Augur Cryptocurrency – Working & Reputation | Blockchain

Augur is a software with the goal of incentivizing a global network of computers to maintain a prediction market platform on Ethereum (ETH).

A prediction market is similar to an exchange, only here instead of trading assets, users wager on the outcome of events. With Augur, users can create and exchange “shares” representing a portion of the value of outcomes, without trusting a company to make or oversee these markets.

The software itself maintains an order book for each market created, and there’s no limitation on what events can be traded, which means that markets may be created to help predict the outcome of everything from election results to the weather.

As with any wagering system, when users predict an outcome correctly, they are rewarded. If they do not, they lose the capital they bid. The idea is market participants gain value by helping outside observers leverage crowdsourced knowledge to gather global data points.

If and when users predict outcomes correctly, they are then rewarded with REP, the crypto asset that powers the Augur network.

History of Augur

Augur was developed by the Forecast Foundation, founded in 2014 by developer Jack Peterson and computer scientist Joey Krug, among others. In 2015, Augur became one of the first cryptocurrency projects to raise funding in an initial coin offering (ICO), in which the Forecast Foundation sold 8.8 million REP coins, raising $5.5 million.

The platform finally went live in 2018, and in its first month after launch, $1.53 million was staked by users across more than 800 outcome bets.

How does Augur work?

Augur operates on the Ethereum blockchain, which means that purchases of the shares in its prediction markets are made using the token ETH. Traders who wish to use a less volatile asset can also bet in markets using DAI, a stablecoin running on top of Ethereum.

The platform uses Ethereum smart contracts to execute all final bet outcomes, ensuring the correct outcomes are reported and that winners are paid automatically.

To facilitate the user experience for betting on event outcomes, Augur divides its execution process into four distinct steps:

1. Market Creation: Anyone can create a betting market based on real-world events. Creators set the resolution source (where the outcome will be determined), and a creator fee (a percentage of a trader’s winnings) they will collect once the market has settled.

2. Market Trading: Users buy shares in an event’s outcome, the price of which fluctuates depending on the amounts of bets placed.

3. Reporting: The outcomes of each event is determined by Augur’s oracle, which brings real-world information onto the blockchain. Reporters report on the market, and the consensus outcome from all reporters is considered “truth.” Those whose report was not part of the consensus lose their staked REP which is then distributed to those who reported with the consensus.

4. Settlement: Traders close out positions and collect payouts

Reputation

The Augur blockchain operates with two cryptocurrencies. The REP (reputation) is a staking token to rectify disagreements on outcomes of the prediction market.

A special incentive structure in augur’s platform rewards reporting correct outcomes. It also penalises reporting false outcomes and passive holders who don’t stake on dispute and forks. Moreover, the additional REP a user has, more trust is assigned to their input.

Operation

Augur allows any user to create a prediction market on any topic. Now there are two kinds of markets:

1. Categorical Markets: These are similar to binary options because they follow the “winner takes all” policy. Also, they have upto seven options.

2. Scalar Markets: These offer a spectrum of numerical outcomes. Traders are allowed to “long” or “short” a value as well.

One must note that invalid is very well an acceptable outcome in all markets. It helps to prevent scams and makes sure the market resolutions are unambiguous.

Reporting fees are also used to incentivize the reporting of market outcomes. Reporters can back their report with tokens. Augur’s security model is secure and it runs on ethereum.

Conclusion

In this article, we gain a brief introduction about Augur, which is a decentralised prediction market platform built on the Ethereum blockchain. We also learnt about its history and genesis, and then discussed how it actually operates and what stages of execution are involved.