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What is Augur and potential risks

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Augur is a platform for creating prediction markets / contracts on Ethereum network. 

Augur went live on the 10th of July, and since then it has permitted everyone to create contracts in order to make predictions of future events like bitcoin price, result of elections, FIFA outcomes, etc. Augur has gained attention from regulators who oversee derivatives, while the developers of Augur still claims they have no hand in creating the debts.


To place bets, users pay in digital currency by buying or selling shares in line with how much they feel an event will occur. According to Prediction Global, responsible for tracking Augur markets, in the first two weeks, around $1.5 million has been wagered and spread over 679 markets. The service is decentralized and it looks unstoppable.




Despite these great features, Augur faces some potential problems. One of the issues is that, listed on its site are at least two contracts permitting users to bet if the assassination of Donald Trump (US President) will happen in July or the latter part of 2018. Another is that, the binary option is a form of derivative through which ways are created on future values of goods, yet Augur has got no permission from the Commodity Futures Trading Commission to list such contracts.


The similarity between binary options and Augur contracts has been noted by the CFTC. As retail investors and other residents in the United States make use of Augur, it may be disregarding the Commodity Exchange Act and the law’s requirement which says that such services needs to be registered as designated contract markets.

In an emailed reply to questions directed at Erica Elliot Richardson, (a CFTC spokeswoman), she said that:


While I won’t comment on the business model of any specific company, I can say generally that offering or facilitating a product or activity by way of releasing code onto a blockchain does not absolve any entity or individual from complying with pertinent laws or CFTC regulations.


There exists some history between the CFTC and prediction markets. Back in 2012, website intrade owner was sued by the agency, because in 2005 the site promised it will not be offering options contracts on the future price of crude oil, gold, and U.S economic data. In 2015, the firm was barred by a Judge from offering the contracts in the U.S. The establishment of Augur took place in 2014, thanks to Joey Krug and Jack Peterson and was partly developed by the Forecast Foundation, which boasts of Advisers such as Vitalik Buterin (Ethereum’s founder) and Ron Bernstein (Intrade’s co-founder). In an interview, Tom Kysar (Forecast Foundation’s head of operations) refused to comment on the markets for assassination predictions. Emin Gun Sirer (an associate professor of computer science at Cornell University) said that: asides censorship, regulators need alternate ways to try to manage such open markets. He then added that, the excitement comes from the gathering of forecasts by different specialists:


I expect Augur to bring out domain experts on climate change, on drug trials, on financial analysis, and a myriad other topics.


Augur’s website plans to confer on users, most of the responsibility. It says: “Augur is not a prediction market, it is a protocol for cryptocurrency users to create their own prediction markets. People who do create markets using the Augur protocol must ensure they’re in compliance with all their local jurisdictional laws, rules and regulations."

After a while a funny contract popped out: "Will the Forecast Foundation face an enforcement action from the SEC or CFTC before Dec. 21, 2018 for hosting unregulated derivatives markets?"

Edited by cryptofreak

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