On July 8, Augur announced via Twitter that the platform’s migration to its mainnet would begin on Monday at 11:01 a.m. PT, and the company’s Medium page estimated the process would last eight to 10 hours. Augur, three years in the making, has promised to predict the future. But for now, predictions about its own future were disappointingly indistinct: It would be live sometime tonight.
In its promotional materials, Augur is usually described as a “decentralized oracle and prediction market platform,” though often it is described more bluntly as a betting platform. On it, anyone can create a question about a future outcome, whether it’s “Will the Warriors win the 2019 NBA championship?” or “Will pork bellies drop to $1 per pound?” People can buy “shares” and are rewarded for correct predictions. Conversely, those who take incorrect positions lose money. (In case you’d rather have all this explained to you by a country music star, feel free to click here.)
Augur may exist in a legal gray area. The Supreme Court recently struck down a law barring states from legalizing gambling. However, many states will still decide to keep sports betting illegal. It’s not clear, however, how exactly Augur could be stopped even if states want to, because of its decentralized, open-source design.
But Augur may offer something beyond the opportunity to gamble. It may offer an actual social good – greater accuracy of predictions of future events. It is based on the theory of the “wisdom of the crowd,” which postulates that any given question can be more accurately answered, on average, by asking a large number of people rather than a single person (even an expert). This is the theory that underpins both Wikipedia (where you can read a wise crowd-written explanation of the wisdom of the crowd) and the “Who Wants to Be a Millionaire” ask-the-audience option.
If Augur’s promise is fully realized, predictions about anything would be improved – weather, politics, natural disasters. Even terrorist attacks (like the prediction market the Pentagon attempted, to the horror of many).
While there is research to support the “wisdom of the crowd” theory, the crowd is far from infallible. Prediction markets have had some high-profile misses lately. A Bloomberg piece on the failure of prediction markets to call the 2016 election had the telling subheading “People who won’t talk to pollsters probably also don’t bet on elections.” It’s an important point. For the wisdom of the crowd to work, there has to be a sufficient diversity of viewpoints.
Augur is far from the first prediction market, but most markets currently occupy a niche: politics, pop culture, sports. The innovation Augur is offering is that anyone may create a prediction market about anything. It remains to be seen if this is enough – if this innovation can lead to sufficient participation to actually improve the accuracy of predictions.
But if it doesn’t pan out that Augur leads to the creation of an army of forecasters, allowing us to see the future more clearly and plan for it more rationally, we’ll still at least be able to put some money on the Warriors.
That’s probably a safe bet.