With smart contacts, Ethereum is enabling companies to develop Blockchain-based applications like Augur, a new decentralized prediction market currently under development and expected to launch this year. Augur is a prediction market platform that rewards you for correctly predicting future real-world events. With prediction markets, you can think of the current market price of any share in any market as an estimate of the probability of that outcome actually occurring in the real world.
Back when NIA predicted that Donald Trump would win the election in a landslide, every major prediction market had his shares priced between $0.05 and $0.22 – giving him between a 5% and 22% chance of becoming President. NIA purchased shares in multiple markets at an average price of $0.15 and when its prediction came true, the shares automatically settled at $1 – earning NIA a profit of 567%. When NIA purchased its Donald Trump shares at an average of $0.15, betters on the other side of the trade who thought Hillary Clinton would win the election – purchased shares against Donald Trump for $0.85. Their upside was limited to only 17.6% and they ended up losing 100%.
With today’s existing prediction markets, a centralized organization is in charge of deciding what markets to create, storing the funds that customers deposit, processing the transactions, and selecting the correct outcome when an event is over. This creates major counterparty risk on top of the huge fees they typically charge of 3%-5% per trade.
During the 2008 and 2012 Presidential Elections, the world’s most popular prediction market by far was Intrade, but shortly after the 2012 election it got sued by the CFTC for operating an illegal options exchange and selling illegal commodity options in violation of the Commodity Exchange Act. Intrade was forced to ban all U.S. customers, causing its trading volume to decline dramatically – and shortly afterwards it was forced to shut down completely after discovering a $700,000 shortfall in funds as a result of its former CEO spending customer funds that were supposed to be segregated.
Augur as a decentralized prediction market built entirely on the Ethereum Blockchain – with customer funds being stored in Ethereum “smart contracts” – will eliminate all counterparty risks. Augur uses a one-of-a kind consensus based system and a unique token called REPutation. Augur recently auctioned off 11 million REPutation tokens that currently trade in the secondary market for $9.49 each – after rising over 100% in value so far this month. Once Augur goes live, holders of REP tokens will be required to report on the outcome of randomly selected events every few weeks. This will entitle REP holders to receive 50% of all fees paid by Augur customers. REP holders who fail to report or report inaccurately will be penalized.
Using Augur, anyone, anywhere in the world will be able to quickly and easily create a prediction market asking a question about anything. If we estimate that Augur processes $1 billion in annual transactions and earns approximately 1% in fees equal to $10 million, 50% of those fees or $5 million will get distributed evenly to the owners of 11 million REP tokens. This would effectively be equal to REP paying out a dividend of $0.455 – equal to a dividend yield of 4.8%.
Augur is just one example of the incredible value being created by the Ethereum Blockchain and why the price of Ethereum is now up 424% year-to-date. NIA’s #1 favorite Ethereum Blockchain stock suggestion is BTL Group (TSXV: BTL) – with its Ethereum-based Interbit platform currently being tested by Visa, major European Banks, and major European Energy companies. When Ethereum finished 2016 at $8, BTL was trading for $1.20 per share or 0.15X the price of Ethereum. With Ethereum hitting a new record high this morning of $42.89, BTL has a lot of catching up to do and could rapidly rise to $6.43 per share (0.15X an Ethereum price of $42.89)!
Past performance is not an indicator of future returns. NIA is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This message is not a solicitation or recommendation to buy, sell, or hold securities. Never make investment decisions based on anything NIA says. This message is meant for informational and educational purposes only and does not provide investment advice.