Introduction to Augur, an open-source, decentralized betting marketplace

Hard pass. Blockchain and Gambling still don't really go together yet. Moreover, I wouldn't touch anything intersecting this space that doesn't have Rick Dudley directly involved. Not only does he have a 15 year headstart working on some of these problems, but he also owns patents on provably fair online gaming systems.

The site acts like the main challenges are legal when really they're technical.

> Settlement - once the reporting has been complete, and it’s verified by the community, the bettors who bought shares on the correct outcome are paid - as is the market creator.

Can anyone comment on how settlement actually works? A persistent problem with new tokens is handwavy explanations of absolutely core features. With a human legal system, humans can argue over intent. When “code is law”, pure intentions alone will not do.

I would love to use a functioning prediction market, and I believe it may be one of the legitimately useful non-money applications of blockchain. But I really wish they would focus on explaining how it solves the key problems rather than marketing the concept.

>>Hard pass. Blockchain and Gambling still don't really go together yet.

  s/Gambling/trading

In Augur's case the provably fair aspect seems to be restricted to the correctness of the order matching and trading engine, similar to other decentralized smart contracts that try to implement exchange functionality.

>>Can anyone comment on how settlement actually works?

The Augur whitepaper[1] explains the gory details, but at a higher level when the market creator defines the prediction market and event states through a smart contract, they must also specify the "designated reporter" and the "resolution source". The designated reporter should be somebody you trust (perhaps even yourself) to report on the event using the specified data source.

If the final event state is invalid, then you (the market creator) forfeit your validity bond, which is a form of punishment for creating a market that ends up in a state of ambiguity.

If the event state is valid (i.e. one of the set of outcomes that can be unambiguously determined) then the settlement proceeds.

After settlement finalizes, reporters get their REP token payout, market creators take their ETH cut, and traders who still hold shares corresponding to the settled reported outcome get their ETH. I believe each reporting cycle is still 7 days.

There are some edge cases where an event outcome can be disputed by other reporters in case the designated reporter is incorrect, but the system economic incentives are such that this type of behaviour is heavily discouraged.

[1] https://www.augur.net/whitepaper.pdf

> The site acts like the main challenges are legal when really they're technical.

The main challenge, in my opinion, is volume.

The future of online betting is exchange marketplaces, where users/members can both back and lay event outcomes. This removes the reliance of a central player (bookmaker/sportsbook) to support the lay side of the market. Overlays are generally much smaller on exchanges.

However, to achieve this and also to support "trading" (multiple back and lay bets in the same market, based on in-play price movements), an exchange needs a high volume. Betfair is the best known exchange and has serious first mover advantage. I'm currently looking at the England vs India 3rd Test cricket Match Odds and over GBP44 million has been traded on that market alone. Liverpool vs Crystal Palace tonight, GBP700k and there's still four hours until kickoff. The 15.05 Thirsk 7f horse race, currently in-play and GBP650k volume.

All of Betfair's competitors to date have really struggled with this aspect. Betdaq, Smarkets, Matchbook, no matter how good their service offering or how low their commission, haven't been able to attract the same level of betting volume and are thus not as attractive as Betfair. A little bit chicken and egg scenario to be sure.

Anyway, in my view the biggest hurdle Augur will need to clear is that of market volume.