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Hello, everyone, and welcome to another edition of Crypto Scam. I am your host, Tone
Face. My blog is LibertyLifetrail.com.

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And today, I am joined by Paul Sztorc, and we will be discussing our thoughts on
Augur in a little fireside chat.

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So, Paul, why don't you go ahead and give the audience a brief intro to yourself,
your background, and how you ended up doing research on Augur.

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And then we'll get into the details.

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Okay. So, I have been interested in prediction markets for basically my entire adult
life.

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I was introduced to them on Robin Hanson's blog, OvercomingBias.com.

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And separately from that, I got around to kind of learning about Bitcoin in 2011,
late 2011, late 2000, early 2012.

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And I kind of, around the time I was learning about Bitcoin, Intrade.com, which was
a big prediction markets website, it had to close down following the 2012 election.

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And it just kind of occurred to me that there might be a need for software that was
like Intrade to be decentralized and kind of immortal in the same way that Bitcoin
was immortal.

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And I saw kind of a parallel between Bitcoin and like Liberty Reserve and eCash and
these other things, and kind of a parallel between that and Intrade and what I think
could be done.

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Because to make this kind of long-winded, I had also been interested in some
statistical methods at the time that were related to how to like measure things that
were very abstract, things like honesty or reliability of sort of data and things
like that.

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So I kind of tried to put all these puzzle pieces together.

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And over 2013, I designed what would eventually become the Bitcoin Hivemind, but
what I called Truthcoin at the time.

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And I published the white paper in early 2014.

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And then I was contacted by some other people, some of whom went on to create Augur
in late 2014.

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So in early 2014, I was contacted by a variety of people.

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And one of the groups of people that contacted me ended up becoming Augur, if that
makes any sense.

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The other people either ended up contributing to Bitcoin Hivemind, or they kind of
went and did something else, or they lost interest.

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In 2014, there was kind of a big germination period of some kind.

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And then the end of 2014, that's kind of when Augur kind of got big onto the scene
in 2015.

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So it was Ethereum, and then we had that sort of…

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And we'll get into those as individual bullet points.

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Yes.

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And your academic background was…

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So I had studied as an undergraduate economics and psychology, as well as math and
statistics.

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And then I stayed on.

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In five years, I did an undergrad and then two master's degrees, one of them in
finance and the other one in operations research, which is a branch of applied math.

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And so after doing that, I worked in consulting for a little while, but then I
changed to work in academia at the economics department at Yale.

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And that's what I was doing, inventing what would become TriCoin slash Augur slash
et cetera, decentralized prediction markets concept in 2013 and 2014.

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And that is sort of my background.

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Roger Ver hired me at the end of 2014.

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I worked for him to make the technology a reality.

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And then in 2016, Jeff Garzik hired me at Block, where I mostly do the same thing,
but I'm focusing on the sidechains technology itself in 2016,

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because I actually made so much progress on Hivemind that I surpassed what was
required, the foundation, the sidechains foundation that was required to run it.

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And so that ended up setting me behind.

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So kind of as a project management detail, I had to switch from my own project to
the project beneath it, which is sidechains.

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So we can talk about all that.

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All right. Well, maybe we'll save that for another podcast.

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So right now I'm doing a screen share.

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I know for only the audio listeners will not be able to see this.

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And one of the things I wanted to focus on here is Paul wrote this amazing summary
titled The Case Against Augur.

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And all the links will be in the description below the video.

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And so maybe we can highlight a couple of things.

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So you believe that Augur team basically was at the very first principles were
trying to follow your vision of what you wrote in the Truthcoin white paper in
order to bring prediction markets into this crypto world.

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That was your initial view when you've met with the members of the Augur team in the
very, very early days.

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And did you think that was going to be cool?

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Did you think that, oh, great, someone likes it, they're going to try and turn it
into something?

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Yeah, that's exactly what I thought.

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And there are a lot of people who were interested in the idea and interested in
working on it.

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And that was my original plan was really to actually just kind of publish the idea
and let other people kind of just kind of take it to the next level.

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And so initially it was sort of perfect.

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And there was nothing about them specifically that was perfect.

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But just this idea of it moving to the next level of moving from just kind of a
design to something more real, that was very ideal.

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And I was totally satisfied with that and happy that people were doing that.

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And how did that initial interaction go?

