"It’s okay to be wrong; it’s unforgivable to stay wrong." -Martin Zweig
Grab your coffee or boba. It’s time to talk Augur.
Each week in The Augur Edge, I share one Tweet, one trade, and a two-minute musing on something I’ve been thinking about Augur. Let’s jump in.
Two Minute Musing
Imagine a social network that:
- none of your friends are on
- where you have to pay to post status updates or to add friend
- you can only pay using some obscure, volatile currency that most people have never even heard of and you must verify each payment using a browser extension and wait minutes for it to process.
Would you use it?
Welcome to Augur v1. It isn’t a social network — it’s more like a liquidity network—but subject to network effects no less. As I wrote in the The Ultimate Guide to Decentralized Prediction Markets,
Markets are networks and networks tend to have network effects. This means that each additional participant makes the network more useful and valuable to other participants. One can think of a market as a sort of dating network that connects buyers and sellers. The fewer sellers, the less likely a buyer is to find a match and vice versa. The ability to find a buyer or seller, and do so quickly, is called liquidity. If you can easily find sellers to buy from or buyers to sell to, a market is liquid. The more liquid a market, the more attractive it is to new buyers and sellers, driving yet more liquidity
Network effects can work against you too. Just like you only want to be on a social network that your friends are on, you only want to trade in a market where others are trading. And you can’t crack this chicken-and-egg if it costs money, time and effort to add friends or to trade, as in the case of Augur v1.
Augur v2 + v3 will be a big leap forward in removing UX frictions and cutting costs. For example, with 0x mesh, it will be cheap to post and update orders, opening the door for market making at scale.
The same network forces that drive illiquidity in Augur v1 will multiply liquidity in v2, v3 and beyond. Once the river is running it will be harder to stop than to keep it going. You can’t put a dam on a borderless, limitless pool of liquidity.
I think it’s cool how much content is sprouting up in this space, but it's only the tip of the iceberg. I expect a wave of new content in v2 and beyond in the form of newsletters, blogs, online courses, videos, ebooks and more.
If you look at the world of PredictIt, the centralized (boo!) prediction market, you see all sorts of content niches. For instance, one trader tweets and blogs almost exclusively about arbitrage opportunities.
But Augur will take things to the next level, since it is radically more open, at both the access and incentive level. At the access level, in that anyone, anywhere can trade in and create markets on anything. And at the incentive level, in that anyone can effectively get a stake in Augur’s success in the form of REP or affiliate capture. So you have more folks who are excited and incentivized to create content.
We may see Augur blogs focused on political markets, on sports, finance, market making, market creation, reporting, trading strategy, betting markets, bounty markets, insurance markets…you name it.
It’s a neat moment right now where Augur is advanced enough that there’s enough content to keep you occupied, but early enough that it’s not overwhelming…yet. I feel like with Ethereum you have to be superhuman to keep up with all the new stuff. With Augur, it’s still manageable…and fun.
You can see my trades here.
This week, I closed most of my short position in “Will Elizabeth Warren be polling over Bernie Sanders by the end of November” at .18. I figured well under an 18% chance of a YES outcome, but I didn’t want to leave so much risk on the table headed into the DNC debate. If something big went down and the sell offers cleared, I’d be locked in my position.
Morning Consult is slated to release a new poll tomorrow that most likely spans from the day after the debate through the weekend. I don’t expect much movement and think there's under a 5% chance the market resolves YES.
Note: This isn’t trading advice, just a look at what I’m up to
I love hearing from readers, so feel free to say hi with any thoughts or questions!
And one more thing, I'll be switching to Tuesdays from here on out, so I'll see you guys next on Tuesday, December 3rd.