Augur’s (REP) Prediction Market Could Be Impossible To Shut Down Or Regulate

  • Augur (REP), a blockchain-based prediction market platform, might be impossible to regulate because of its decentralized nature.
  • Augur’s platform may also be impossible to shut down because its not controlled by a centralized entity, and it’s fully open-source.

Founded in 2014, Augur is a decentralized prediction market platform developed on the Ethereum blockchain. Shortly after a $152 million legal battle between its founding members, it is now being scrutinized by regulatory authorities.

Betting on the outcome of future events, which Augur allows, may not necessarily be illegal, but its “death-pools” may be a cause for concern. That’s because their recent associated activity is considered illegal in the United States.

Death pools” or “assassination markets” let users place bets anonymously, which means that someone could be motivated to commit a murder if they’re paid for it.

Potential For Unregulated Options Market

Moreover, American regulators think that Augur could potentially help facilitate a very large and unregulated options market. At present, options trading is part of a huge global financial derivatives market, which is very tightly regulated.

Only a very limited number of investors are able to meet the strict requirements for options trading. However, Augur lets its users easily issue what can be described as over-the-counter (OTC) derivatives.

While Augur’s current market size may be too small to concern regulators such as the US Commodities Futures Trading Commission (CFTC), it’s still possible that its blockchain-based predictions platform could begin to attract more investors.

Hard To Regulate, Impossible To Shut Down

Should Augur’s options market grow significantly large, then it would become very difficult to monitor and regulate. Unlike a traditional financial market where the participants are basically centralized entities, and are easy to track, Augur’s distributed network allows its users to trade on its platform from any part of the world.

So, if there are traders on Augur’s platform who engage in fraudulent activities, it would be very difficult for authorities to take legal action against them. There would be no central or fixed location where they could be reached. Also, if the offender is a citizen of another country, then it may be very costly to prosecute them.

What might be even more worrying for authorities is that even if Augur’s developers wanted to close down the decentralized oracle, they would not be able to. That’s because it’s a fully open-source protocol, which has already been introduced in the market.

Anyone wanting to create a predictions market similar to Augur’s platform could do so, or they would also be able to easily maintain and support the existing Augur network.  

Notably, other concerns cited about the Augur (REP) platform are that it has attracted around $255 million in investments, but the number of people actually using the platform is comparatively minuscule - at less than a 100 a day in recent weeks.

Weekly Newsletter

Bitcoin Dominance Bump Unlikely to Last — Market Analysis

The entire crypto market seems to be going risk-off and turning to a state of correction, after an excellent start to 2020 throughout January and February which saw significant gains. This is reflected in the brief pop in Bitcoin market dominance. But in the longer term, it’s a different story, and we must always bear in mind the intercourse the conflicting trends of different timeframes – and how they can still agree with each other.

Here, rather than focusing on any specific crypto, we’ll look at the market as a whole using some trusted indicators.

We first look at a small-to-medium-timeframe chart of Bitcoin plus Bitcoin’s market dominance arrayed against the “Others” market dominance, Others being a basket of all altcoins below the top 10. This panoply of charts gives us a broad insight into the whole market.

just some speedbumpsBTC chart by TradingView

During January and some of February, we can see clear risk-taking in the form of a rising altcoin market share. Bitcoin’s price was rising even as its dominance was falling: peak altcoin conditions, where so much buying is coming into the system that more entities are buying Bitcoin than selling Bitcoin for altcoins, even when there is a lot of that.

This pattern has reversed in the past few days, with Bitcoin’s price falling even as its dominance rose, with altcoins being sold back into Bitcoin. The market was overheated in the short term, and people are wisely hedging their profits.

But this trend is unlikely to last. Zooming out and looking at a chart of Ethereum/Bitcoin and both dominance charts again (with Ethereum being a general proxy for the altcoin market), we see a different story.

the bigger picture says the opposite thingETH chart by TradingView

There is a lot going on here. First we can note that Ethereum – again, bearing in mind its role as a general proxy for altcoins – has retaken a very important inflection line that it lost during 2019, the dotted line. It is likely, based on this line retaken last week, that Ethereum is starting a long term uptrend against Bitcoin – and that altcoins in general will do the same in the long term.

Moving to the Bitcoin dominance display in the middle panel, we see an agreement of the above thesis. Bitcoin’s dominance has fallen below its own critical level, namely the area near and above 70%, which BTC held for a while during 2019. This level had not been held since 2017, when Bitcoin put in its all-time-high – and it now looks to be trending steadily away from it again.

This trending away will again provide the space for altcoins to grow in market share, and we have already seen the beginning of this trend during 2020. Perhaps what we have seen was only ‘Round One’.

And moving below to the Others dominance, we see that this indicator has, yet again, taken an important level of 6% and is likely trending away from it. This is the same message in reverse: this level was first tickled during the first real altcoin mega-rally, in the beginning of 2017, and stayed above it for years. It was lost for a time in 2019, about the same time Bitcoin retook its level of 70%.

The larger trends are likely moving in the opposite direction than the shorter ones. Bitcoin's price, based on these indicators, is likely to continue rising even as its market share continues to falls. Altcoins, after years of being battered, are likely to continue gaining market share; and in that situation, the pie can only be getting larger overall.

The views and opinions expressed here do not reflect those of and do not constitute financial advice. Always do your own research.

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