Augur: Blockchain-based Internet prediction market.

[schear.steve@gmail.com (Steven Schear)]

Also,

http://reason.com/archives/2015/04/09/bitcoin-and-the-cypherpunks/

On Wed, Aug 26, 2015 at 2:31 AM, jim bell <jdb10987@yahoo.com> wrote:

> http://reason.com/blog/2015/08/11/augur-gambling-prediction-ethereum
>
>
> Augur May Become the Greatest Gambling Platform in History. Is There
> Anything the Government Can Do to Stop It?
> A blockchain-based prediction market that wonâ??t be controlled or managed
> by anyone.
> Jim Epstein   Aug. 11, 2015 12:36 pm
>
> An online gambling platform could do to the neighborhood bookie what
> electric refrigerators did to the ice delivery man.
> Coming this fall, Augur will allow participants to wager money on any
> future event of their choosing. Software will set the odds, collect the
> bets, and disperse the winnings. The price alone should give Nevada
> sportsbook operators pause; an estimated one percent of every pot will go
> to keep the system running. The average vig today is about 10 times that.
>
> Augur isn't a full-fledged casino. You can't play roulette or poker, and
> running lotto on the platform would be tricky. But it'll be great for
> sports betting.
>
> Hereâ??s whatâ??s truly novel about Augur: It wonâ??t be controlled by any
> person or entity, nor will it operate off of any one computer network. All
> the money in the system will be in Bitcoin, or other types of peer-to-peer
> cryptocurrency, so no credit card companies or banks need to be involved.
> If the system runs afoul of regulatorsâ??and if itâ??s successful, it most
> certainly willâ??they'll find that there's no company to sue, no computer
> hardware to pull out of the wall, and no CEO to lockup in a cage
> .
> This is new legal territory. If Augur catches on as a tool for betting on
> everything from basketball games to stock prices, is there anything the
> government can do to stop it?
>
> Augur is a decentralized peer-to-peer marketplace, a new kind of entity
> made possible by recent breakthroughs in computer science. The purpose of
> these platforms is to facilitate the exchange of goods and services among
> perfect strangers on a platform that nobody administers or controls.
> Augurâ??s software will run on whatâ??s known as a â??blockchain"â??a concept
> introduced in 2008 with the invention of Bitcoinâ??that's essentially a
> shared database for executing trades that's powered and maintained by its
> users.
>
> Bitcoinâ??s blockchain was designed as a banking ledger of sortsâ??kind of
> like a distributed Microsoft Excel fileâ??but Augur will utilize a
> groundbreaking new project called Ethereum that expands on this concept.
> Ethereum allows Augur's entire system to live on the blockchain. That means
> the software and processing power that makes Augur function will be
> distributed among hundreds or thousands of computers. Destroying Augur
> would involve unplugging the computers of everyone in the world
> participating in the Ethereum blockchain.
> If Augur is destined to become the cypherpunks answer to gambling
> prohibitionâ??the betting manâ??s version of the online drug market Silk Road
> if you willâ??you'd never know it from talking with its developers. They work
> for a San Francisco-based nonprofit, attend conferences, have legal
> representation, and talk openly about what theyâ??re up to with reporters.
> Augur even commissionedone of those cheesy motion graphics promotional
> videos favored by new tech startups.
>
> About half of the roughly $600,000 raised by Augur's development team
> comes from Joe Costello, the successful tech entrepreneur who was
> once Steve Jobs' top pick to become the CEO of Apple.
>
> Joey Krug, a twenty-year-old Pomona college dropout and Augur's lead
> developer, never uses the world â??gambling" to describe his venture. He and
> his team of five employees call Augur a â??prediction market,â?? a term that
> emphasizes the information generated when a bunch of people have a
> financial incentive to feed their expertise into a sophisticated algorithm.
>
> With Augur, as bettors move money in and out of the pot, the odds adjust.
> This yields publicly available statistics that should carry weight because
> they're derived from the opinions of a crowd of people with a stake in the
> results. InTrade, for example, the best-known prediction market until
> federal regulators forced it to stop serving U.S. customers in 2012, beat
> the pollsters and pundits by foreseeing the outcome of the 2008
> presidential elections in 48 out of 50 states.
> Augurâ??s developers hope that their platform will make it possible to do a
