Augur has now been live for over half a year. I think 2019 will be a year of progress as well as productive growing pains for the young peer-to-peer prediction platform. Since it’s always fun to try to predict the unpredictable, here are a few thoughts on what the year will have in store for Augur.
For simplicity, I state each prediction without any conditionals, but you can mentally insert an “I predict” or “I think” before each statement to better reflect the uncertainty.
- The first half of the year will be slow with minimal increase in usage. In fact, total money at stake will drop once the House market is settled, and I don’t expect the Super Bowl or any other event in the first half of the year to draw nearly as much interest. In the second half, activity will gradually tick up with the arrival of v2, the credibility of being around and accurately resolving markets for a year, progress with consumer-grade UIs built atop Augur, and likely more activity in the broader crypto market and greater volatility in broader markets. But I don’t think we will see the real fireworks and steep S-shaped adoption until 2020 and beyond.
- By summer, more trading volume will occur on apps like Veil and Guesser built atop the protocol rather than directly on Augur’s end-user app. I think that Augur’s key innovation is a trustless oracle and an API that lets people build things atop this oracle like derivatives, betting, bounty, and insurance markets. Augur’s UX has come a ways and is good for a certain breed of trader. But because The Forecast Foundation takes a hands-off position due to regulatory caution, I don’t think it can (or wants to) get close enough to users and take the kinds of risks needed to rapidly iterate and develop a great UX. I think this is the right move.
- Building on this theme, the rise of companies like Veil built atop Augur (AugurCos, in the words of Kyle Samani), will result in the use of Augur becoming more centralized in practice even as the underlying protocol remains decentralized. While I think Augur will keep the promise of making it possible for anyone, anywhere, anytime to speculate on anything, AugurCos will create meaningful centralization in that they will increasingly control which markets are most visible, accessible, liquid, and most quickly settled. This could be an early case study in the tensions between decentralization at the protocol level and centralization at the practical level. Centralized services built atop protocols can rapidly improve UX, amass users, and reap the rewards of aggregation theory. In the case of Augur, Veil & Co will attract users due to superior UX, which will attract more market makers, in turn making it more attractive to more users in a virtuous cycle. I think on net this will be a positive and allow us to build a valuable ecosystem, but we need to keep an eye on potential tradeoffs. While the oracle itself will remain decentralized, control over which markets are most visible, liquid, and easily accessible will increasingly be influenced by AugurCos.
- Today, Augur follows an exaggerated Pareto: a tiny number of markets capture the lion’s share of liquidity. By the end of 2019, this will still be the case but to a lesser degree. Creating markets won’t get much easier but trading and infusing liquidity into them will due to better UX, off-chain order creation, and Dai integration. So the total number of markets will rise more slowly than the proportion of liquid markets.
- At some point in ’19, more than a billion USD worth of Ether will be ‘locked up’ in MakerDao and Augur contracts combined, though Augur will account for a tiny percentage of this and some of this may be one and the same since Augur will accept Dai.
- The integration of Dai into Augur will be game-changer for the platform allowing users to minimize Eth volatility risk. Ironically though, it will also make it easier to recklessly leverage crypto exposure. There will be some ugly stories of people getting ‘rekt’, creating Dai to enter illiquid, high-risk positions on Augur. This may be amplified by the fact that Augur liquidity tends to dry up when Eth is plummeting, the exact same time when trader’s CDPs will be flirting with liquidation. Allowing traders to trade however they want, including making dumb mistakes, is key for a permissionless platform. However, I think Augur and AugurCos would be wise to provide tools and info to help users minimize these risks not just to benefit traders but to appease regulators. However, this may be the least of Augur’s concerns when it comes to regulation…
- Sometime in 2019, the most popular Augur skeptic narrative will change from “nobody uses this thing” to “the regulators will kill this thing.”
- Augur’s most popular use cases will remain crypto price speculation and political predictions. But we’ll also see the gradual rise of the important use case of hedging risk. While generating accurate predictions requires the wisdom of the crowd i.e., many traders, hedging in theory only requires two parties to take the opposing sides. Conversely, hedging risk a more serious use case that requires more trust, so its momentum will be limited until Augur is more established.
- Augur markets will become more efficient i.e., better priced, due to more liquidity, more eyeballs, and more trading bots. Still, these are early days and there will be many, many inefficiencies leaving plentiful opportunities for astute traders. In fact, I think it will still be a while before we hit the sweet spot of meaningful liquidity but still meaningful inefficiency to allow great trading and arbitrage opportunities.
- There is a less than 50% but non-trivial chance that Augur will fork in 2019. If it happens, I think it will be a net positive in that it will test the forking process early on, encourage better standards for market creation and vetting, and productively split the purists and pragmatists.
- I think 2019 will be a volatile year for REP and it will have less correlation to Ether than most other ERC-20 tokens.
- By end of year, there will be more money at stake on Augur than on PredictIt, the leading centralized prediction market. However, PredictIt will still have more users. Unlike PredictIt, Augur has no betting caps, so it will attract high-conviction, high-capital wagers. But until Augur gets cheaper and faster due to scalability upgrades and lower fee fiat-on ramps, platforms like PredictIt will be the preferred venue for casual speculation due to fewer trading frictions.
- A greater proportion of cryptocurrency speculation will move from binary to scalar markets as the advantages of these become clearer and Veil makes it more intuitive to trade in these types of markets.
- There will be more media coverage on specific Augur markets. Perhaps a story on how Augur surpassed other platforms in forecasting a political outcome or a story about how insider information tipped a market.
- We will see more interesting things built atop Augur as more developers enter the space and more primitives in the DeFi space are available to build on in tandem with Augur.
- We will see experiments with new types of markets and financial instruments on Augur. Most will fall into the category of cool idea but no compelling real-world use case…but a few will succeed.
- We will see the gradual emergence of better standards for market creation, or at least a system for vetting markets. In 2018, we saw many markets with poor, ambiguous wording — sometimes deliberate attempts to mislead traders. I think we’ll see either some system for communally vetting new markets or a centralized trading platform insuring against invalid outcomes for “verified” markets.
- There will be growing pains, perhaps significant ones. Augur is still a young, experimental platform. The sheer amount of game-theoretic complexity to get something like Augur working is staggering. It is probably the most complex thing deployed to date on Ethereum, which itself is still young, experimental and arguably one of the most ambitious tech projects in modern human history. Augur will be tested and I believe this will be an opportunity for it to grow and showcase its antifragility. I am optimistic that a strong community, vision, and team of developers can overcome almost any challenge that may arise.
- By end of ’19, the Augur market with the most money at stake will be on the Democratic Presidential nominee for 2020. It will be the most crowed presidential primary in U.S. history, and according to Augur, Kamala Harris, Beto O’Rourke, and Cory Booker will lead the pack…
Despite the growing pains, Augur’s long-term prospects have never looked brighter. I think the platform will continue its slow march toward becoming the world’s freest, most frictionless financial market where anyone can speculate on anything, where man and machine come together to predict and prepare for the future, manage risk, and resolve the state of reality.
Happy predicting and happy 2019.
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