Who Could Have Predicted This?
Updated: Mar 31, 2019
A dive into Augur and the launch of its hotly anticipated predictive market
We are still in the early days of crypto, with many projects still building out their platforms and networks. So when a project finally launches its platform, people tend to pay attention. On July 9th, Augur, a decentralized application (DApp) on the Ethereum blockchain, officially launched, one of the first platforms built on Ethereum. In short, Augur is a decentralized, open source prediction market aimed at providing a market that uses the “wisdom of the crowd” principle to forecast event outcomes. This principle states that a large group’s aggregate answers is as good as, and often superior to, the answer given by any one individual within that same group. Augur’s platform allows users to bet on and forecast real-world events.
Early Success as Top Ethereum Smart Contract
Augur’s co-founders, Joey Krug and Jack Peterson, began working on the project in 2014. With the backing of high profile advisors, including Ethereum founder Vitalik Buterin, Augur conducted an ICO in mid-2015, raising roughly $5.3 million. After a long period of development, Augur launched its mainnet to the public on July 9 to much fanfare. Open interest within the platform surpassed $100,000 on July 11 — the first full day of betting. Regarding participation, sporting events led the way, and the first event to close on the network was the semi-final of the World Cup between Croatia and England. Only a week after the launch, users began flocking to the platform, which then reached over $1 million in daily betting volume on July 17. It quickly became one of the top DApps on the Ethereum blockchain.
Introduction of Assassination Markets
While the Augur predictive markets got off to a hot start, not everything associated with the platform went as smoothly. Many people saw it coming, albeit probably not the rapidity with which it happened, but a mere two weeks post-launch the first assassination markets began popping up on Augur. Since users have no restrictions on the type of markets they can create, it was only a matter of time. Users have recently posted bets on Augur regarding the deaths of several high profile individuals including U.S. President Donald Trump, Warren Buffett, Jeff Bezos, and even everyone’s favorite Golden Girl Betty White (although Betty White’s market is just questioning whether she will live past 2018).
It is slightly disturbing that these markets exist, but even more disturbing is the fact that there are actual bets being placed on some. Introducing markets such as these, while possibly harmless to bet, could encourage individuals or groups to not only consider such an assassination but to also incentivize attempts at such a crime. While creating such a market on the platform is not illegal, there are some ethical ramifications to providing users carte blanche to create markets.
Possibly, coincidentally, a few days after the assassination markets were created, the team at Augur destroyed its access to the fail-safe kill switch to the platform. Many blockchain projects have kill switches built into their platforms to allow developers to fix any potential issues in the event of any unanticipated problems. After a few weeks, the Augur team made the decision to destroy their access to the kill switch, meaning that the Augur team no longer has any privileged access over the network, providing true decentralization. They claim this was the result of a successful launch, however, some may say this is a response to the assassination markets to provide the team some protection from questions about the accountability and liability potentially attached to these markets.
Current Status and Future Outlook
Fast forward to present day, the honeymoon phase between platform and its users looks to have ended. In the last few weeks, Augur has shed users and continues to slip in the DApp rankings. At the time of writing, Augur currently has 36 users (compared to 316 in the figure above) and is sitting at #27 according to DApp Radar. A few potential reasons why usage has dropped:
Current Bear Market - The current bear market has removed much of the hype surrounding cryptocurrencies and altcoins specifically. We would expect to see higher usage of DApps once altcoins reach their bottom and we see the emergence of a bull market.
Liquidity Issues - There are only a few markets with enough liquidity on either side to even participate. Without liquidity, it will be hard for users to discover potential markets to trade in.
UX issues/bugs - Even with all the fanfare surrounding the launch, the main flaw found by users was the user experience of the DApp itself. Augur is working diligently to fix any bugs and make the platform easier to use. However, it seems as though many users may have abandoned the platform due to the early UX issues.
Limitations of Ethereum - Since the platform is built on the Ethereum blockchain, it is limited to the ability of Ethereum. High gas costs have been issues before and could continue to be an issue until Ethereum can solve its scalability problems.
Assassination Markets - These markets could have deterred users from using and being associated with Augur.
Looking ahead at that future of Augur, it is still in its early stages and many of the current issues are common for something only a few months post launch. UX issues can easily be fixed, and the market, we hope, will recover soon to provide additional relief. However, Augur still faces issues with these assassination markets. One solution would be for the Augur community, particularly the “reporters” or users designated to determine the outcome of events, to step in and determine that these markets are invalid. It’s possible for these reporters and REP token holders to fight back against these markets. Another potential solution is a fork of Augur into two platforms with one that permits assassination markets and one that doesn't.
It is too early to say what may happen to Augur in the future. Co-founder Joey Krug tried to manage expectations when he said, “I think it’ll be a two- to three-year process before this is usable from an average user standpoint.” A platform like Augur will need to build a history of reliability before serious adoption occurs, much like Bitcoin and Ethereum in their early days. Time will tell if Augur will be able to regain its early success, but we’d bet there is already a predictive market for that.