What is Augur?
In 2014, a platform for market prediction was launched; the name of this decentralized, open-source prediction market platform is Augur, and it was created using the Ethereum blockchain. A prediction market lets users bet on the likely results of future events, to win monetary rewards.
With the integration of blockchain technology with prediction systems, Users on the Augur platform will enjoy seamless accessibility, better accuracy, and fewer fees compared to other prediction platforms.
Augur is decentralized, and this automatically translates to a lot of amazing features, some of which are:
- No Central Servers: The Ethereum blockchain –based decentralized platform means there are no central servers that can be tampered with.
- Low Fees: The fees on the Augur network are set by users and are very low.
- Create your own Markets: Users from around the world can ask a question that will be the basis for the prediction market. When a market creator creates a prediction market, the market creator is to provide some initial funding and will receive half of every trading fee collected for the duration of the market.
- Crowd-sourced Reporting: Compared to centralized markets where one person is in charge of the final outcome of a market and where there is vulnerability to mistakes and manipulations, Augur is decentralized and so it does not work that way, rather, there will be thousands reporting about market results, based on a consensus system.
- Safe Automated Payments: There are no counterparty risks because all funds are kept in smart contracts. This will allow users enjoy automated and fast payments. Also, blockchain allows for automated withdrawal and depositing of funds. This prevents human error.
How Augur Works
Users on the Augur platform can work with either of these:
- Trading Event Shares: Apart from the creation of markets, users can also trade and buy shares that indicate the odds of an event happening. Take this simple illustration as an example: Will Ethereum Cash reach $10,000 by June 2018? (for better understanding, we are using a yes/no illustration, it could be more complex than this)- because a popular crypto exchange just added Ethereum cash to their system, you suddenly get interested in the market and you are so certain Ethereum cash will hit $10,000 before June 2018, so you decide to put in a bid to buy 100 shares at 0.8 ETH a share.
Traders on the Augur platform can make money through two methods: When share prices fluctuate, the user can buy low-cost positions and sell them higher. The other way is to hold shares when there is a closure of the market, and that is if the user predicted an event correctly.
From each of the winnings, the user is obligated to pay settlement fees.
- Creating Markets: A user willing to create a market needs to spend some amount of Ethereum as a prerequisite to creating an Augur market. The moment the user creates a market, the cost involved to sell and buy shares are set (maker and taker fees). Taker fees are set between 1.0% and 12.5%. However, the maker fee is never more than half the amount of the taker fee. These are the fees accrued the market creator after the market closure. In the future, there will no longer be taker/maker fees, but just creator fees. The creator fee will be taken from winning traders’ rewards.
Augur intends to completely change the fundamentals of prediction markets. On the platform, users will be able to make predictions about anything, and other users decide to sell or buy shares within the prediction, as a function of whether the prediction will tend to a positive or negative eventuality. Every share traded in any event equals $1, hence, if a user buys a share with the odds even, that will be 50 cents, but if the user gets it right, then for every share bought, the user will get a dollar. If peradventure the user is wrong, then the money is lost. However, users are not required to hold on to shares pending when the events take place because there are no restrictions to trading on the Augur platform until there is an actualization of the event.
Reputation Tokens (REP)
The Augur system is powered by tokens called REP tokens; the REP token is what is staked to report on the possible outcomes of events across different markets. When there is the closure of a market, the reporter sends a report on the results of the events, and then a specific amount of REP is put up to support the claim. The reporting phase (days after the closure of an event, when a report can be submitted) lasts 27 days, during which a reporter can send in the report. If the reporter’s report tallies with the reports of more than half the reporters within the reporter’s market, the reporter gets the REP back, including a part of the reporting fee.
Intending buyers can get REP from the Bittrex exchange. Users can also purchase REP directly on Kraken, using EUR. Most altcoins can only be exchanged using Ethereum or Bitcoins,. To achieve this, the user can buy Ethereum or Bitcoin from a platform and then have it transferred to a preferred exchange from which a trade for REP can take place.
There is no dedicated wallet for REP as such, but there are a lot of options. However, the best way to securely store REP is by using a hardware wallet. A hardware wallet is a secure way to protect funds from hackers. Hardware wallets like the Trezor and Ledger Nano S can be used.