As part of the Digital Currency Council’s Continuing Education partnership with Inside Bitcoins, the DCC’s Director of Curriculum, Dan McArdle, has had the opportunity to interview the thought leaders that will be speaking at Inside Bitcoins Berlin on March 5-6. Today, we share insights from Joey Krug. Joey is the lead developer at Augur, an open-source, decentralized, prediction market platform.
Dan: Tell us a little about your background in Bitcoin and Digital Currencies, and how and why you got involved?
Joey: Back in 2011 I used to frequent a forum called overclock.net and I came across a post that said: “Earn money with your GPU!” It didn’t seem true so I ignored it for about six weeks, and then I noticed that it was still the number one post on the forum, so I decided to look into it. The idea of a currency that wasn’t controlled or debased by a centralized entity, but instead a set of algorithms was really fascinating to me.
Dan: There are a few predictions-market platforms using Bitcoin. What’s different about Augur? What’s the big opportunity, what are the challenges, and how are you solving them?
Joey: The main difference with Augur is that it’s decentralized. I’ll step back a moment and briefly explain prediction markets (PMs) for those who haven’t heard of them. PMs allow their users to buy and sell shares in the outcome of an event, and the current price of a yes share is the market’s estimate that the event will occur. All the possible outcomes’ share prices add up to $1, and whichever outcome actually happens then has a share price of $1 and the other shares go to zero. Now after the event occurs, you need a way to report what actually happened. For example, after the 2000 election, did Bush or Gore win? All the current Bitcoin PMs have a centralized party who reports this, which means they could get hacked or abscond with funds. Additionally, these are all traditional centralized websites, so they can easily be shutdown or have funds stolen.
Instead, we have a distributed oracle system report on event outcomes (these reporters get a portion of trading fees from the markets). The other difference with Augur is that anyone can create a question on the market about anything and provide some initial liquidity (these people set the trading fee and also get a portion of it).
Imagine being able to Google questions about things that haven’t happened yet and receiving accurate odds of their occurrence (which PMs provide due to their reliance on the wisdom of crowds): the big opportunity is the power to glimpse into the future. And anyone who thinks they know better than the market can buy shares in the outcome they think will occur and get rewarded for it.
Dan: What is Sidecoin? Why is it important?
Joey: Sidecoin is a working proof of concept that allows you to take a snapshot of Bitcoin’s current distribution (its unspent transaction outputs) and load them into a new blockchain. If you were creating a new stable coin for instance (e.g. a stable cryptocurrency with respect to the USD) you could bootstrap its distribution with Sidecoin instead of just premining the stable coin for yourself.
Dan: What excites you the most about the long-term prospects for Bitcoin and decentralizing technologies in general?
Joey: I think Bitcoin could be used as a sort of lingua franca for cryptocurrencies. If you want to enter this decentralized financial universe you buy some Bitcoin at a place like Circle or Coinbase and then exchange it for a stable coin on whatever platform you’re using. So instead of having to bother with buying separate tokens you simply buy Bitcoin, send it to a decentralized exchange address and it spits out the token you need for that specific decentralized app (imagine a sort of decentralized Shapeshift.io). In general, I don’t think the idea of “Decentralize all the things,” is always applicable, but what I do believe is that many things will be decentralized for much cheaper, safer, and more robust solutions than relying on centralized third parties. They’ll also enable a whole host of technologies we haven’t even though of yet that simply weren’t possible within centralized frameworks.
Dan: What worries you the most about getting there? What is the biggest challenge to success?
Joey: As much as it’s been welcomed recently, regulatory concerns are what worry me the most. The idea of some law that effectively places such a regulatory fence around the technology that to comply you have to essentially re-centralize is what concerns me. Another big challenge is adoption of this technology: I think over the next three years Bitcoin either has to “cross the chasm” or fall off the cliff. From what I’ve seen, combined with the huge influx of VC into this space and the hopefully awesome results we’ll be seeing in the next couple years from that, I’m inclined to think it will succeed in jumping the chasm.
Dan: How do you see the so-called “Bitcoin 2.0” space evolving? There’s been a lot of experimentation, both with bitcoin-layered approaches, as well as new blockchains. Do you see the “2.0” space developing more towards layers on top of Bitcoin, or completely new chains?
Joey: So for layers on top of Bitcoin you can’t actually use Bitcoin in any of the smart contract systems that I’ve seen thus far; the main advantage is in supposed security benefits. I think what we’ll see is a migration to completely new chains that interoperate with each other and Bitcoin, possibly even piggybacking on each other’s security. Ethereum and Vitalik Buterin’s 12-D Hypercube scalability proposals along with the work that Blockstream is doing will provide for a very interoperable 2.0 space in the coming years.
Dan: What are you planning to speak about at Inside Bitcoins?
Joey: I’ll be speaking about prediction markets, how they work, why they need to be decentralized, and how the Augur team is building a platform for them where anyone can easily create a market.
Dan: How can we in the Digital Currency profession help Bitcoin adoption in general? How do we educate the public and communicate the benefits to potential new users?
Joey: 18 months ago I would’ve said to get more merchant adoption, as that was lagging far behind consumer adoption. Now, however, merchant adoption has gotten quite a bit ahead of consumer adoption, so currently I think public adoption is more important. As far as education and the benefits, I think there are three main categories of users. One is the people who like the tech, politics of bitcoin, or find the idea of quick, low cost payments anywhere in the world fascinating. I think our core community is currently mainly composed of this group. The second is the remittance user base: anytime you speak with someone who’ll benefit from this their eyes immediately light up, we really need a good remittance solution to point them to.
The final group is the largest group that will allow us to really jump the chasm: it’s composed of people who don’t care about low fees, the tech, remittances, or anything else our community constantly talks about. They’re comfortable with their credit cards and 2% cash back. The way we get these users is by giving them the ability to do something that isn’t possible without Bitcoin. Not something that’s cheaper with Bitcoin, or faster with Bitcoin, something that truly isn’t possible. At Augur, we’re focused on this last group.
Dan: Joey, thank you very much for your time and insight!