"Predicting rain doesn’t count. Building arks does." Warren Buffet
I’m excited to bring The Augur Edge back to life with a fresh format. Each edition will feature one trade idea, one tweet & a two minute musing on something interesting about Augur.
That’s it. Short and sweet.
So grab your coffee or boba. It’s time to talk Augur.
This week marked a year out from Election Day 2020. Augur is on pace to deliver the best trading experience for the election cycle, due to no limits, low fees and global access.
I think that politics will be the biggest use case in Augur v2, by far. In the long run, I think political markets will give sports betting markets a run for their money, since many of the reasons sports betting became dominant in the first place go out the window with Augur.
I think post-2020, financial markets will take off more and long-tail markets on all sorts of things we haven’t even imagined yet. But elections will be the big thing in 2020, and I think a small number of markets will capture the lion’s share of volume.
You can see my trades here.
The main market I traded this week was “Will Elizabeth Warren be polling over Bernie Sanders by the end of November,” according to Morning Consult, where I sold shares at .6 and .54 and added to the position this morning at .4 after Morning Consult released a new poll.
Morning Consult, like any pollster, has what Nate Silver of 538 calls “house effects,” biases relative to other polls. So by looking at trends in other polls, you can ballpark potential movements in Morning Consult. This trade was based mostly on such trends.
I’m keeping a close eye on things and may add to or cut this position in coming days. This could be one of those markets that swings around and remains interesting up to the final innings.
Note: not trading advice...just a look at what I’m up to
Two Minute Musing
On Augur, anyone can create markets on anything. This radical openness is one of its greatest assets *and* greatest liabilities.
Any open system, whether email, Craigslist or the telephone will have junk and scams. The challenge is to filter out, signal or disincentivize them, such that the average user doesn’t see or fall for them.
What’s the best way to do this for Augur? Can it be done in a 100% decentralized way?
This remains an open question. I doubt that Tradable Invalid will be a silver bullet, or close. I think tapping more into services like overlays and instant settlement providers for curation (and insurance) will be useful, if not essential.
Curation is almost a dirty word in this space, since it implies a centralized curator. But curation can be done with varying levels of centralization, and if the point of decentralization is to make something that is more resilient and accessible…is a system rife with scams accessible or resilient?
Market filtering is unavoidable on Augur. For instance, many markets are not and should not be visible by default, due to low liquidity, high fees or Invalid risk. The question is who is doing this filtering. How much is done by algorithms vs. human judgement?
Market creation, trading and resolution are all decentralized on Augur. To what degree can and should market filtering be?
One thing that might work is an opt-out filter where, by default, users only see markets where instant settlement is on offer. Instant payout providers have skin in the game and (mostly) aligned incentives in that they want to have as many markets as possible to settle on *but* they only want markets that will resolve predictably.
Poyo’s recent scam, involving markets that resolve unpredictably but not necessarily Invalid…this is the exact type of market an instant settler would never touch *and* the exact type of market that would slip through the cracks of Tradable Invalid.
And since most users likely prefer instant payout anyway, such a filter could be broadly useful, in a similar way that the liquidity sort is broadly useful in v1 beyond just concealing the markets that pose the highest Invalid losses risk.
I think in a complex system like Augur the bias should always be on simplicity: solutions that introduce minimal complexity and require the fewest dev resources. Tapping a bit more into curation by market actors like instant settlers and overlays seems like it fits the bill. What do you think?
I love hearing from readers, so feel free to say hi with any thoughts or questions!