David Johnston, managing director and founder of the DApps fund, and a close friend, outlines his law for decentralized applications in “The General Theory of Decentralized Applications, DApps”: Everything that can be decentralized, will be decentralized. Prediction markets, as seen by our Augur prototype, can and will be decentralized.
But why, you may ask?
Let us take a look at the entities who currently employ prediction markets:
Best Buy, Motorola, Qualcomm, Edmunds.com, Corning, Renault, Eli Lilly, Pfizer, Siemens, Masterfoods, Hewlett-Packard, Google, Intel, Microsoft, France Telecom, Starwood, General Electric, are a few of the large organizations, among many, who use prediction markets internally.
Then, of course, the Department of Defense and Central Intelligence Agency famously tried to build a public one, of course. The CIA has since made a compelling case for the tool.
Lastly, online prediction markets, like InTrade, despite quite limited liquidity, managed to be often eerily accurate in their forecasting; much more so than any pollster, pundit, or politician (besides Nate Silver, on a good day).
Before answering your first question, this has perhaps engendered another: If many of the most admired companies, feared government agencies, and some of the world’s top economists, all value and employ prediction markets, then why on earth are they not legal?
There is a wealth of compelling arguments about why prediction markets are banned, but fundamentally it boils down to three factors:
- Misunderstanding of what prediction markets actually are in a post-Puritan society that deems anything (besides the stock market, or casinoes, or lotteries) involving wagering, “immoral.” (Forbes seems to agree.)
- Gaming industry interests in not having online competition.
- Most importantly, overbearing regulation by the CFTC.
And this, friends, is why Augur is needed. Economists, the military-industrial complex, and Google are not likely to team up and wage an information and lobbying war against Sheldon Adelson and the CFTC in Congress. Hell, Congress can’t even pass a budget. (However, they could be well served by employing prediction markets, according to this Penn State Law Review piece.)
Thus, the answer is decentralization. As previously discussed, the beauty of the blockchain, first introduced in the Bitcoin protocol, is that it allows for distributed consensus protocols, and importantly, in the Augur system, distributed oracles.
By creating something open-source and decentralized, this can be a tool for the world, that anyone with an internet connection can access. With bitcoin becoming increasingly easier to obtain and use, it is our hope that this technology, just like the cryptocurrency, can transcend borders and become a tool for people everywhere. That is why Augur is so wildly important.
Like bitcoin, Augur is an unstoppable force. If successful, it will unleash an unrelenting torrent of truth and accurate forecasting, in a world that contains little of either. The more people who use Augur, the more powerful and accurate it will become.
While we promise to always do our very best to abide by the regulation and the laws we live under, if it should be determined that an open-source information aggregation project is wrong, then as Martin Luther King wrote from a Birmingham jail cell, “An individual who breaks a law that conscience tells him is unjust, and who willingly accepts the penalty of imprisonment in order to arouse the conscience of the community over its injustice, is in reality expressing the highest respect for the law.”
