposing trade.

So a contrarian may be the most valuable type of user to acquire. You’re not just getting their trading volume but the volume of all the traders they will spur into action by virtue of their outlandish odds.

The trader shared some clever ideas for reaching out to these sorts like getting political-Twitter power users with contrarian views who are into crypto like Scott Adams and Mike Cernovich to tweet something like, “Trump won’t get impeached in 2019. Disagree? Put up money against me on (Augur link).”

I personally think that speculating on political events will be Augur’s dominant use case in the next 5 to 10 years. If and when Augur hits a billion at stake, I think most of that will be on political outcomes (if however, it hits a trillion someday, that may be ruled by financial derivatives and insurance).

One of the main reasons I think a timely v2 release is important is because things will soon start heating up for the 2020 elections. On PredictIt, a leading centralized prediction market, four of the top five markets by trading volume already concern the 2020 presidential election. The window of time for a new player like Augur to jump in and disrupt the status quo for this election cycle will soon close.

JM’s comments also made me think about UX. Augur gets a bad rap when it comes to UX, and of course it needs to and is improving on this front. But let’s remember, UX is not just pixels on a screen or things you have to click on. Defined broadly, it is the entire experience of using something. So in this particular use case and for this particular user, Augur had the best UX of any betting platform in the world. Even with all of its present shortcomings, Augur was the world’s least painful-to-use option.

So aside from improving its UX, Augur can grow by capturing market share where it’s already won, where it already has the best UX in the world. Where the existing alternatives are so lacking and painful to use that Augur shines in comparison. Right now, these use cases are narrow but they will broaden out in time.

In terms of improving UX, notice how JM used the words “hard and confusing” to describe Augur, rather than, say, slow and costly. In my view, the greatest cost on Augur right now is not trading fees or gas prices; it’s the mental effort one must spend to figure out how the darn thing works. This is not the fault of Augur’s creators. Decentralized prediction markets are hard to wrap one’s mind around.

Fees and speed are enticing issues to solve because they are quantifiable and obvious. And while they are critical, it’s the mental effort barrier that may be the lowest-hanging fruit right now. For every individual like JM, there are probably a hundred other folks with the same convictions, funds, and interest in betting on political outcomes but who have never heard of Augur or find the UX daunting and hard to understand.

While JM’s trade probably didn’t pan out as he had hoped on Election Night, he should know that ultimately it was not in vain. By sharing his experiences and insight, he has given us an invaluable window into who’s using Augur and why and how we may grow it.

So, if you’re reading this JM, thank you and good luck in 2020.

Thanks for reading. To stay ahead with fresh insights on the future of prediction markets, join my newsletter The Augur Edge.