"The reward for conformity is that everyone likes you except yourself." -Rita Mae Brown
Grab your coffee or boba. It’s time to talk Augur.
Each Tuesday on The Augur Edge, I share one Tweet, one trade, and a two-minute musing on something I’ve been thinking about. Let’s jump in.
Speculators having been in pursuit of edge since the dawn of markets. Today, that may mean hedge funds using satellite imagery to monitor the number of cars in Walmart parking lots to gauge retail demand or high frequency traders pouring millions into shaving microseconds of latency. In the 1600s, it meant using...telescopes.
I call this newsletter The Augur Edge for two reasons. First, because it’s about what's happening at the cutting edge of prediction markets and Augur. Second, cause I look at the question of how to get an edge in Augur markets.
I wrote a couple pieces a ways back looking at how one might get an edge on Augur. Since then, Augur has changed as well as my thoughts, but I think the broad points still apply.
Veil vs. Guesser
Veil and Guesser have been the two highest-profile companies on Augur to date, though Veil closed its doors earlier this year. I’ve tracked each project from day one and met founders from each. Today, I’d like to take a quick look at their differing strategies.
The idea of Veil vs. Guesser as competitors is mostly a meme, a storyline. They were different animals trying to do different things. But it’s still interesting to compare their strategies and the tradeoffs involved, since they approached things so differently.
On the surface, Veil was everything a VC could ask for. A talented team that moved fast, pushing new releases on a weekly-ish cadence, building a fast, sleek UI with cutting-edge tech.
Veil made the decision to set up their own exchange, using 0x, enabling fast, cheap order creation and updates , a key feature for prediction markets. There was a moment in spring when Veil had the best UI on Augur and was my preferred trading venue.
But the decision to go with 0x came with tradeoffs. Doing its own exchange meant foregoing pooled liquidity with Augur. And having its own exchange marketed as a “derivatives platform” may have invited unwanted regulator attention.
Guesser took the flip approach, foregoing the product perks of building its own exchange for the market advantages of sharing liquidity. I think this was a good move.
First it scored not just the liquidity of folks trading on Augur UI, but the trust and good faith of the broader community, something that I think is easy to underestimate the importance of in crypto. Second, given high trading fees, the product-market fit of Augur at this point in time is high-stakes bettors who aren’t as fee sensitive as casual traders, so the upside of cheap market making via 0x is limited in Augur v1. Third, this approach is probably more defensible on a regulatory level than setting up your own exchange.
I think if Veil had done more to market its platform and add liquidity to its markets, this siloed approach might have worked. But the combo of walling itself off from the Augur liquidity pool *and* doing little for user acquisition or to jumpstart liquidity created an uphill battle. Guesser has opted to play an aggressive role in market making and today is Augur’s top liquidity engine, market creator and curator.
I think of Veil as a fox and Guesser as an eagle. A fox is fast, resourceful, and clever, while the virtues of an eagle are patience, vision and boldness. Both are smart, aggressive creatures that can be successful…just in different circumstances. I think Veil was early to the game, given its style and strengths. I think a fast-moving, product-focused team like Veil could be wildly successful down the line when there’s more solid footing to build on at both the infrastructure and regulation level.
There’s more to unpack here, including Veil’s decision to fork Augur. I look forward to digging more into this in an upcoming post. Stay tuned!
You can see my Augur trade history here.
Things have been quiet on Augur this week, so I’ve been more active on PredictIt and also taking a step back to think about the big picture of the 2020 race. This has been a tricky election cycle to get a pulse on, and I’ve made my share of bad predictions. I didn’t have any strong convictions on the election for most of the this year, so I didn’t put much into the markets. Now I feel like I’m starting to form some more cohesive thoughts…though time will tell if they’re right.
My two main positions in PredictIt DemNom, both of which I added to this week, are long Pete Buttigieg and Bernie Sanders. Both of these are at least medium-term plays that I plan to hang on to headed into the first primaries, barring any major surprises or developments. That said, no surprises would be...surprising. Feel free to ping me if you want to hear more about my reasoning here or to share your thoughts.
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. Until next Tuesday...