Every prediction market trades on the possibility of a particular event occurring. The market is proven to be effective in forecasting results accurately.
However, it is yet to be adopted generally because of the hurdles associated with setting it up. Augur hopes to operate this kind of market in a decentralized way.
Augur is one out of a whole lot of DeFi projects established on the Ethereum blockchain. It is currently a high promising blockchain project based on prediction.
Augur also uses the ‘wisdom of the crowd’ to establish a ‘search engine’ that can run on its native token. It is adopted in 2016 and has had a good number of updates on its technology since then.
This Augur review will analyze the Augur token, the project’s unique features, the foundation and project work, etc.
This review is a sure guide to Augur users, intending investors, and individuals who wish to increase their general knowledge of the project.
What is Augur (REP)?
Augur is a ‘decentralized’ protocol built on an Ethereum blockchain for betting. It’s an ERC-20 token that relies on the Ethereum network in harnessing the ‘wisdom of the crowds’ for predictions. This means that people can freely create or trade on future events from anywhere with fewer fees.
The predictions are based on real happening events with which users can develop markets for their specific questions.
We can refer to the Augur prediction mechanism as gambling and the token REP as gambling crypto. REP is used for betting in events like political outcomes, economies, sporting events, and other events in the prediction market.
Reporters can also stake them by locking them in ‘Escrow’ to clarify the outcome of a particular prediction market.
Augur aims to give the predictive community greater accessibility, greater accuracy, and lower fees. It is a global and limitless betting platform. Augur is also a non-custodial protocol that implies that users are in full control of their funds.
However, the project is an ‘open-sourced’ smart contract. It is coded strongly and then deployed on the blockchain of Ethtereum. These smart contracts settle user’s payments in ETH tokens. The protocol has an incentive structure that rewards correct predictors, penalizes idle users, non-stakes, and incorrect predictors.
The Augur is supported by developers who are not owners of the protocol but contribute to its development and maintenance.
They are known as the Forecast Foundation. However, their contributions are restricted as they cannot operate on created markets nor receive fees.
What Is a Prediction Market?
A prediction market is a trading platform for predicting events that will happen in the future. Here, participants can sell or buy shares at a price predicted by the majority in the market. The prediction is based on the probability of a future event occurring.
Research proves that prediction markets are more reliable compared to other institutions that engage pools of experienced experts. Moreover, prediction markets are never new as innovation with the predictive market dates back to 1503.
People used it then for political betting. Next, they explored the “Wisdom of the Crowd” mechanism in generating accurate estimates of the reality of an event.
This is just the principle that the Augur team adopted to ensure accurate predictions and forecasts of the future outcome of all events.
Augur Market Features
The Augur protocol has many unique features that enable it to achieve its vision. This is the most accurate betting platform operating with a lesser trading fee in the prediction market. These features are;
Comment Integration: The protocol has an integrated discussion that allows integrating a comment section on each market page. Users can interact with others to hear rumors, updates, latest news, make analyses and take their trading to the next level.
Curated Markets: The freedom of users to create their market has a disadvantage too. There are lots of fake, scam, and unreliable markets with low liquidity.
Hence, one can find it difficult, frustrating, and time-consuming to find a reliable and decent market. The Augur mechanism provides users with the safe and best markets that are attractive to trade on through its community.
The idea is to give hand-picked and recommended markets to users. They can also adjust the ‘Template Filter’ to accommodate a wider range of reliable markets.
Lower Fees-Augur charges users who activate their trading account via ‘augur markets’ fewer fees when they make any trade.
Persistent URL: The project website location frequently changes as Augur constantly updates their technology. Augur markets take care of these updates by including the newly introduced features as soon as possible.
Referral Friendly: The ‘Augur. markets’ website rewards users for introducing other users to the platform. This reward is a portion of the referred user’s trading fee so long as he continues to trade.
