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Offline Bitcoinfan

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Roger Ver reveals prediction market project-- Truthcoin
« on: June 23, 2015, 05:02:38 PM »

Roger Ver has finally revealed his backing in the Truthcoin project.  They have some prelim code release today as well in github. He is saying that it is the most important project since Bitcoin.

https://bitcoinmagazine.com/20971/roger-ver-backing-prediction-market-sidechain-may-important-invention-since-bitcoin/

How did bitshares ever let Roger Ver  sweep down and poach this project?

Offline Permie

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Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #1 on: June 23, 2015, 05:26:05 PM »
It sounds very interesting but it's still limited by Bitcoin's scaling issues.
Quote
Joshua Unseth • 29 minutes ago

Will this be merge mined? How are they going to secure the sidechain?
   
Joey Krug Joshua Unseth • 21 minutes ago

    Sounds like a federated peg, merge mined 2 way peg sidechains are "5 years off" according to the talk Greg Maxwell gave a few weeks back at SF Bitcoin Devs meetup
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Offline bytemaster

Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #2 on: June 23, 2015, 05:27:22 PM »
prediction markets without smart coins don't work.    The volatility of the underlying asset overwhelms any profit or loss made by predicting the outcome of the event.
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Offline arhag

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Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #3 on: June 23, 2015, 05:29:14 PM »
How did bitshares ever let Roger Ver  sweep down and poach this project?

The answer to that is easy: Bitcoin maximalism.

The real question is why aren't we able to convince Augur to use our platform rather than the much slower Ethereum (plus we already have BitUSD working while they are still working on eDollar).

Speaking of prediction markets. The use of BitAssets 2.0 for PM is unsatisfactory in many ways (although it is nice that we get it "for free" so to speak).

First, it is limited to binary outcomes rather than generally to N disjoint outcomes. That is an easy fix. Create a PM pool that let's you deposit X BitUSD to get assets X BitPM-1, X BitPM-2, ... , X BitPM-N, and also require you to burn X BitPM-1, X BitPM-2, ... X BitPM-N simultaneously in order to withdraw X BitUSD from the pool.

Second, I like that we can do traditional order book prediction markets (Ethereum will struggle with that), but a market maker is very important. I believe it should be possible to have both (is that correct? yes, should be possible [1]). So I would love to see BitShares have these BitPM-type assets trading against BitUSD but also have a liquidity sensitive LMSR autonomous agent making those markets on behalf of the PM creator (who would fund the initial liquidity, but would also be able to potentially profit from the trading fees acquired by the market maker). There wouldn't only be market orders, there would also be limit orders. A limit order might match against the LS-LMSR market maker, but could also match against other limit orders by real users sitting in the order book.

Third, using a multisig judge to provide outcomes of prediction markets is an okay start, but eventually we would need something more decentralized. We should learn from the REP token approach used in Augur. In my opinion, we can generalize this a little by allowing a special UIA type that can be used as a REP token to judge certain prediction markets. Some additional features for UIAs would be a prerequisite. First, UIAs should be allowed to elected managers the same way BTS can elect delegates. These managers would of course still have limited powers with what they could do with the UIAs. Second, there should be a built-in mechanism in the blockchain to shift the order of magnitude of the balance to the left or right as necessary to allow the max supply with desired precision to fit in a 64-bit number. This means that the token can be endlessly inflated and there won't be any overflow (instead balances would lose the starting precision of their balances over time, and very small balances would eventually completely disappear by just sitting there). This mechanism is important because redistribution from non-participating or dishonest REP holders to participating and honest REP holders can be simulated through distributing automatically inflated supply to the participating and honest REP holders, no matter if the other REP are locked in a contract or not. With these features in place for UIAs, a prediction market could be set up to choose a particular UIA as the oracle providing the outcomes. If the managers of the UIA (that represent the UIA holders) commit the UIA holders to act as an oracle to that PM (an action that the managers get compensated for from funds provided by the PM creator), then the PM opens up for trading. Eventually, once the PM expires, the UIA holders are obligated to report on the outcome of some selection of PMs that the UIA managers committed them to, and if they don't they won't receive the newly inflated UIA (thus diluting their ownership). For actual details of how this reporting process works (including details like how the consensus outcome is determined and how PCA is used to redistribute the inflated UIA) check out Augur.

These are three projects that I would absolutely vote a credible worker proposal to fund after BitShares 2.0.

[1] Here is a paper I found on integrating a market scoring rule (e.g. LMSR) with conventional limit orders: http://www.seas.upenn.edu/~hoda/HLPV.pdf
« Last Edit: June 24, 2015, 03:42:44 AM by arhag »

Offline xeroc

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Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #4 on: June 23, 2015, 05:29:36 PM »
prediction markets without smart coins don't work.    The volatility of the underlying asset overwhelms any profit or loss made by predicting the outcome of the event.
My thoughts too ..
would have stated it differently though as to calculation need to consider a wider variance including volatility .. but in essence a simple "won't work" does the job well too :P
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Offline monsterer

Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #5 on: June 23, 2015, 05:30:49 PM »
prediction markets without smart coins don't work.    The volatility of the underlying asset overwhelms any profit or loss made by predicting the outcome of the event.

Isn't that the same thing as saying that exchanges which list other cryptos priced in BTC don't work?
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Offline bytemaster

Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #6 on: June 23, 2015, 05:48:49 PM »
prediction markets without smart coins don't work.    The volatility of the underlying asset overwhelms any profit or loss made by predicting the outcome of the event.

