Augur, a project to create a decentralized prediction market, has launched the Crowdsale of its token, ‘Reputation’ (REP).
The project aims to decentralize prediction markets across the masses, thereby realizing a number of benefits. “Imagine an Early Warning System for Everything that tapped into the Collective Awareness of Humanity, Imagine Better Forecasts about Politics, Commerce, Technology, Entertainment and more,” say the project’s founders. Predictions would be subject to the “wisdom of the crowd”, which when taken as an average, has proven more accurate than that of select individuals in some cases.
The project team points to examples: the Columbia Business School exercise of estimating the number of jellybeans in a jar, this year’s Conservative upset in the UK elections, and the Iowa Electronic markets success in predicting the outcome of US presidential elections since 1988.
One rationale behind the “wisdom of the crowd” theory is that the crowd, based on the laws of probability, naturally cancels out the individual idiosyncrasies of each member that distort their own predictions, allowing a more realistic average prediction to emerge.
The theory is more relevant for some cases than others, and numerous counterexamples have demonstrated the predictions of a few expert individuals outperforming those of the crowd.
In any event, the notion is consistent with the cryptocurrency ideal of decentralizing things away from a few select individuals. This became particularly relevant during the controversial forking of Bitcoin into Bitcoin XT and Bitcoin Core. Bitcoin XT was strongly advocated by a number of experts and core developers, but it has been opposed by others in the community, many of whom have alleged that the new version arose from centralized decision making.
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Another stated benefit of Augur’s system is that the reporting of event outcomes is not restricted to a few individuals, but is rather validated by the crowd. Predictors proven to be correct would be rewarded by the network, in decentralized fashion.
The crowdsale is issuing 11,000,000 REP tokens, which grant individuals the right to report on the outcome of events and receive a portion of the network’s trading fees as compensation. 80% of the REP will be distributed through the crowdsale, 16% will be retained by early angels and the founding team, and 4% will be given to the “Forecast Foundation.” Funds are managed in a multisignature wallet requiring two signatures from either of Forecast Foundation, Vitalik Buterin and BitGo.
According to Augur’s website, the project has gotten warm reviews from Marc Andreessen, Brian Armstrong, Vitalik Buterin, Erik Voorhees, Max Keiser, and several other notable figures in the crypto industry and beyond.
The prediction market can be constructed via Ethereum, or alternatively, Counterparty, according to Augur’s white paper. The crowdsale was scheduled for two weeks after the launch of Ethereum’s Frontier. Beta testing will continue until sometime this winter.
In less than 24 hours, the crowdsale has raised 2,140 BTC and 100,526 Ether, Ethereum’s native token, according to Augur’s website. Total proceeds are worth over $650,000.
Whether the project lives up to its lofty mission statements remains to be seen. But it may at least serve as a valuable experiment into how blockchain technologies can radically change the way many things work.