Oracles of Blockchain

Gnosis, Augur and The Future of Prediction Markets

Clearly the price considered most likely by the market is the true current price: if the market judged otherwise, it would quote not this price, but another price higher or lower. — Louis Bachelier

As a child, I remember an old tree in a dusty market square whose branches were so lush they provided a shade to weary travelers. However,the same tree also provided a meeting point for people who bet on any unpredictable event such as the weather, stocks to the outcome of a game. Very similar, in my eyes, to the bullpen of a stock exchange.

History of Gambling

There is an odd sense of guilt discussing gambling in the same sentence as investment and speculation. But, if you understand human nature, insider trading ceases to surprise. Investment, speculation and gambling are separated by the underlying uncertainty of events.

Difference Between Investment, Speculation and Gambling

The speculator’s deadly enemies are: Ignorance, greed, fear and hope. All the statue books in the world and all the rule books on all the Exchanges of the earth cannot eliminate these from the human animal. — Edwin Lefevre, Reminisces of a Stock Operator.

Investing typically involves studying company and market fundamentals before placing money in an investment.

“Théorie de la spéculation”

The theory behind prediction markets has its roots in the random walk theory which postulates that the prices in the stock market fluctuate randomly and therefore cannot be predicted.

Prediction Markets

Like I said before, my experience with the speculators under the tree is also summarized as:

Gnosis

Gnosis, a Greek word loosely translated as knowledge of spiritual events, is also a prediction Market designed to run on the Ethereum platform (Blockchain).

Source:Gnosis.pm

Universal Basic Income (UBI)

Interestingly, Martin is also a supporter of UBI for all and is one of many supporters on the business of basic income platform (supporters include Sam Altman — founder of YCombinator, a former Greek minister of finance , a former US secretary of labor etc.)

The Competition

Gnosis Competes directly with another predictive market platform — Augur. As per the white paper on Gnosis listed on its website, the key differences between the two are:

The Law

While speculation is under scrutiny by regulators around the globe, the spread of decentralized prediction markets holds promise. Unsurprisingly, it faces legal and regulatory challenges.

Hedging Bets

In a separate article, I will discuss a very fascinating subject ie hedge funds. But, for the sake of this article, I want you to imagine a Blockchain based hedge fund.

Conclusion

Today, Ether breached the $300 mark and Ethereum has become the next revolutionary Blockchain platform to facilitate person to person smart contracts from Tibet to Timbuktu. Make no mistake, financial markets stand at an inflection point. Risks abound but so does the promise of a new internet. Time will tell if Ether is digital gold for the future generations but the digital architects have laid out a blueprint for a bold future.

“Are you a betting man?”

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Disclaimer: This article is intended for purely academic purposes and is a personal opinion. It should not be construed for anything else.

Writer @ The Intersection of Finance, Tech & Humanity. Stories of a Global Language: “Money”. Contributor @ Startup Grind, HackerNoon, HBR. Twitter@akothari_mba

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