It kicks off once the new user activates his account. To refer someone, simply login into ur account, copy your referral link, and share it with the market.
The Augur Team and History
A team of thirteen persons led by Joey Krug and Jack Peterson started the Augur project in 2014 October. The protocol is the first of its kind to be built on the Ethereum blockchain.
The two founders had gained blockchain technology experience before their founding in Augur. They initially created a fork of Bitcoin-Sidecoin.
Augur released its ‘public alpha version’ in 2015 June, and Coinbase selected the project among the 2015 more exciting blockchain projects. This raised rumors that Coinbase intends to include the Augur token in the list of its available coins.
Another member of the team is Vitalik Buterin. He is the founder of Ethereum and an advisor in the Augur project. Augur released a beta and upgraded version of the protocol in 2016 March.
The team re-wrote their Solidity Code due to their challenges with the Serpent language, which delayed the project development. They later launched a beta version of the protocol and the mainnet in March 2016 and 9th July 2018.
The protocol has a major competitor, the Gnosis (GNO), which also runs on the Ethereum blockchain. Gnosis is a project very similar to the Augur, and it has a development team made up of experienced team members.
The basic thing that differentiates the two projects is the type of economic models they use. Augur’s model fee depends on the volume of trade, while Gnosis relies on the volume of outstanding shares.
However, the prediction marketplaces can accommodate both projects. They both can freely flourish and thrive in a manner that allows multiple stocks, options, and bond exchanges to exist.
The Augur second and faster version was launched in 2020 January. It allows for prompt payouts to users.
Augur Technology and How It Works
Augur’s working mechanism and technology are explained in for segment which are the market creation, reporting, trading, and settlement.
Market Creation: Users with the role of setting parameters within the event create the market. Such parameters are reporting entity or designated oracle and the ‘end-date for each market.
On the end date, the designated oracle provides the result of predicting gambling events such as the winner, etc. The result can be corrected or disputed by the community members- the oracle doesn’t have the sole right to decide.
The creator also selects a resolution source like ‘bbc.com’ and sets a fee that he will be paid when the trade has been settled. Creators also post incentives in REP tokens as a valid bond to appreciate the well-defined created events. He also posts a ‘no-show’ bond as an incentive in picking a good reporter.
Reporting: The Augur oracles determine the outcome of any event once it occurs. These oracles are reporters driven by profit designated for reporting the true and real outcome of an event.
Reporters with consistent consensus outcomes are rewarded, and those with inconsistent outcomes are penalized. Holders of the REP token are allowed to partake in the reporting and disputing of outcomes.
The Augur’s reporting mechanism operates on a fee window of seven days. Fees collected in a window are withdrawn and shared among the reporters who participated during that particular window.
The amount of reward given to these reporters is commensurate to the volume of Rep tokens they staked. Thus, REP holders buy participation tokens for eligibility and continuous participation and regain them in some portions of the ‘fee pool.’
The Other Two Technologies
Trading: The predictive market participants predict events via trading the shares of the possible outcomes in ETH tokens.
These shares can freely be traded immediately after their creation. However, this leads to volatility in the price as they can drastically change between creation and market settlement. The Augur team, in their second version of the protocol, now introduced stable coins to solve this price volatility challenge.
The Augur matching engine allows anyone to create or to fill a created order. All Augur-owned assets are always transferable. They include shares in fee window tokens, dispute bonds, shares in market outcomes, and ownership of the market itself.
Settlement: Augur charges are known as reporter fee and creator fee. They are deducted when a market trader settles a trades contract in proportion to the reward given out to users. Creator fees are set while creating the market, and reporter fees are set dynamically.
When there is a dispute in the market like if a market is not reported, Augur freezes all the markets until such confusion is resolved. REP token holders during this period as asked to switch over to the result perceived to be correct via voting with their crypto.
The idea is that when the market settles on the real outcome, service providers, developers, and other actors will continue to use it naturally.
