Prediction markets allow users to express their opinions on the likelihood of an event happening through buying shares in a given outcome, for issues ranging from politics, to sports, to business. Augur is an open-source, decentralized prediction market where users can both create markets and vote on other market’s expected outcomes. The system operates, as with other prediction markets, on the principle that the ‘wisdom of the crowd’ is a superior forecasting tool than individual views. By allowing participants to win, and lose, real money, Augur incentivizes individuals to express their convictions on a given subject.
Co-founded by Joey Krug and Jack Peterson, Augur has been under development since 2014, with both alpha (2015) and beta (2016) versions of the platform having been released on the Ethereum testnet. Augur is intended to be a decentralized prediction market that no one entity controls or manages—in a traditional prediction market, such as Hollywood Stock Exchange or Nadex, a company is responsible for opening markets, managing bets and funds, and resolving outcomes. Augur creators intend to enable this functionality without having market participants trust the solvency and good intentions of a managing entity
Augur’s token, REP, is not a preferred currency used in the actual prediction market, but is instead used primarily to incentivize honest and timely reporting on prediction markets. REP grants holders the right to contribute to the prediction market’s resolution process, and, as compensation for this service, REP holders will receive a percentage of a given market’s trading fees, proportional to the quantity of REP tokens staked. Diligence in reporting is incentivized by this setup, as tokens staked to non-consensus outcomes are effectively —such REP are redistributed to users staking for the consensus outcome.