Augur is a decentralized oracle and prediction market protocol built on the Ethereum blockchain. REP is an ERC-20 utility token used on the Augur platform. The current REP/USD spot price is down 91% from the all-time high set in January 2018. The token has a market capitalization of US$121 million, with under US$1 million in trade volume over the past 24 hours.
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The Augur protocol was founded by Jack Peterson and Joey Krug in 2014 with an alpha version of the platform released in 2015. Peterson is a National Defense Science and Engineering Graduate Fellow and holds a Ph.D. in Biophysics from the University of California, San Francisco. Krug is a 2016 Thiel Fellow, which allowed him to drop out of Pomona College in order to work on Augur full-time. Krug also joined Pantera Capital in June 2017 as a technical advisor and co-chief investment officer. Notable Augur advisors include Vitalik Buterin, one of the founders of Ethereum, and Lightning Network founder Elizabeth Stark.
The Forecast Foundation, also founded in 2014, is a not-for-profit group of software developers dedicated to open-source trading protocols and decentralized applications which focuses on development work for the Augur protocol.
The protocol was initially written in Serpent, which was found to have several vulnerabilities, and led to a rewrite of the platform in Solidity. A beta version was released in March 2016 and the mainnet version was released in July 2018. The Augur Core development team currently consists of 12-15 people geographically dispersed across the globe.
The Augur ICO was one of the earliest, occurring from August to October 2015 and raising US$5.3 million by collecting 19,053 Bitcoin (BTC) and 1,176,816 Ethereum (ETH). Most of these assets were sold soon after the ICO. REP tokens were sold at a price of approximately US$0.63 each with about 3,500 users participating. Unofficial financial holdings of the Forecast Foundation, as of March 2018, included US$2.75 million, 35,000 ETH, 1,200 BTC, and 2.1 million REP. More recent financial information was unable to be obtained.
The REP token generation event created 11,000,000 REP tokens, 8.8 million sold through the crowd sale, and 2.3 million tokens allocated to founders and advisors for continuing operational costs. According to Crunchbase, Augur had an additional seed round in June 2016 and a venture round in October 2017, both for undisclosed amounts.
Augur markets follow a four-stage progression: creation, trading, reporting, and settlement. Anyone can create a market based on any real-world event. Trading can begin immediately after a market is created, and users are free to trade on any market. After the event on which the market is based has occurred, the outcome of the event is determined by Augur’s oracle. Once the outcome is determined, traders can close out their positions and collect their payouts.
REP is needed by market creators and by reporters when they report on the outcome of markets. Reporters confirm an outcome of a market by staking their REP on one of the possible results. By doing so, the reporter declares that the outcome on which the stake was placed matches the real-world outcome of the market’s underlying event. The consensus of a market’s reporters is considered the “truth” for the purpose of determining the market’s outcome. If a reporter’s report of a market’s outcome does not match the consensus reached by the other reporters, Augur redistributes the REP staked on the non-consensus outcome by this reporter to the reporters that reported with the consensus.
By owning REP, and participating in the accurate reporting on the outcomes of events, token holders are entitled to a portion of the fees on the platform. Each staked REP token entitles its holder to an equal portion of Augur’s market fees. The more REP a reporter owns, and reports correctly, the more fees they will earn for their work in keeping the platform secure.
Although REP plays a central role in Augur’s operations, it is not used to trade in Augur’s markets. Traders will never need to own or use REP, as they are not required to participate in the reporting process.
Several companion sites exist to access Augur market history or plug into the Augur markets with MetaMask, including; https://exploreaugur.com, https://predictions.global, https://reporters.chat, and https://guesser.com. The Augur platform also currently supports Metamask, Trezor, Ledger, and Edge.
The competitive advantages offered by Augur, compared to other betting platforms, include; no betting or winning limits, low fees, and pooled liquidity. Thus far, the Augur platform has struggled to address low accessibility, time to sync with the platform, poor design, lack of options, gas costs, and ETH price volatility. Over the past year, Augur has added default sorts and filters to disincentivize bad wording and data, decreasing invalid markets from 14% to 3%.
