“If you don’t look at yourself and think, ‘Wow how stupid I was a year ago,’ then you must not have learned much in the last year.” Ray Dalio
First off, welcome to 2020, we made it!
This is the first of two special New Year editions of The Augur Edge. This one will look back on 2019 and next week's will look forward to 2020 and v2 with predictions of what lies ahead. Let's plunge in.
The Most Surprising Things That Happened In 2019
(aka what I was most wrong about)
This was going to be an annual here-are-the-main-things-that-happened recap, but I think a more interesting thing would be to look at what I got most wrong about Augur in 2019 and why.
Let's start with a simple but notable surprise...
Going into the year I was bullish on overlays, like really bullish. I thought that independent UIs would play a central role in driving Augur forward and would be responsible for driving most Open Interest (funds at stake on Augur).
This idea sounded right at the time. You had a clunky Augur UI and a new crop of talented teams who could focus 100% on the end user. They could experiment with different UIs without the operational constraints of the Augur foundation, like not being able to create and curate markets, add liquidity, or buy ads.
This intuition may have been right, just early. But in this case, early is wrong. Fast-forward a year and Veil has shut down, Flux has parted ways with Augur and Ethereum, and BlitzPredict has moved its focus away from building an exchange on Augur, at least for now. Guesser is the lone exception.
Why did all this happen?
It's the kind of question that defies a one sentence answer, but here's an attempt: it stopped being worth it to build on Augur. At least for most teams, at this point in time.
Infrastructure and regulatory risk are part of it. The technical pains are not insurmountable but when you couple them with regulatory risk, maybe the risk-reward starts to look iffy.
Another big factor was v2 delays. UI teams were likely counting on, at least hoping for a sooner launch. Going into the year, I expected around summer or autumn. This was sort of an umbrella assumption on which other bad predictions I made was based.
Why has v2 taken so long? In part, because software always takes longer than you think. I know this first-hand from my days as a developer. This is doubly true in DeFi due to early tooling and immutable contracts that once deployed cannot be rewritten. They're also open-source so getting security right is extra important and demanding.
This challenge is compounded for a project like Augur that uses other decentralized building blocks. For example, multi-collateral Dai, the stablecoin that v2 is slated to use, didn't launch till late November.
But another and I think more interesting force at play, both in the v2 delay and this broader shift in the ecosystem, is Augur's repositioning away from a protocol-first focus. I've written before about Guesser and Veil's strategies, but I haven't written much on the Forecast Foundation's, the core Augur team.
The Foundation, in my view, has moved away from a protocol-first focus. This can be seen in different actions, including putting off contract upgrades in order to direct dev resources at its in-house UI, end-user focused branding around specific use cases e.g., a "betting platform," and focusing on direct user acquisition via tactics like content marketing.
I agree with some of these moves - I even played a role in some -and am skeptical of others. The point is that the focus has shifted. A reflection of this shift can be found on Augur's landing page. At the start of 2019, its headline read "The Future of Forecasting. A prediction market protocol owned and operated by the people that use it." A year later it reads "Put your skills to the test and WIN" with a "Start Betting" call to action button.
This is the difference between a protocol seeking users (developers) and an app seeking users (traders/bettors). Of course, Augur is still a protocol, but conceiving of it as just a protocol or even primarily as a protocol, I think is limited.
The Foundation may have operational constraints, but it also has more site traffic, resources, and manpower than independent teams, and another major asset: the ability to reach U.S. based users, maybe the most underserved betting market. All that combined with an effort to own the end-user experience will make life hard for overlays taking a Veil-like approach.
I think that overlays can still thrive by focusing on the things that the Foundation can't do but that they are uniquely positioned for, like creating and curating markets, adding liquidity and market making, instant settlement, building thematic market-specific experiences, offering "free rolls" of Dai for first-time users, and running social and search ads.
In the best world, it's a Yin and Yang where overlay teams and the Foundation complement each other with their differing assets and limitations, where Augur benefits from overlays driving traffic and overlays benefit from an infrastructure to build on and a UI to point U.S. users to.
Headed into 2019, I thought the path to growth for Augur would be through overlays. I thought that product-market fit between Augur and its end users would be preceded by "protocol-maker" fit between Augur the platform and developers and entrepreneurs building on it, like Chris Dixon talked about.
But for better or worse, this prediction turned out to be wrong, at least for now. Heading into 2020, Augur is as much an app as it is a protocol.
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Happy Predicting + Happy New Year from San Francisco,