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You don't even have to name names, but how did that initial interaction go?

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Did you find them to be interested?

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Did you find them to be – oh, I should get to that part later.

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So at which point did you realize that they were not taking their project into the
scientific direction, which I'm sure you were intending, but you started to see it
more as like a crowd sale, get rich token?

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When did you first realize this and how did those conversations come about?

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Or were you upfront with them, like this is not what I was looking for, this is not
what I wanted, and you no longer wanted to be associated with the project?

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Okay, so that's like late 2014 if I'm getting the years correct, which I think I am.

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But at any rate, it was after I – so I think really actually Vitalik is kind of a
lot to blame for this.

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I don't blame him personally, but Vitalik has this attitude about the crowd sale and
about it not being a big deal to do this or do that.

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He had a very successful crowd sale of a token that did not even exist.

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And we will be covering Ethereum in this series of podcasts, but Ethereum is a more
complicated beast to tackle.

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But not to go on a tangent of Ethereum, but Vitalik was very successful in a crowd
sale, which I was against from the beginning.

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How can you sell a token that doesn't exist?

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I vaguely knew the SEC rules because of my experience in the financial world.

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I didn't realize the loophole on selling security was, well, what if the security
doesn't yet exist?

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Yeah, it's even faker than fake.

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It's like you're literally just selling columns in an Excel spreadsheet or
something.

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Correct.

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It's really amazing.

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And we will be covering Ethereum.

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I'm still looking for which experts I would like to do a Fireside Chat on Ethereum
with, so we will not go into detail on Ethereum.

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So let's talk a little more about this crowd sale.

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When you realized that the crowd sale was happening, what were you thinking?

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What did it look like to you at the time?

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The biggest problem was that they were going to do the crowd sale.

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Vitalik was kind of exactly as you were saying.

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He was saying that they could do the crowd sale first, effectively first.

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And I thought that was total nonsense, and I'm very against that for a variety of
reasons that we could go into.

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But to answer your question, that is when I was really like, oh, this is going to
end up being a disaster.

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Because they were never the best out of all the people who were interested,
actually.

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And so I was fine to have a lot of people working on it, of course, and competition
is great, and there's nothing wrong with any of that.

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But the crowd sale move is really a kind of juke to kind of intimidate people or get
them to flinch and get them to kind of silence all the dissension.

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It's anti-competitive, I think, because it wants to concentrate the influence in one
project or something like that.

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And I really didn't want it to be in this project.

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But the interesting thing about that is since Vitalik was leading them into Ethereum
and I knew –

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See, the core questions are this, right?

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Like how do we know that Augur is a scam or why do we believe that?

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And so what is a scam?

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It's something I think that we know.

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It's kind of the core of the definition.

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Everyone has their own definitions of what a scam is.

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And we're not here to – we're just saying our case as to why we are not fans of
Augur for the many reasons we're going to get through on this show.

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And it's up to the listener to decide if it is or isn't a scam.

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But obviously neither myself nor Paul are fans of Augur, and we will lay out our
case for that.

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So also on that note, so what did you think of the competency of the developers in
Augur and how easily they were convinced to do it on Ethereum and integrate Ethereum
in there?

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Well, I think if you want to write blockchain software, your technical competence is
not a really –

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And I think that's the big difference of opinion that I have with a lot of people,
which is to say that the design is really not very technical.

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And it's not even very cryptographic.

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The stuff that was in there, the cryptography in there is very old and it's
relatively simple.

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It's not – it was just stuff was combined in a new way.

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And I think the technology is really game theoretic more than it is computer
scientific or more than it is cryptographic or even more than it is macroeconomic.

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I don't think it's like a monetary policy experiment.

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I don't think it's a software experiment.

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It's an experiment on getting people to send you the right version of the UTXO set
effectively.

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It's a version of getting people to provide you with some information when they
could theoretically provide you with any amount of information.

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They could say you have three coins, you have 13 coins, you have zero coins.

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They could say anything, but the Bitcoin experiment is how can you get everyone to
be passing around only valid messages.

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And I think that that is game theoretic because it's about what people can and
aren't motivated to do.

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And so I think even though I thought the technical skills were very low, there was
really only one person who was actually like an actual C++ developer, A.

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But I don't think it really matters.