> Google search to look up the likelihood of some future event. This could
> usher in a better world, with more informed policy decisions and less
> malinvestment.
>
> But Augur also serves the less high-mindedâ??though no less nobleâ??purpose of
> providing cost savings and convenience to gamblers. Restrictions on
> gambling serve to protect government revenue at the betting man's expense.
> State-sanctioned casino operators pay high taxes, and state-run lotteries
> fleece their customers. But there's no logical or moral case for government
> restrictions on gambling, since no third party is harmed when consenting
> adults wager money on the future. Augur actually has the potential to make
> the world safer by taking away market share in the gambling industry from
> criminals.
>
> And yet sports betting is illegal in most states, and prediction markets
> are tightly regulated by the Commodity Futures Trading Commission (CTFC).
> The agency sued Ireland-based InTrade in 2012 to prevent it from accepting
> bets from U.S. customers. (The company folded shortly after.) In 2013, the
> CFTC and the Securities and Exchange Commission (SEC) jointly sued the
> prediction market Banc de Binary for allowing U.S. customers to make bets
> on commodity prices.
> The CFTC has approved other prediction markets, such as the New
> Zealand-based PredictIt, but only after it agreed to abide by the agency's
> restrictions.
> Krug says the Augur team is planning to meet with CFTC staff go over how
> their system works before itâ??s launched, but says he's not overly
> concerned. â??Our friends in Washington, D.C. say the CFTC will probably just
> dismiss Augur and say itâ??s not a big deal,â?? Krug told me in a phone
> interview.
>
> That doesnâ??t sound like much of a legal strategy, but how do you have a
> legal strategy when you're building something unlike anything that's ever
> existed? Federal anti-gambling laws, such as the 2006 Unlawful Internet
> Gambling Enforcement Act, target the companies that facilitate online
> bettingâ?? website operators, credit card companies, banksâ??not individual
> gamblers.
>
> Augurâ??s biggest legal vulnerability is the community of human â??reportersâ??
> who are needed to settle bets on the platform, says Cardozo Law School's
> Aaron Wright, who is writing a book about the legal implications of
> blockchain technology. Letâ??s say a group of people wager money on Augur
> over the outcome of a boxing match. Once the bout is over, human
> participants (who receive a portion of the trading fees as compensation)
> must report the outcome to the system before Augurâ??s software will disperse
> the money to the winners. "Thereâ??s at least an argument that the people
> doing that reporting are aiding or abetting unlicensed options and could be
> prosecuted," says Wright.
> But Augur doesn't collect personal information on any of its users, so
> identifying these people could be difficult. And Augur is a borderless
> technology, so U.S. gamblers could simply rely on foreigners to report on
> the outcomes of their bets.
>
> One attorney I spoke with suggested that the team thatâ??s building Augur
> could be brought up on charges for aiding and abetting a criminal
> conspiracy. Nate Cardozo, a staff attorney with the Electronic Frontier
> Foundation, thinks that's far-fetched but says he can't rule it out.
> Cardozo emphasizes that writing open source software doesnâ??t necessarily
> protect the team from prosecution.
> â??Weâ??ve taken the steps that we need to take in order to bracket the
> individual's risk and the organizationâ??s risk,â?? says Augurâ??s attorney,
> Marco Santori, who declined to comment further on exactly what those steps
> might entail.
>
> Even if Krug and his colleagues were to face criminal prosecution, the
> technology would live on. After Augur is born into the world, the
> development team could release a software update that would cripple the
> system. But in that case, Augur's users could band together to block any
> changes to the underlying code, or another developer could copy the open
> source code and simply re-launch the platform.
> The big question with Augurâ??and with blockchain platforms more
> generallyâ??is whether they can outrun our regulatory state long enough to
> grow so large and popular that they're truly unstoppable. My moneyâ??s on
> Augur in that race.
>
> For more on the promises and pitfalls of decentralized peer-to-peer
> marketplaces, read my recentReason magazine feature story on the topic.
>
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