Token Sale Exceeds $1.7M, but Augur’s ‘Reputation’ Isn’t All About the Money

Bitcoin Magazine
Token Sale Exceeds $1.7M, but Augur’s ‘Reputation’ Isn’t All About the Money

It’s been a wild couple of days for the team at Augur. Just 48 hours into their crowdsale, which launched at noon EST on August 17, they have raised in excess of 4200 BTC and 549000 ETH.

“Unfortunately, the ether and BTC price keep falling, so the buys can’t keep up with the (USD) price,” said Augur’s marketing director, Tony Sakich. Bitcoin has dropped from $253 USD to around the $232  mark since the Augur sale began.

It’s a remarkable feat for a company that has a somewhat esoteric product, built on Ethereum, arguably an as-yet unproven blockchain platform. Ethereum’s Frontier stage was released just last month, making Augur the first major platform to stake its claim there.

Augur is an open-source, decentralized prediction market. It uses “the wisdom of the crowd” to project and confirm the outcome of future events. People set up events and buy shares in the possible outcomes of those events. Once the event is concluded, the funds associated with shares of the correct outcome are distributed among the shareholders, the Augur Foundation, and the “oracles” — people who contributed to verifying the outcome of the event.

“Reputation” (REP) is the token that fuels the network; the more REP a user has, the more value or trust is assigned to that person’s input. After an event occurs, the consensus of Augur “oracles” defines its outcome. People who report truthfully earn REP tokens and are also awarded a portion of the winnings. People who report against the consensus (untruthfully) lose REP tokens and earn nothing.

Jeremy Gardner, Augur’s Director of Operations, told Bitcoin Magazine that the purpose of the Augur token sale is to distribute reputation tokens as widely as possible, not necessarily “to raise tens of millions of dollars,” thereby creating a decentralized and accurate network of oracles.

“The point is to create a distributed consensus maintained by reporters all over the world,” said Gardner. “It has been extraordinary to speak to folks from all over the globe looking to participate in our system. Hundreds of individuals have already bought in, guaranteeing a robust, global consensus network. Whether we raise a million dollars or 10, what we want is thousands of unique participants, each willing to help maintain this truly revolutionary system.”

Thus far, the distribution of Augur accounts seems to be meeting that goal. More than 2,400 accounts have been created on the Augur crowdsale site with approximately 1,000 users already buying in. The global distribution of those accounts, according to Augur’s data, is widespread, although higher concentrations of activity seem to be in the United States, along with Brazil, Italy, China, and Japan.


Distribution of Augur accounts worldwide – courtesy of Augur

Spreading the Word

In a conversation with Bitcoin Magazine, Sakich discussed some of the factors that have contributed to Augur’s initial appeal.

He emphasized the company’s commitment to making Augur approachable and easy to understand. They developed an entertaining animated explanatory video (featuring the voice-over talents of country star Shooter Jennings) and a user-friendly platform.

“Our platform will be designed so the user will be able to create a market and place wagers on it without even knowing about what’s going on “in the background” of the app,” said Sakich. “More than a few participants in the REP crowdsale have been impressed by how simple it has been to generate an Ether address via our sale site and purchase Reputation Tokens with bitcoin.”

Augur has also invested a lot of time and energy over the past few months spreading the word both within and outside of the Bitcoin community — with a good measure of success. Gardner admits he’s probably been to “about two dozen” events and conferences, promoting the platform in the months leading up to the crowdsale.

Augur also was a finalist in the CNBC & Singularity University’s Exponential Finance XCS Challenge — the only blockchain-related technology to make it that far. According to Sakich, the applications committee was so impressed by the technology that “they decided to put us in the ‘Breakthrough Technology’ category rather than ‘Finance.’”

Sakich pointed out that the most valuable part of being invited to the Exponential Finance conference was the opportunity to meet with “an amazingly influential and important list of attendees. …The interest we had was fantastic and it exposed us to many important people, which undoubtedly [has] helped the crowdsale performance.”

