
Wager on Anything Using Bitcoin – Decentralized, Trustless Prediction Markets - diminou
http://www.augur.net
======
thecabinet
I'm no Bitcoin expert, but from skimming the paper it seems that the way they
were able to achieve this (being "trustless") was by adding new opcodes. You
record your position and commitment to the wager in the blockchain, at which
time your coins are transferred to a "sidechain". Basically, the blockchain
itself holds all the wagered coins.

The part that seems a little weak is they've created a new resource,
Reputation, that allows you to report the outcome of a wager. Reputation is
tradeable, and therefore gameable.

------
maaku
1) What adversarial analysis have you done to make sure that the reputation
weighting mechanism can't be gamed, or the market making bot's funds emptied?

2) How do you handle miner censorship of vote revelations?

3) Why do you include floating point operations in the consensus code?

4) Have you considered separating the market-making aspect from the prediction
market vote counting?

5) Have you considered implementing this proposal in an extended script
directly, rather than monolithic opcodes?

~~~
diminou
1). Good question. Paul Sztorc -- the inventor of the Truthcoin concept, on
which Augur is based -- has been helping us a lot with game theoretic
calculations. The Reputation concept's goal is to create a Schelling point on
the consensus. You can construct a thought experiment, where you look at how
the Reputation payoffs align with a perfect coordination game (with Schelling
points). The result was that there is around a 90% chance that the Reputation
mechanism creates a Schelling point. I don't have the details of this
calculation, but I'm sure Paul and/or Jack (our project lead) could provide
them if you're interested!

As for emptying the funds, we have the B parameter in LMSR vary according to
volume. However, we're currently talking with an expert in automated market
making (PhD @ CMU in CS w/ thesis in market makers) and he's recommending that
we do not use LMSR (because new, advanced, market making algorithms have came
out that don't allow issues like the one you mentioned come up).

2). I'm not exactly sure what you're asking here. We currently plan to encrypt
votes using time lapse cryptography and then decrypt them via distributed key
sharing.

3). SVD 0 and 1 work fine for binary outcomes, however when you include scalar
predictions you have to fit the scalar values between 0 and 1 (because that's
what svd operates on), hence floating point decimals. We're currently writing
and implementation using fixed point, however, and that's probably what we'll
end up using.

4). Yes we have, that was the simplest way to do it in a bitcoin transaction,
however...

5) Absolutely, we're currently looking at Serpent contracts as a way to
implement this (it looks like the biggest hurdle will be keeping SVD costs
low, but so far it's progressing nicely)!

------
otoburb
Appreciate the attribution to TruthCoin[1]. Was Auger implemented in
consultation with the TruthCoin author? Curious to know his thoughts.

EDIT: According to the Auger whitepaper[2], Paul Sztorc provided feedback.

[1] [http://www.augur.net/code/](http://www.augur.net/code/)

[2]
[https://github.com/tensorjack/Augur/blob/master/augur.pdf?ra...](https://github.com/tensorjack/Augur/blob/master/augur.pdf?raw=true)

------
jpatokal
This seems like a really bad example of a sample bet: "the claims of climate
change alarmists will be proven wrong in the next year"

...and just how will that be decided?

------
gojomo
Surprised that this doesn't reference the very-related prior work:

"On Decentralizing Prediction Markets and Order Books"

[http://users.encs.concordia.ca/~clark/papers/2014_weis.pdf](http://users.encs.concordia.ca/~clark/papers/2014_weis.pdf)

~~~
A_Grothendieck
Thank you, gojomo. We have talked to two of the authors of
[http://users.encs.concordia.ca/~clark/papers/2014_weis.pdf](http://users.encs.concordia.ca/~clark/papers/2014_weis.pdf),
and they were very helpful. Their proposed design differs from Paul Sztorc's
in various key aspects. Scroll to the bottom of this page:
[http://www.truthcoin.info/faq/](http://www.truthcoin.info/faq/) for Paul
Sztorc's comments on the paper to which you are linking above.

------
contingencies
This sounds like a really well cushioned description of a generic system to
implement Jim Bell's[1] Assassination Politics[2] system... "well cushioned"
in that it uses the 'free market' rhetoric of the establishment to
preemptively self-justify.

[1]
[https://en.wikipedia.org/wiki/Jim_Bell](https://en.wikipedia.org/wiki/Jim_Bell)

[2]
[https://en.wikipedia.org/wiki/Jim_Bell#.22Assassination_Poli...](https://en.wikipedia.org/wiki/Jim_Bell#.22Assassination_Politics.22_essay)

------
cryptonerd
Hmm...this seems like a very interesting venture. I remember websites like
this (there was one where you could bet on practically any event, but the name
escapes me). I read the paper and found many of the concepts very interesting.
The question is, capitalism (as we know it) is built upon trust; it is the
essential value needed in capitalism, so how will a "trustless" prediction
market work? I'm very interested to see how this works out.

~~~
diminou
Perhaps you remember InTrade? Or there's also a few UK websites like that. The
problem is they're centralized, so they can go out of business or a person who
judges / shows the outcomes of events could lie to get a payout.

As for capitalism, I would argue that greed is one of the most common
elements. We rely on people being greedy and, generally, willing to do the
least work for the most possible results - aka laziness. It's trustless in the
sense that bitcoin is trustless, we're building a platform that unlike the
traditional financial system, doesn't require you to trust others.

The way the trustless aspect is used is that people are incentivized to vote
on the outcomes of events with the consensus, because if you don't, you will
lose reputation in the system. This is explained in further detail in the
game-theoretical explanation of this project, available here:
[https://github.com/psztorc/Truthcoin/blob/master/docs/Truthc...](https://github.com/psztorc/Truthcoin/blob/master/docs/Truthcoin_Whitepaper.pdf)

------
danielcg
Coolest Dapp I've heard of! It also sounds like a solution to an existing
problem that could start running immediately. When are you guys planning to to
go beyond the testnet and release the real thing?

~~~
diminou
We're working on a more scalable and secure version currently. Eta is sometime
around May for the official production version

------
higherpurpose
I'd like to see a secure blockchain-based online voting system. What are the
best options right now and how secure are they?

~~~
kybernetikos
Can you describe the usecase?

------
kleer001
True, but misleading title.

"Augur is a decentralized open source __platform __for prediction markets,
built on Bitcoin Core. "

~~~
diminou
We are going to sidechain bitcoin to allow bets directly using bitcoin.