Version 2 (V2) of the platform is slated for a June release, with Dai (DAI) denominated markets being the biggest addition to the platform. V2 will also include new trading and betting UIs (see below), easier log in options, the ability to bet on whether or not a market will be invalid, and faster disputing periods. Krug talked more about the upcoming V2 changes in a podcast and gave a presentation on the upcoming changes during Ethereum’s Devcon V conference.
V2 will also introduce a new REP price auction. Two double auctions will take place each week, where a pot of DAI and REP are sold for one another, and a REP price is calculated from the sale prices. The platform will mint a small amount of REP to compensate for any losses from the auction. This will introduce a small amount of inflation to REP in exchange for a decentralized price feed used to maintain platform security.
Two of the most popular betting markets are sports and political events, both of which fall under heavy regulatory scrutiny in the U.S. and elsewhere. The European Union, however, has far fewer regulatory guidelines surrounding online betting. According to Statista, licensed online sportsbooks worldwide account for upwards of $39.7 billion in revenue. In 2017, eSports betting alone generated over US$650 million in revenue, projected to create upwards of US$1.5 billion in revenue by 2020. In May 2018, the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA), paving the way for all 50 states to offer legal sports betting. Investment firm Morgan Stanley also recently projected sports betting to become a US$7 billion to US$8 billion business in the U.S. within the next five years.
In October 2018, Commodity Futures Trading Commission member Brian Quintenz classified blockchain prediction markets, like those offered on Augur, as binary options, “the CFTC has generally prohibited prediction markets as contrary to the public interest, only permitting them in limited circumstances when it has found that they operate on a small-scale, non-profit basis, and serve academic purposes” also hinting at potential future enforcement actions.
PredictIt, a non-profit New Zealand-based political prediction market run, owned, and operated by Victoria University of Wellington, has seemingly navigated through these murky regulatory waters, becoming increasingly popular in recent months. The website requires KYC, has a US$850 limit per contract, charges a 10% fee on profits, a 5% fee on withdrawals, and reports any profit to the U.S. IRS in the form of a 1099, all of which does not occur with the decentralized, no limit offering on Augur.
V2 will also be competing with FTX and FTX.US, relatively newer crypto derivatives exchanges which continue to aggressively launch numerous options and betting markets, including a prediction market for the 2020 U.S. Presidential election. FTX is led by Sam Bankman-Fried of Alameda research. The new Augur platform will offer a decentralized betting avenue over centralized competition, but V2 will need to drastically improve accessibility and ease-of-use.
On the development front, the REP project has 46 repos on Github with 25 developers contributing nearly 5,500 commits to the main repo over the past year. Tom Haile and Phoebe Mirman have contributed most of the commits on this repo over the past year. There are currently 11 issues labeled “area/audit” and 16 issues labeled “Bug”. Augur v1.16.11 was released in early April.
Most coins use the developer community of Github where files are saved in folders called "repositories," or "repos," and changes to these files are recorded with "commits," which save a record of what changes were made, when, and by who. Although commits represent quantity and not necessarily quality, a higher number of commits can signify higher dev activity and interest.
Source: Github – AugurProject/augur
On the network side, Augur activity has continued to decline over the past two years. The total USD value locked in Augur has also declined to new yearly lows, which is a function of both a decline in activity and a decline in ETH value. Any increase in these metrics after the v2 release should be a sign of bullish momentum for the REP token.
According to a recent blog post, “when v2 is deployed, all current token balances must be migrated to a new REP token contract”. This migration process will serve as a reset for any dormant REP, on exchanges or held by individuals, and temporarily dramatically spike the on-chain activity of the token.
REP token transactions per day (line, chart below) have mainly ranged between 100 to 600 over the past year with spikes to 1,600 in January and October 2019. Transactions per day have increased slightly in early 2020. Average transaction values (fill, chart below) have ranged between US$500 to US$10,000 over the past two years. Going forward, a consistent and sustained uptick in either measure should be seen as a bullish indicator for the asset.
