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Augur is a relatively new blockchain-based market project. The service offers a place for users to make predictions about all kinds of events that occur in the world, whether social, political, financial or any other. Regular members of the network make payments for those events that look true to them. The other group of users has a duty to check these events and their real outcomes regularly. The system uses ERC-20 tokens supplied by Ethereum network. It is interesting that Augur demonstrated a high level of prediction ability that was even more correct than the ideas of professionals in the spheres.
The project was one of the first to use Ethereum as a basis and started in October 2014 by Joey Krug and Jack Peterson. They have already been familiar with a blockchain technology since they were working on Sidecoin (a Bitcoin’s fork) before. Ethereum’s creator Vitalik Buterin is an advisor of the Augur project. The first version of the service was launched in 2015. Soon, Coinbase proclaimed Augur the best blockchain project of that year. In March 2016 the improved beta version of Augur saw the world.
Augur has a strong competitor – Gnosis, a similar platform also based on the Ethereum network. However, they are quite different in term of the economic models they implement.
As a prediction market, Augur encourages participants to purchase and sell shares about the results of important events. The prices depend on the crowdsourced likelihood of the particular event. According to the researches and results presented by Augur, prediction markets can be even more efficient than professional institutions.
Most predictive markets use a principle called “Wisdom of the Crowd” to create estimates of future events. This activity is nothing new since 1503, when the political betting was so popular. The idea is that a large sample size answers might be as correct as the answers given by an expert or a group of them.
While there is an opinion that prediction markets are similar to gambling, in the reality they might be accurate enough, especially when carried out properly. For example, Google and Ford Motor used prediction market information for their decision-making strategy for a decade.
Augur pays the network members if their predictions come true. These predictions are made in the form of shares that include information about the future events. Users choose the shares that seem possible to and purchase them. Therefore, a profit you can make depends on the level of possibility for an event to happen and is decided by the crowd. Every share costs 1 ETH.
REP (Reputation) tokens let the Augur platform function in a proper way. These tokens act as scores assigned to those users, who report about the published events and their results every few weeks. These users are called Reporter and if they fail to do the work, the reputation (quantity of REPs) decreases. In case of successful and regular activity, Reporters receive fees for their work.
These tokens cannot be perceived as investments since they don’t bring passive income. However, they help the entire resource work. In fact, these coins are not used as the traditional cryptocurrency. This is more an internal reward than real money. REP has a limited supply of 11 million tokens (80% are sold to their ICO).
Following the ICO, REP coin had a price of $1.5 and $2. Later, REP’s price has increased three times. The first spike was in March 2016, when the beta version of Augur was released and REP costed $16 at that moment. REP tokens were released to the public use in October 2016 and their price grown above $18. The third time was in December 2017 and the price went above $108. The reasons for this spike are unknown. Rumors say that the rise was because REP appeared as a tradable coin on Coinbase.