Isn't that the same thing as saying that exchanges which list other cryptos priced in BTC don't work?

No, it isn't.

Imagine a prediction market on a coin toss to occur 3 months from now.   Imagine it is price in BTC such that heads is worth 1 BTC and tails is worth 0 BTC.    You have an opportunity to buy at .45 BTC which means if you repeated this bet over and over you would make 11% return by holding until expiration.    Now if BTC falls by 50% over 3 months then you only have a 11% return on BTC, but a real loss.   Therefore, speculating in this coin-toss market is overwhelmed by speculation in BTC.  The only thing you could do is "day trade" by buying when it deviates from expected value and selling when it returns to expected value.    This may work for a coin toss, but doesn't work at all for something like an election.

If you are speculating on an election and have good information that a tight election is rigged and want to bet on it, so you put in 1 BTC worth $1000 expecting to win 2 BTC worth $2000 in 3 months.  3 months later BTC has fallen 75% leaving you with 2 BTC worth $500.  You won in the prediction market but lost in the BTC market.   

In other words, the noise/risk introduced by pricing a prediction market in a non-stable currency limits the market to only those who are willing to be long BTC or able to hedge their BTC position separately. 



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Offline Empirical1.2

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Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #7 on: June 23, 2015, 05:52:54 PM »
In other words, the noise/risk introduced by pricing a prediction market in a non-stable currency limits the market to only those who are willing to be long BTC or able to hedge their BTC position separately.

 +5% That's a good point
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Offline Permie

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Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #8 on: June 23, 2015, 06:03:20 PM »
First, UIAs should be allowed to elected managers the same way BTS can elect delegates. These managers would of course still have limited powers with what they could do with the UIAs.
This is already in BTS 2.0, can't remember what the position is called but they are basically UIA delegates.
I imagine Banx will be using the system to avoid centralization of control of their asset.
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Offline arhag

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Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #9 on: June 23, 2015, 06:04:24 PM »
First, UIAs should be allowed to elected managers the same way BTS can elect delegates. These managers would of course still have limited powers with what they could do with the UIAs.
This is already in BTS 2.0, can't remember what the position is called but they are basically UIA delegates.

I remember reading that in docs as well, but I don't know if those docs (see here and here) were credible or outdated or a wish list. Can we get confirmation from bytemaster on this?
« Last Edit: June 23, 2015, 06:09:53 PM by arhag »

Offline monsterer

Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #10 on: June 23, 2015, 06:08:23 PM »
In other words, the noise/risk introduced by pricing a prediction market in a non-stable currency limits the market to only those who are willing to be long BTC or able to hedge their BTC position separately.

Good point. The longer the time until the close of contract the more noise is introduced by the volatility of BTC vs fiat.

...However, for those long BTC, this fact doesn't really matter.
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Offline Ander

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Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #11 on: June 23, 2015, 06:16:19 PM »
In other words, the noise/risk introduced by pricing a prediction market in a non-stable currency limits the market to only those who are willing to be long BTC or able to hedge their BTC position separately.

Good point. The longer the time until the close of contract the more noise is introduced by the volatility of BTC vs fiat.

...However, for those long BTC, this fact doesn't really matter.

A prediction market priced in BTC can ONLY be used by people who desire to be long BTC, but a prediction market with Smartcoins can be used by anyone. 

Given that some of the bets will last months, the volatility risk of BTC will be a big deal.

So we will have a better product. 
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Offline monsterer

Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #12 on: June 23, 2015, 06:29:30 PM »
I'm interested to hear how the LMSR performs in practice - I've read a report that says although it has bounded loss by design, in practice it nearly always looses.
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Offline Akado

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Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #13 on: June 23, 2015, 06:42:21 PM »
Wouldn't it be possible to approach Augur to implement this in BitShares? Wouldn't it be easier? Don't we have more resources for them to build this on? Would be nice to have on article about how BitShares could implement prediction markets once 2.0 is launched (even during the test phase), maybe then it would be easier to either get Augur to join with is or to get some competition for them (which will end up surpassing it). It's just Augur has caused a lot of buzz and if it worked out on BitShares, with our smartcoins.. well, you can imagine
« Last Edit: June 23, 2015, 06:44:35 PM by Akado »
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Offline Bitcoinfan

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Re: Roger Ver reveals prediction market project-- Truthcoin
« Reply #14 on: June 23, 2015, 06:45:19 PM »
prediction markets without smart coins don't work.    The volatility of the underlying asset overwhelms any profit or loss made by predicting the outcome of the event.

This statement shows why BM overlooked Truthcoin in the first place. He is unclear on how Truthcoin works or at least didn't spend enough time trying to do so.

This is false, and Truthcoin achieves stability through combintorial markets.   Truthcoin has Bitusd stabilitiy for any type of market as a core features. (See whitepper example 5 of paper 2 "The Power of Prediction Markets"  Also featured in Pauls blogpost, truthcoin.info.)  Not only that you can do all of this with Bitcoin.  This is a benefit because it is way ahead in terms of network effect. 

What bytemaster calls smart coins, Paul infers as dimensions.  Maybe the difference is time of expiration date versus continuous markets.  However the limitation of Bitshares 2.0 is that it can't do Bayesian type of Markets.  Baysian markets are a major feature of Truthcoin. 
« Last Edit: June 23, 2015, 06:47:39 PM by Bitcoinfan »

 

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