Also, http://reason.com/archives/2015/04/09/bitcoin-and-the-cypherpunks/
On Wed, Aug 26, 2015 at 2:31 AM, jim bell <[email protected]> wrote: > http://reason.com/blog/2015/08/11/augur-gambling-prediction-ethereum > > > Augur May Become the Greatest Gambling Platform in History. Is There > Anything the Government Can Do to Stop It? > A blockchain-based prediction market that won’t be controlled or managed > by anyone. > Jim Epstein Aug. 11, 2015 12:36 pm > > An online gambling platform could do to the neighborhood bookie what > electric refrigerators did to the ice delivery man. > Coming this fall, Augur will allow participants to wager money on any > future event of their choosing. Software will set the odds, collect the > bets, and disperse the winnings. The price alone should give Nevada > sportsbook operators pause; an estimated one percent of every pot will go > to keep the system running. The average vig today is about 10 times that. > > Augur isn't a full-fledged casino. You can't play roulette or poker, and > running lotto on the platform would be tricky. But it'll be great for > sports betting. > > Here’s what’s truly novel about Augur: It won’t be controlled by any > person or entity, nor will it operate off of any one computer network. All > the money in the system will be in Bitcoin, or other types of peer-to-peer > cryptocurrency, so no credit card companies or banks need to be involved. > If the system runs afoul of regulators—and if it’s successful, it most > certainly will—they'll find that there's no company to sue, no computer > hardware to pull out of the wall, and no CEO to lockup in a cage > . > This is new legal territory. If Augur catches on as a tool for betting on > everything from basketball games to stock prices, is there anything the > government can do to stop it? > > Augur is a decentralized peer-to-peer marketplace, a new kind of entity > made possible by recent breakthroughs in computer science. The purpose of > these platforms is to facilitate the exchange of goods and services among > perfect strangers on a platform that nobody administers or controls. > Augur’s software will run on what’s known as a “blockchain"—a concept > introduced in 2008 with the invention of Bitcoin—that's essentially a > shared database for executing trades that's powered and maintained by its > users. > > Bitcoin’s blockchain was designed as a banking ledger of sorts—kind of > like a distributed Microsoft Excel file—but Augur will utilize a > groundbreaking new project called Ethereum that expands on this concept. > Ethereum allows Augur's entire system to live on the blockchain. That means > the software and processing power that makes Augur function will be > distributed among hundreds or thousands of computers. Destroying Augur > would involve unplugging the computers of everyone in the world > participating in the Ethereum blockchain. > If Augur is destined to become the cypherpunks answer to gambling > prohibition—the betting man’s version of the online drug market Silk Road > if you will—you'd never know it from talking with its developers. They work > for a San Francisco-based nonprofit, attend conferences, have legal > representation, and talk openly about what they’re up to with reporters. > Augur even commissionedone of those cheesy motion graphics promotional > videos favored by new tech startups. > > About half of the roughly $600,000 raised by Augur's development team > comes from Joe Costello, the successful tech entrepreneur who was > once Steve Jobs' top pick to become the CEO of Apple. > > Joey Krug, a twenty-year-old Pomona college dropout and Augur's lead > developer, never uses the world “gambling" to describe his venture. He and > his team of five employees call Augur a “prediction market,” a term that > emphasizes the information generated when a bunch of people have a > financial incentive to feed their expertise into a sophisticated algorithm. > > With Augur, as bettors move money in and out of the pot, the odds adjust. > This yields publicly available statistics that should carry weight because > they're derived from the opinions of a crowd of people with a stake in the > results. InTrade, for example, the best-known prediction market until > federal regulators forced it to stop serving U.S. customers in 2012, beat > the pollsters and pundits by foreseeing the outcome of the 2008 > presidential elections in 48 out of 50 states. > Augur’s developers hope that their platform will make it possible to do a > Google search to look up the likelihood of some future event. This could > usher in a better world, with more informed policy decisions and less > malinvestment. > > But Augur also serves the less high-minded—though no less noble—purpose of > providing cost savings and convenience to gamblers. Restrictions on > gambling serve to protect government revenue at the betting man's expense. > State-sanctioned casino operators pay high taxes, and state-run lotteries > fleece their customers. But there's no logical or moral case for government > restrictions on gambling, since no third party is harmed when consenting > adults wager money on the future. Augur actually has the potential to make > the world safer by taking away market share in the gambling industry from > criminals. > > And yet sports betting is illegal in most states, and prediction markets > are tightly regulated by the Commodity Futures Trading Commission (CTFC). > The agency sued Ireland-based InTrade in 2012 to prevent it from accepting > bets from U.S. customers. (The company folded shortly after.) In 2013, the > CFTC and the Securities and Exchange Commission (SEC) jointly sued the > prediction market Banc de Binary for allowing U.S. customers to make bets > on commodity prices. > The CFTC has approved other prediction markets, such as the New > Zealand-based PredictIt, but only after it agreed to abide by the agency's > restrictions. > Krug says the Augur team is planning to meet with CFTC staff go over how > their system works before it’s launched, but says he's not overly > concerned. “Our friends in Washington, D.C. say the CFTC will probably just > dismiss Augur and say it’s not a big deal,” Krug told me in a phone > interview. > > That doesn’t sound like much of a legal strategy, but how do you have a > legal strategy when you're building something unlike anything that's ever > existed? Federal anti-gambling laws, such as the 2006 Unlawful Internet > Gambling Enforcement Act, target the companies that facilitate online > betting— website operators, credit card companies, banks—not individual > gamblers. > > Augur’s biggest legal vulnerability is the community of human “reporters” > who are needed to settle bets on the platform, says Cardozo Law School's > Aaron Wright, who is writing a book about the legal implications of > blockchain technology. Let’s say a group of people wager money on Augur > over the outcome of a boxing match. Once the bout is over, human > participants (who receive a portion of the trading fees as compensation) > must report the outcome to the system before Augur’s software will disperse > the money to the winners. "There’s at least an argument that the people > doing that reporting are aiding or abetting unlicensed options and could be > prosecuted," says Wright. > But Augur doesn't collect personal information on any of its users, so > identifying these people could be difficult. And Augur is a borderless > technology, so U.S. gamblers could simply rely on foreigners to report on > the outcomes of their bets. > > One attorney I spoke with suggested that the team that’s building Augur > could be brought up on charges for aiding and abetting a criminal > conspiracy. Nate Cardozo, a staff attorney with the Electronic Frontier > Foundation, thinks that's far-fetched but says he can't rule it out. > Cardozo emphasizes that writing open source software doesn’t necessarily > protect the team from prosecution. > “We’ve taken the steps that we need to take in order to bracket the > individual's risk and the organization’s risk,” says Augur’s attorney, > Marco Santori, who declined to comment further on exactly what those steps > might entail. > > Even if Krug and his colleagues were to face criminal prosecution, the > technology would live on. After Augur is born into the world, the > development team could release a software update that would cripple the > system. But in that case, Augur's users could band together to block any > changes to the underlying code, or another developer could copy the open > source code and simply re-launch the platform. > The big question with Augur—and with blockchain platforms more > generally—is whether they can outrun our regulatory state long enough to > grow so large and popular that they're truly unstoppable. My money’s on > Augur in that race. > > For more on the promises and pitfalls of decentralized peer-to-peer > marketplaces, read my recentReason magazine feature story on the topic. >
