Copied from correspondence.
----- Forwarded Message -----
From: Jim Epstein <[email protected]>
To: jim bell <[email protected]>
Sent: Saturday, September 26, 2015 5:23 AM
Subject: Re: Fw: Augur: Blockchain-based Internet prediction market.
Thanks, jim. I will read your essay and engage with this topic again soon, but
I'm immersed in another unrelated story that's consuming my brain and time.
I'll get back to you.
On Sat, Sep 26, 2015 at 3:47 AM jim bell <[email protected]> wrote:
I wanted to mention that Prof Juels has responded to my inquiry. See his
work at:
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&sqi=2&ved=0CCsQFjACahUKEwi9hY33mZTIAhXRpYgKHeapAhY&url=http%3A%2F%2Fwww.arijuels.com%2Fwp-content%2Fuploads%2F2013%2F09%2Fpublic_gyges.pdf&usg=AFQjCNHOBvCYwJ5Aq0CmHTOY53sGdRs5Sw&sig2=XpktiIWHc5e6slk0VsLOcQ&bvm=bv.103388427,d.cGU
I should point out that the main reason for my inquiry WASN'T to get academic
credit, but rather to point out that people who have read my AP essay (and who
understand and agree with its goals and likelihood of working) would consider
Juels et al objectives to be undesirable and, indeed, dangerous.
Superficially, it sounds good to say that they are trying to prevent "criminal
contracts", but for those of us who oppose (for example) laws against
currently-illegal drugs, we might very well WANT a "criminal contract" to be
operational, like Silk Road or such. Or my AP (assassination politics) idea.
Prof Juels claims that he/they were not aware of my AP essay. Well, sorry, but
I find that a little hard to believe. It's not that it's hard to believe that
an average citizen of America (or the world) hadn't heard of it.THAT would be
easy to believe. Rather, Juels, Shi, and Kosba claim to be working on the
concept of trying to stop "criminal contracts", and do you really believe they
haven't heard of AP?!?
My understanding is that my AP essay is probably the second most-famous
Internet essay in existence, perhaps being Ted Kaczynski's, and it makes far
more sense. Now that Juels, Shi, and Kosba definitely know about AP, I think
that they should address its implications BEFORE they purport to fight it.
Jim Bell From: jim bell <[email protected]>
To: Jim Epstein <[email protected]>
Sent: Wednesday, August 26, 2015 3:39 PM
Subject: Re: Fw: Augur: Blockchain-based Internet prediction market.
You might also want to look at
http://www.arijuels.com/wp-content/uploads/2013/09/public_gyges.pdf , by
Juels, Shi, and Kosba. Jim Bell
From: Jim Epstein <[email protected]>
To: jim bell <[email protected]>
Sent: Wednesday, August 26, 2015 2:35 PM
Subject: Re: Fw: Augur: Blockchain-based Internet prediction market.
I'm not familiar with it, but I'm going to read it. I'm very interested. Thanks
for sending this.
Jim
On Wed, Aug 26, 2015 at 1:14 PM, jim bell <[email protected]> wrote:
Dear Mr. Epstein, Are you familiar with my 1995-6 essay, "Assassination
Politics". www://cryptome.org/ap.htm Jim Bell
----- Forwarded Message -----
From: jim bell <[email protected]>
To: Cpunks List <[email protected]>
Sent: Tuesday, August 25, 2015 7:31 PM
Subject: Augur: Blockchain-based Internet prediction market.
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.
