[Parker] Breaking down the cryptocurrency forecast system
[Parker's Crypto Story] With services related to forecasting the result of the U.S. presidential election gaining popularity lately, so is the cryptocurrency forecast system. When David Marcus, who is heading the Libra project, recently asked through Twitter which DeFi project he should pay attention to, Vitalik Buterin, founder of Ethereum, answered that the forecast market is included in the DeFi realm and said that it should be paid attention to. Buterin had previously said that the accuracy of cryptocurrency forecast systems has surpassed that of other existing analytic models. #The past and the present Market insiders pick Augur as the de facto origin of the cryptocurrency prediction market. Augur, a decentralized prediction market platform, received angel investment from Buterin back in 2015. Augur’s basic process is more similar to a conventional prediction market rather than cryptocurrency, except the fact that it is decentralized. For example, when a menu is based on a platform of who will be the next U.S. president, users will bet on the candidate they pick. In the case of Augur, people can make bets using Ethereum. Then the oracle validates the outcome to announce a winner. #Low commission In the case of Augur, costs can be saved through its decentralized system and charge low commissions for users. Augur also added that while other centralized platform charges 10 percent commission fees, Augur only needs 1 percent. People also point out that decentralized prediction markets can lower the risk of dine-and-dash. In most countries, betting services, which includes prediction market alike, are categorized as illegal service. Therefore, most of the founders for prediction platforms remain ambiguous and the credibility of the owner is low. In fact, there have been many cases of dine and dash around the world where operators suddenly suspend the service and take away the collected fund. The problem is that such illegal betting services make up more than 80 trillion won just in Korea. Decentralized systems can wipe out such risk and if so, a lot of the portion of such sizable markets could be handed over to blockchain-based prediction projects. A lot of prediction projects going on right now aims to not only operate betting services but also operate prediction service for financial products as well. If such a plan is realized, the prediction market based on blockchain will only get bigger. #A paradox? People on the other side, however, claim that there could be other risks because the system runs on a decentralized basis. Even if centralized betting operators are illegal, it doesn’t mean that the decentralized prediction project could be legal. Such projects could also be categorized as illegal as there are many elements that cannot be defined by current laws. When Buterin recently said that the decentralized prediction platform could be actually more accurate than traditional ones, he added that because the parent population is small, the error range for each cryuptocurrency-based prediction platform is actually big. For example FTX recorded $0.63 for Trump’s nomination while on Augur, it recorded $0.45. At this point where we know the election result, Augur shared a similar view with traditional prediction operators, while FTX predicted Trump’s nomination. The error range between the two platforms was pretty big. #What’s the future? The problem is that the definition of what the range should be is not even accurately confirmed. Even so, market gurus are paying attention to the prediction market because if the service is supplemented in a good way, it could really get the best out of blockchain benefits. It is still a very uncertain market, but we hope that some meaningful projects can be built on such big potential.