Crowdsale To Distribute Augur Prediction Market Tokens

Prediction markets have been studied by academics for decades, and are often more accurate than experts and pundits. One of the oldest and most famous is the Iowa Electronic Markets (IEM), introduced during the 1988 U.S. presidential election as an educational and research project operated by University of Iowa.

In comparison to 964 polls covering five Presidential elections from 1988 to 2004, the IEM significantly outperformed in every election when forecasting more than 100 days in advance.

While the need for financial incentivization in prediction markets is still debated, individuals generally wager on the outcomes of future events. Those who forecast the outcome correctly win money, and if they forecast incorrectly they lose money. People are therefore incentivized to forecast such outcomes as accurately as they can.

US regulators have been known to target profit making services that leverage monetary incentivization. The IEM is an experimental market operated for academic research and teaching purposes, specifically extended “no-action relief” by the Commodity and Futures Trading Commission (CFTC). In 2013 the Irish company InTrade was less fortunate, as was Israeli and Cypriot company Banc de Binary, both companies ceased trading following action from US regulators.

"If a company wants to offer U.S. persons the opportunity to buy and sell predictions on the direction of commodity prices, the company must play by the rules or suffer the consequences."
— – David Meister, CFTC Enforcement Director

Augur is a decentralized prediction market platform, with no central point for regulators to target, much like Bitcoin. The financial reward for participating in the market comes in the form of the digital asset called Reputation (REP). Jeremy Gardner, Augur Director of Operations, explains “It allows its holders to report on the outcome of events in Augur’s prediction markets, and rewards them for honesty, and regular reporting, with half of all trading fees on the platform.”

Those who hold REP are expected, every eight weeks, to report on the outcome of a random selection of closed events in the system. If Reputation holders fail to report on the outcome of events assigned to them during the reporting period, or report dishonestly, the platform redistributes REP to those who have reported both regularly and honestly.

“A crowdsale/auction is so important because it incentivizes people who buy rep to report honestly because they have something valuable at stake if they don’t.”
— – Jeremy Gardner

The Augur crowdsale is selling off 80% of 11 million REP that will be on the platform. The remaining 20% will be held by the development team behind the project, their advisors, and the Forecast Foundation, which will act as a community governing body for the open source project.

The company behind the project will also operate their own prediction markets on the platform, which will be for-profit, with a similar business model to the open source, decentralized marketplace OpenBazaar.

The sale will last until October 1, when the tokens will then be released to buyers  Those who buy into the crowdsale will be given a slice of the 8.8 REP million pie in proportion to the total raised. If someone buys $10 of REP, and the crowdsale raises a total of $100, that would secure 10 percent of the overall REP. People will be able to buy REP tokens with any digital currency through Shapeshift.io, directly with bitcoin, and also with the Ethereum asset, Ether.

"In order to allow us to maintain development during the very pivotal period between the release of our Alpha (when we would have liked to conduct our crowdsale) and the point at which Ethereum was launched, we offered early REP buy-in to a handful of trusted friends of the project. The amounts ranged from 17.5 to 120 BTC and totaled $100,000. The participants got an 18% discount compared to someone who takes advantage of the bonuses outlined above, but beyond that they received no other benefits. In the spirit of full disclosure, the people who bought in early to the sale were Vitalik Buterin, Bo Shen, and Erik Voorhees."
— – Augur

Augur is built upon Ethereum, a digital currency and blockchain with added smart contract capabilities. Ethereum was created to allow for greater and more complex distributed, decentralized applications.

Investors will also be able to increase the amount of REP they receive by investing earlier in the crowdsale. Different time periods will multiply how much participants receive, the longer someone waits the less of a bonus they will get.

• True Augur (15%): August 17- August 22, 12:00 pm (EST)
• Prophet (10%): August 22-  August 27, 12:00 pm (EST)
• Nate Silver (5%): August 27 – September 5, 12:00 pm (EST)
• Nostradamus (0%): September 5- October 1, 12:00 pm (EST)

The auction will be held at sale.augur.net.