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What was more concerning to me was that they were not – they did not totally get the
design and very similar to the way things work in Bitcoin.

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People show up and they just think we can change this, we can change that.

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Why not a one-minute block time?

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Why not whatever?

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Why don't we fix the deflation problem or something?

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People just did not get why these decisions were made in Bitcoin.

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And that led them to take kind of cavalier risks.

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And so in that domain in particular, I thought that they were kind of dangerously
unaware of the – and unwilling to just kind of – and it's a normal disagreement to
have.

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I just say just do it the way I wrote it down.

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And people would say, no, we want to always make it better and think everything
through.

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But I did get tired after a period of six to eight months of just kind of correcting
their mistakes.

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So you weren't trying to consult with them.

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You weren't trying to build a project for a good six months at least, right?

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Yes.

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While I had a job, I would help them.

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And what about some of the other people that they were saying that had good things
to say about Augur, some of the other academics, some of the other important people?

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How did you feel that they were utilizing them?

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And did you think that that was a fair representation of other academics helping to
pump this crowd sale?

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Well, you should really ask them.

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But as I write in that post that you linked, I mean a lot of the – most of the
endorsements are friends of mine.

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And they only have them in the Rolodex because I already knew them.

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And they had to then – those people.

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And a lot of the endorsements, like they're happy to help anyone, but it's hard.

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As you know, it's very easy for things to be misconstrued if you have a certain – if
you lend an endorsement to this or you say some comment like this.

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So as I point out, a lot of the people, especially the very intelligent people like
Dr. Hanson and others, they had to like very cleverly word the endorsements so that
it would be accurately general to just say prediction markets are great.

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Everyone who works on them is great, both of which are true.

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And so that's – but I think a lot of the – I mean whenever anyone has a marketing
department, there's always a big risk that the marketing department will kind of
just go ahead and kind of go off.

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It always worries me when your project that involves a coin of value or a token
representing some kind of a currency has a marketing department.

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And we've talked about this or this might air before or after the video about Dash,
and that's the same issue that we pointed out in some of these other crypto tokens.

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Okay, so let's jump on from there.

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Because again, I wasn't really – I wasn't paying attention to Ogre in these early
stages, so I don't really have much to add.

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All I know from those days is Jeremy Garner at every seminar, at every conference –
I go to a lot of conferences.

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And I enjoy it.

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I pay my own way most of the time.

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If I'm lucky, the venue will cover some travel because I'm one of the speakers.

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I go to a lot of conferences, and I'm watching – I'm constantly seeing the
presentations for Ogre as they're getting ready for their crowd sale, and I was
never a big fan of it.

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But that was the other thing with all of the promotion going into the crowd sale.

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Yeah, I think the promotion is a good point.

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This is going to be very interesting.

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I'm wondering, since you're doing this interesting scam tour of scams, I'd be
interested if you find that they're all different or they're all very similar or
that they're similar in some ways or different in others.

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I'm not sure, but one of the reasons why I did this is because a lot of people are
asking me what my thoughts are on a coin, and I don't know everything.

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I have my opinions, and I wasn't around for the very beginnings of those coins, and
other people have done research on the beginnings of those coins, whether they were
or weren't around for them.

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In your case, you were there front and center for the grass roots of Ogre, and this
is why this is a very good conversation where I also get to learn a lot, but I also
read some of that research in order for us to have a more intelligent conversation.

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The interesting thing is why wouldn't you like it, because it is my kind of idea, so
I'm kind of attacking myself.

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Yeah, and that happens, and this is why I might…

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We have a lot of opportunity to continue to clarify exactly why that is, but what I
get is this scam might be different than other scams, so I think it is a good idea,
but it's a scam on Ethereum for technical reasons, and no one should do anything on
Ethereum because Ethereum is itself a scam.

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And we will break down Ethereum in this series as well. I'm still trying to consider
all the best people to do so.

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All right, so let's talk about the crowd sale itself, and this is what maybe you
might be able to educate me on this one, because I remember the headlines, Ogre made
how many millions in the crowd?

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Five million.

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Five million, or don't hold us to the numbers, please. I know it's easy to look up.
Like five million in the crowd sale, yet those headlines were like what, six months
ago? Nine months ago?

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Yeah, I think so.

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They were a while ago, right?