The Augur platform is powered by its native token known as the REP (reputation) token. Holders of this token can stake them to bet on the possible outcome of events in the market.
The REP token serves as a working tool in the platform; it is not a crypto investment coin.
The REP token has a total supply of 11million. 80% of this was sold during the initial coin offering (ICO.
Holders of Augur token are referred to as the ‘Reporters.’ They report accurately the real outcome of events listed in the protocol’s marketplace at the interval of few weeks.
The reputation of reporters who either fail to report or report wrongly is given to those who report accurately within a reporting cycle.
The Benefits of Owning REP Tokens
Users who own reputation tokens or REP are qualified to be reporters. Reporters share in Augur’s creating and reporting fee by reporting accurately.
Holders of REP are entitled to 1/22,000,000 of all market fees deducted by Augur in an event with just a REP token.
User’s benefits in the Augur platform are equivalent to the number of accurate reports they give and the volume of REP they possess.
Price History of REP
The Augur protocol had its ICO in 2015 August and distributed 8.8 million REP tokens. There are 11 million REP tokens currently in circulation and gives the total token amount that the team will ever create.
The REP token price was between USD1.50 and USD2.00 immediately after the launch. The token has recorded three all-time highs ever since then. The first was dring the Augur beta release in 2016 March with a rate above USD16.00.
The second one occurred in 2016 October when the team gave out the initial tokens to investors at over USD 18.00. This high rate quickly went down as many ICO investors declined interest in REP and dumped it for a quick profit.
The third spike happened in Dec. 2017 and Jan. 2018, when REP was traded slightly above USE108. Nobody gave any information on the reason for this price spike, but it happens during a boom in the crypto world.
Trading Events in Augur
Besides being the creator of markets, you have the opportunity to trade shares when others create markets. The shares that you trade represent the odds for the event’s outcome when the market closes.
For instance, is the created event is ‘Will the price of BTC goes below $30,000 this week?’
By closely monitoring the equity markets and through technical and fundamental analysis, you can make your trading.
Supposing you decide to trade for trade that the price of BTC will not go below $30,000 this week. You may move a bid of purchasing 30 shares at 0.7 ETH per share. That gives you a total of 21 ETH.
If a share is at 1 ETH, investors can price the value anywhere between 0 to 1 ETH. Their pricing is dependent on their belief in the outcome of the market. The price for your shares is 0.7 ETH per share. If more people agree with your prediction for a higher price, it will impact the trading outcome in the Augur system.
As the market closes, if you’re right in your prediction, you will make 0.3 ETH on each share. This gives you a total gain of 9 ETH. However, when you’re wrong, you will lose all your shares in the market with a total value of 21 ETH.
Traders earn from the Augur protocol through the following ways
- Holding their shares and getting profits from their correct prediction ate the close of the market.
- Selling of positions as the prices go up due to changes in sentiment.
Note that other events and sentiments from the real-time world affect market prices periodically. Thus, you can get profits from the value of the shares changes before the actual closure of the market.
Reporting fees get a weekly update. They are used in paying REP holders that report events outcomes. Also, you will pay the Augur Reporting fees for every trade that you win. The fees calculation brings a variation in the value.
The fee is calculated using the parameter below:
(Augur open interest x 5 / Rep market cap) x Current reporting fee.
Conclusion of Augur review
The ‘Augur review’ details reveal that the protocol is among the first blockchain projects and betting platforms. It is also among the first protocols to use the Ethereum network and the ERC-20 token.
The Augur token known as The REP is not for investment. It only serves as a working tool in the platform.
The Augur team aimed to provide a platform that will gradually replace the centralized option for future trades. And make the decentralized marketplace the best option for trading everything, both commodities and stocks.
Augur is designed with a simple and easy mechanism that predicts future events or betting more than many notable experts.
The protocol will achieve its aim completely, maybe in many years from now. When the decentralized as hoped, will finally replace the centralized exchanges.