update 19 August 2021

Investing in Augur (REP) – Here is What You Need to Know?

Augur was one of the first platforms to surface on the Ethereum blockchain in 2015. It had a promising start before falling into obscurity. Now, five years later, the oracle for prediction markets godfathered by Vitalik Buterin is making a spectacular comeback.

The recent release of Augur v2 is the first big upgrade to the protocol, and it comes with a comprehensive suite of improvements to Augur. The industry is looking at one of the most promising platforms that one day may support a fully decentralized marketplace for everything, from commodities to stocks.

Augur is part of the ever-expanding crypto universe and one of the most ambitious blockchain projects out there. If you are curious about how it works, this comprehensive guide to Augur should clear the air for you.

Augur in a Nutshell

  • Augur is a decentralized peer-to-peer protocol for prediction markets.
  • Augur was launched in 2015
  • Augur v2, an improved version of the platform, was launched in July 2020
  • Augur enjoys the support and counsel of the Ethereum co-founder, Vitalik Buterin.
  • Augur is developed on top of the Ethereum blockchain.
  • Augur has a native token called REP.
  • Augur enables users to wager on the outcome of real-world events.
  • Augur wants to eliminate the risk of corruption in trade by decentralizing prediction markets.
  • Augur demands the reporting of correct data from its token holders, a.k.a. the reporters.
  • Augur is available to buy on most of the major crypto exchanges.
  • Augur can be stored in Ethereum-compatible wallets.

What is Augur?

Augur is a decentralized oracle platform for prediction markets. It enables the transition of data from trusted off-chain sources to on-chain applications. It is built on Ethereum and acts as a peer-to-peer protocol through which participants can make predictions on real-world events that may range from election results to weather forecasts. When they make winning guesses, they earn crypto rewards.

In terms of coding, Augur is written in Solidity. It consists of a string of smart contracts that can be developed on Ethereum, and it operates with two cryptocurrencies, Ether (ETH) and Reputation (REP).

Behind Augur is a team of developers that ensure its maintenance and development called The Forecast Foundation. They do not receive any fees from the protocol and cannot intervene in the markets that users may build on the platform.

According to the Augur whitepaper, the protocol aims to “harvest the wisdom of the crowd and make predictions on real events.” Through its use of blockchain technology, Augur aims to provide predictive communities with low-cost, accurate data faster than other oracles on Ethereum.

What is the REP token?

REP, which is short for Reputation, is a staking token that participants on Augur use to validate outcomes of specific events on the prediction market. It is an ERC-20 token built on Ethereum, and it is also an indicator of activity on the Augur platform in the form of “use it or lose it.”

There is a limited amount of REP tokens that Augur set at 11 million, all of which are circulating. Almost 80% of these tokens were sold during the platform’s Initial Coin Offering (ICO) in 2015.

When token holders report on an outcome, they lock their REP tokens in escrow. They are also known as “Reporters,” and they must report the correct outcome of real-world events on which prediction markets are established. The outcome that they provide becomes the “truth” as soon as it is validated by other participants on that specific prediction market.

An incentive mechanism on the Augur platform rewards them if they provide the correct outcome. On the other hand, it also penalizes those who report incorrect outcomes and passive REP holders. A reporter who fails to deliver the correct information loses “Reputation.” At that point, his/her tokens are redistributed to the rest of the reporters in that market.

REP works more like a tool than a traditional token. Reporters pass them around while engaging in different prediction markets. Guessing the correct outcome can earn you a share of the platform fees. For example, each REP token gives you 1/22,000,000 of the total market fees collected by Augur for an event. Having more tokens will result in receiving higher market fees.

At the time of this writing, REP had a market capitalization of $147,375,179, and one REP was trading for $13 40. The token reached its All-Time High (ATH) in January 2018 when a single unit was available for $99.80.

A Brief History of Augur

Augur is one of the first platforms developed on the Ethereum blockchain. In October 2014, it surfaced from a team of developers led by Jack Peterson and Joey Krug. The two masterminds behind the project have a solid experience in blockchain technology, with one of their first projects being a fork of Bitcoin, called Sidecoin.