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Or maybe I think it was last…

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This is what's weird. No, I don't really want to look it up, but again, this is the
people thinking about Ogre, and I don't want to look it up on purpose. What I am
going to show is the market cap and price of Ogre.

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Ever since it actually started trading.

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Right, so it appears that, and again, this is not for the audio will not show this,
it looks to me like there was a price target.

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There was pre-trading.

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There was price on Ogre going all the way back to October of 2000, and it was like
October of last year, I would say.

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Yeah.

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Oh no, two years ago.

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2015.

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Oh, we have years here, right? February, January.

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This is embarrassing.

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Right.

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So this is 17…

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2015, it's up there. October 2015 is when there was a price on Ogre, yet the market
cap popped right here on October…

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The very first day.

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On October 5th of last year. So the crowd sale took place here when there was
already a market cap, or the crowd sale took place back there?

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The crowd sale took place in 2015.

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Yeah, I remember it was a long time ago.

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It was pre-trading, and so this is trading that was all liability side, so there was
no actual token.

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Correct.

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So we're making it even more abstract.

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So again, they followed the Ethereum model of you pre-sell a token that doesn't yet
exist.

190
00:18:28,000 --> 00:18:32,000
And they couldn't even launch the product until October.

191
00:18:32,000 --> 00:18:35,000
Right. So that's when the product finally went live.

192
00:18:36,000 --> 00:18:42,000
So you see, as soon as you actually could trade, you see that what has happened is
that it's just precipitous decline.

193
00:18:42,000 --> 00:18:48,000
Right. Well, the first day it could trade, the price was $10, and then it had fallen
all the way down to $2.

194
00:18:48,000 --> 00:18:52,000
The market cap, $110 million, and it never has been anywhere near that.

195
00:18:52,000 --> 00:18:57,000
And right now, we're looking at about – so it's lost over 50% of its value since the
launch.

196
00:18:57,000 --> 00:19:01,000
It's a classic scam pattern of just popping and then not coming back.

197
00:19:01,000 --> 00:19:06,000
So that was the launch, and the moment the launch happened, we're not going to get
into people,

198
00:19:06,000 --> 00:19:11,000
but a lot of the people that were involved in that project took the money and
immediately left,

199
00:19:11,000 --> 00:19:15,000
which is one of my biggest problems with ICOs.

200
00:19:15,000 --> 00:19:24,000
And again, we will be covering most of these ICOs, and I might do one of these
episodes for the ICO in general as a concept

201
00:19:24,000 --> 00:19:27,000
because a lot of these need to be defined.

202
00:19:27,000 --> 00:19:29,000
So now let's talk about the use.

203
00:19:29,000 --> 00:19:37,000
I have a little comment on that because I think it's very similar to the retroactive
financing of the banker bailouts.

204
00:19:37,000 --> 00:19:43,000
Bankers have these bonuses that they get paid all through the 2000s, the aughts.

205
00:19:43,000 --> 00:19:49,000
Bonus, bonus, bonus, and then 2008, everything blows up, and we bail out the banks,

206
00:19:49,000 --> 00:19:53,000
and it's kind of retroactively kind of – there's like a skin in the game problem
with that

207
00:19:53,000 --> 00:19:59,000
where a lot of the people were being paid a lot at Augur to do way more than I was
being paid full time,

208
00:19:59,000 --> 00:20:02,000
and then they would do this thing, and then they'd just leave.

209
00:20:02,000 --> 00:20:06,000
Really, as soon as the times would roll up, they'd just leave and do actual work.

210
00:20:06,000 --> 00:20:11,000
As soon as that time arrived, they would leave, and it's kind of – what do you say
to something like that?

211
00:20:11,000 --> 00:20:14,000
That's not what we signed up for, I think.

212
00:20:14,000 --> 00:20:19,000
All right, so let's change gears and talk about the current state of Augur.

213
00:20:19,000 --> 00:20:23,000
I think we went through a little bit of the history, and again, I know there will be
comments.

214
00:20:23,000 --> 00:20:29,000
There will be complaints saying that we haven't done enough research on Augur and
especially these little details.

215
00:20:29,000 --> 00:20:34,000
But again, we have 700 – I want to get through as many of these crypto coins as
possible.

216
00:20:34,000 --> 00:20:42,000
We have over 300 that people think are valuable and not to mention other projects
that don't have a tradable token.

