Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World

by Don Tapscott

Augur is building a decentralized prediction market platform that rewards users for correctly predicting future events—sporting events, election results, new product launches, the genders of celebrity babies. How does it work? Augur users can purchase or sell shares in the outcome of a future event, the value of which is an estimate of the probability of an event happening. So if there are even odds (i.e., 50/50), the cost of buying a share would be fifty cents. Augur relies on “the wisdom of the crowd,” the scientific principle that a large group of people can often predict the outcome of a future event with far greater accuracy than one or more experts.82 In other words, Augur brings the spirit of the market to bear on the accuracy of predictions. There have been a few attempts at centralized prediction markets, such as the Hollywood Stock Exchange, Intrade, and HedgeStreet (now Nadex), but most have been shut down or failed to launch over regulatory and legal concerns. Think assassination contracts and terrorism futures. Using blockchain technology makes the system more resilient to failure, more accurate, and more resistant to crackdowns, error, coercion, liquidity concerns, and what the Augur team calls euphemistically “dated jurisdictional regulation.” The arbiters on the Augur platform are known as referees and their legitimacy derives from their reputation points. For doing the right thing—that is, correctly stating that an event happened, who won a sporting match,...