Peterson and Krug are also the co-founders of the Forecast Foundation. Besides their know-how in blockchain, the developers behind Augur also benefit from Ethereum creator Vitalik Buterin, an “Angel Investor” and advisor for the project.

In June 2015, after the Augur alpha version was released, Coinbase named Augur as one of the most exciting blockchain projects of the year.

In August 2015, Augur hosted its first ICO on Ethereum and managed to raise more than $5 million from the sale of 80% of the entire amount of issued tokens, 8.8 million REP. The rest of 20%, 2.3 million REP, was distributed to the Forecast Foundation, the founders, and its advisers.

The beta version of Augur was released in March 2016. Since then, the developers have been working on an improved version of the platform. In a 2017 interview, the team admitted that “The first version of Augur will likely be somewhat slow and slightly expensive (think pennies and many seconds per trade), but it’ll certainly be a beautiful glimpse of what’s to come.”

The development of Augur v2 was slow, but the wait finally came to an end in July 2020 when the new version was released.

According to their website, Augur’s new version is “a comprehensive suite of improvements to Augur and the first major upgrade to the platform.”

How does Augur work?

Augur has the same mission as other oracle platforms like Chainlink and Band Protocol have, and that is to make real-world events available for prediction markets on the blockchain.

The platform provides a viable environment for users who want to create prediction markets for real-world events, for the token holders who bet on those events’ outcomes, and for the reporters who provide the correct results. All these participants have access to rewards for their correct inputs.

There are three types of markets available for predictions in Augur:

  1. A Yes/No market
  2. A categorical market with up to eight choices
  3. A scalar market between zero and 100

Augur users can create prediction markets on virtually every real-world event ranging from presidential elections to sports competitions and financial markets.

The REP holders then trade their tokens for shares on one or more prediction markets of their choosing. The profit varies according to the likelihood of a particular outcome taking place, as determined by the crowd. Each share has a value of 1 ETH.

Anyone can pay a small Ethereum fee and create a market in Augur. As a market creator, you get to set your market’s fee and claim it from the total pool of collected fees when the market closes. The creator’s fee can be as high as 50%, but it can be lowered throughout the market’s activity period.

The Emergence of Augur v2

The first Augur version was slow and limited, so it failed to maintain the attention it received in the beginning.

One of the main issues with Augur v1 was that it branded markets that didn’t have a determined outcome as “invalid.” As a result, the predictions made in these markets would be denied.

The recent release of Augur v2 solves this problem by allowing users to bet as an additional option on all invalid markets. This option is proof that several users on the platform deem that the market is incorrect by creation standards.

Some of the major changes and important new features that Augur v2 delivers include:

IPFS Implementation

Augur wants to anticipate the transition to Web 3.0 by integrating the Interplanetary File Systems (IPFS) as its decentralized client storage.

Better Data Management

Augur has upgraded contracts created on the platform to hold more relevant data than those on Augur v1. This way, it avoids the network slowing down from dealing with heavy-data contracts, a problem that Ethereum is facing.

No Admin Keys

Contrary to other DApps built on Ethereum, Augur v2 is completely permissionless. The absence of admin keys means that developers do not have a back door to enter and make unexpected changes to the network.

Ox Mesh Integration

Augur v2 adopts and integrates Ox Mesh, an on-chain relay order book system used for betting.

From Ether to DAI

Augur v1 was using Ether as a stable betting medium. However, the coin’s intense volatility made it an improper tool for betting. Augur v2 now uses DAI, which is a decentralized stablecoin pegged to USD.

Uniswap Link

Augur v2 uses Uniswap as a price oracle service. This new addition to the platform enables traders to create and participate in information pools and trade and list tokens in an easy, decentralized fashion.

Where to Buy & Store Augur (REP)

REP is available to buy from a wide range of crypto exchanges that include:

Because it is an ERC-20 token, you can store REP in any Ethereum-compatible wallet, such as:

The Bottom Line

Augur v2 hit the “refresh” button on one of the first and most promising Ethereum-based platforms. Its swaging collection of new features fits perfectly with the DeFi boom and the direction in which blockchain technology is going.

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Augur promises a fully decentralized platform for trading futures, commodities, and stocks, among others, and which may soon replace the traditional centralized platforms that we still have to deal with today.

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