The 30-day Kalichkin network value to estimated on-chain daily transactions (NVT) ratio (line, chart below) is currently 51, near all-time lows. An uptrend in NVT often suggests a coin is overvalued based on its economic activity and utility, which should be seen as a bearish price indicator, whereas a downtrend in NVT suggests the opposite. Once V2 goes live, NVT should continue to decrease if the platform rises in popularity.
Active and unique addresses are important to consider when determining the fundamental value of the network using Metcalfe’s law. Monthly active addresses (MAAs) have remained flat over the past two years, ranging between 150 and 500 (fill, chart below). Once V2 goes live, NVT should continue to decrease and MAAs should increase dramatically, if the platform becomes popular.
Exchange-traded volume has been led by the Bitcoin (BTC) pair on Binance, Coinbase, and Kraken. REP has had several listings and delistings over the past two years. Bitfinex added REP pairs in January 2018. Coinbase listed REP/BTC and REP/USD pairs in April 2019 and added REP to the Coinbase card in December. Coinbase UK also added REP in October. Binance removed the REP/BNB pair in early November and Poloniex removed several REP pairs in May. REP is also on the shortlist for an addition to Binance.US.
A roadmap for trend shifts can be deduced using Exponential Moving Averages, Volume Profile of the Visible Range, pivot points, and the Ichimoku Cloud. Further background information on the technical indicators discussed below can be found here.
Over the past two years, the REP/USD price has largely ranged between US$7.00 and US$17.50. On the daily chart, the 50-day Exponential Moving Averages (EMA) and the 200-day EMA have been bearishly crossed since mid-March. Over the next week, these key EMAs should once again cross bullish.
Based on the historic volume profile (horizontal bars), support sits from US$7.50 – US$10.75 with resistance from the US$14 – US$15 range. There has been relatively little volume above the US$20.00 price. There are no active volume or RSI divergences at this time to suggest waning bullish or bearish momentum.
Turning to the Ichimoku Cloud, there are four key metrics; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, and the Lagging Span. Trades are typically opened when most of the signals flip from bearish to bullish, or vice versa.
Cloud metrics on the daily time frame with doubled settings (20/60/120/30), for more accurate signals, are neutral; the spot price is inside of the Cloud, the Cloud is bearish, the TK cross is bullish, and the Lagging Span is below the Cloud and above the current spot price. The trend will remain bearish so long as the spot price remains below the flat Kumo at US$13.38.
Lastly, the daily chart for the REP/BTC pair shows bearish trend metrics with price below both the 200-day EMA and the daily Cloud. Overall, there is minimal downside support from 0.0007 BTC to 0.0011 BTC. RSI does show a slight bullish divergence with a lower low in price.
After the V2 launch, bullish momentum will need to regain the historic support and resistance zone around 0.0017. Long entries will not trigger until price is once again above the 200-day EMA and daily Cloud. Significant overhead volume sits between the 0.0035 BTC – 0.0070 BTC range with the psychological zone of 0.0050 showing the most volume historically.
Despite a successful ICO raise in 2015, Augur has been slow out of the gate with a user-friendly protocol. Initially bogged down with coding vulnerabilities requiring a rewrite, the platform continued to be hampered by poor design, lack of options, gas costs, and ETH price volatility.
With the upcoming shift to V2 in June, a whole host of improvements have the potential to breathe life into what has essentially become a ghost town of a decentralized application. A revamped trading and betting UI, along with DAI denominated markets and improved dapp accessibility, should increase the potential for a popular decentralized betting playground in a massively growing addressable market. One remaining hurdle, however, is regulatory scrutiny in the eyes of U.S. lawmakers.
Technicals for the REP/USD show the rumblings of a bullish trend shift with a pending Golden Cross and move to the flat Kumo at US$7.38. Yearly pivots and VPVR both show strong resistance in the US$14 – US$15 range. Technicals for REP/BTC lean heavily bearish as price begins to threaten multi-month lows with very little remaining support other than the psychological level of 0.001 BTC. The success of both pairs hinges on the V2 launch and rollout, as well as the use case for REP on the new Augur platform.