If early results of Augur’s reputation sale are any indication, the team seems to be well on that road to success


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The Future of Smart Contracts: Positive Social Innovation or Criminal Activity?

Smart contracts, a feature of “Bitcoin 2.0” technologies such as Ethereum, could empower criminals with sophisticated trustless collaboration means, the prestigious MIT Technology Review reports.

Cornell University professors Ari Juels and Elaine Shi, with University of Maryland researcher Ahmed Kosba, present several cyber-crime scenarios enabled by smart contracts in the recently published paper “The Ring of Gyges: Using Smart Contracts for Crime.”

The Ring of Gyges is a mythical magical ring mentioned in Plato’s Republic which grants its owner the power to become invisible at will. Of course, criminals wearing the invisibility ring would commit all sorts of crimes beyond the reach of law enforcement.

Shi joined the Computer Science Department at Cornell University in August 2015. Shi was recently awarded a large National Science Foundation (NSF) research grant for cyber-security research, Bitcoin Magazine reported in July. Shi, formerly at the University of Maryland and the Maryland Cybersecurity Center, researches cryptocurrencies and “smart contracts” – computer programs that can automatically execute the terms of a contract.

“We illuminate the extent  to  which  these  new  cryptocurrencies, by  enabling  criminal  activities  to  be  conducted  anonymously and  with  minimal  trust  assumptions,  may  fuel  new  criminal ecosystems,” note the researchers. “Specifically, we show how  what  we  call criminal smart contracts (CSCs)  can  facilitate  leakage  of  confidential information,  theft  of  cryptographic  keys,  and  various  real-world crimes (murder, arson, terrorism).”

The examples developed by the researchers work on the recently launched smart contract platform Ethereum.

For example, malicious agents could anonymously hire hackers to compromise a website by creating a smart contract that, upon automatic verification that an agreed code string has been added to the hacked website, pays the hackers a reward in cryptocurrency. The method doesn’t require that the two criminal parties trust each other.

Similarly, self-executing smart contracts could be used in “assassination markets.” Criminals could place a smart contract for the assassination of a target, and the contract could pay the murderer automatically upon verification (for example by automatically scanning news wires) that the target has been murdered at an agreed place and time. Again, the method doesn’t require that the criminals trust each other.

The researchers participate in the Initiative for Crypto-Currencies and Contracts (IC3).

“Emerging smart  contract  systems  over  decentralized  cryptocurrencies  allow  mutually  distrustful  parties  to  transact safely with each other without trusting a third-party intermediary,” notes a related IC3 paper.

“In some ways this is the perfect vehicle for criminal acts, because it’s meant to create trust in situations where otherwise it’s difficult to achieve,” says Juels.

Ethereum CTO Gavin Wood notes that the aspects of Ethereum that make it suitable for “criminal smart contracts” can also permit all sorts of positive, radical social changes. For example, Ethereum smart contracts could permit creating decentralized versions of services such as Uber, and handling the payments without the need for a company in the middle. Such decentralized peer-to-peer (P2P) systems would be nearly impossible to legislate against.

Ethereum communications officer Ken Kappler made similar examples of how smart contracts could permit developing P2P versions of services such as eBay and AirBNB, which work without intermediaries. In general, intermediaries have been needed to operate exchange networks where the users don’t necessarily trust each other, but exchange networks built around self-enforcing smart contracts don’t require trust, and therefore don’t require intermediaries.

Therefore, smart contracts represent a disruptive innovation with a huge potential. In 2001, legendary cryptographer Nick Szabo spoke of smart contracts that solved the problem of trust by being self-executing, and property embedded with information about who owns it. For example, the key to a car might only operate if the car has been paid for according to the terms of a contract.

“The potential for Ethereum to alter aspects of society is of significant magnitude,” said Wood. “This is something that would provide a technical basis for all sorts of social changes, and I find that exciting.”

Photo Tim Pierce / Flickr (CC)

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