217
00:20:42,000 --> 00:20:49,000
So there's only so much research one person can do to even come close to covering
all of them.

218
00:20:49,000 --> 00:20:51,000
So we are doing the best we can.

219
00:20:51,000 --> 00:20:54,000
So let's talk about the current state of Augur.

220
00:20:54,000 --> 00:21:03,000
Have you actually seen any use cases where the Augur rep tokens are useful for
anything other than speculation?

221
00:21:03,000 --> 00:21:11,000
Well, it's a function of – design requires the tokens to be kind of secure against
someone bribing the oracles to.

222
00:21:11,000 --> 00:21:13,000
So it depends on whether or not the markets are useful.

223
00:21:13,000 --> 00:21:21,000
But I don't know if – I mean for me it's all a completely moot point because the
token itself, it only exists to have a market cap,

224
00:21:21,000 --> 00:21:24,000
which is such that it's very difficult.

225
00:21:24,000 --> 00:21:28,000
It costs money if you want to bribe the oracles and flip the market state.

226
00:21:28,000 --> 00:21:30,000
So is this making sense to you?

227
00:21:30,000 --> 00:21:32,000
At the end of the market, someone has to throw a switch.

228
00:21:32,000 --> 00:21:33,000
Okay, it's making sense.

229
00:21:33,000 --> 00:21:35,000
I was going to talk about this in the future state.

230
00:21:35,000 --> 00:21:42,000
It makes sense that you want to have a financial component to prevent the bribing of
oracles.

231
00:21:42,000 --> 00:21:49,000
My problem with this is, and I think we're going to jump a little bit ahead, is that
why does it need to be its own currency?

232
00:21:49,000 --> 00:21:54,000
As opposed to a currency that people already know and like.

233
00:21:54,000 --> 00:21:56,000
It doesn't even have to be Bitcoin.

234
00:21:56,000 --> 00:22:00,000
No, but when I use Hivemind, it will be just with Bitcoin.

235
00:22:01,000 --> 00:22:05,000
It will also have its own token, which I don't even know what I'm calling it now.

236
00:22:05,000 --> 00:22:06,000
I guess I'm calling it the vote coin.

237
00:22:06,000 --> 00:22:07,000
Would it be pegged to Bitcoin?

238
00:22:07,000 --> 00:22:11,000
No, this has to be its own thing because this has to be something that you buy.

239
00:22:11,000 --> 00:22:15,000
First of all, you don't need this token in order to use the markets.

240
00:22:15,000 --> 00:22:17,000
The markets, this token is only for employees.

241
00:22:17,000 --> 00:22:20,000
Right, so it's an internal token like coin system.

242
00:22:20,000 --> 00:22:22,000
It's for employees.

243
00:22:22,000 --> 00:22:28,000
So what you need is you need an incentive for someone to buy in a job and then be
compensated.

244
00:22:28,000 --> 00:22:31,000
They need to be able to sell in the future at a higher price theoretically too.

245
00:22:31,000 --> 00:22:37,000
So the token is kind of like a corporation share in a way, in a metaphorical sense.

246
00:22:37,000 --> 00:22:46,000
Because you want something where if the better the market resolution technology is,
the more valuable all that is.

247
00:22:46,000 --> 00:22:55,000
But the reason this is all a moot point for me is because in Ethereum you can
trivially, whereas in sidechains you cannot.

248
00:22:55,000 --> 00:23:01,000
But in Ethereum you can trivially corporation set up that just copies that
corporation.

249
00:23:01,000 --> 00:23:04,000
And that one will always be able to undercut on price.

250
00:23:04,000 --> 00:23:11,000
And as a result, the entire market cap of reputation is like there is no equilibrium
for that existing.

251
00:23:11,000 --> 00:23:17,000
Because it exists, as you know since you're a finance guy, maybe we'll explain for
the audience.

252
00:23:17,000 --> 00:23:25,000
A company's market cap is like a function in theory of the dividend payments in the
future kind of discounted and brought back to the present.

253
00:23:25,000 --> 00:23:28,000
Right, and the dividends are determined obviously by the revenues.

254
00:23:28,000 --> 00:23:34,000
Right, and so with this, the revenues are fees that you charge people who trade in
these markets.

255
00:23:34,000 --> 00:23:42,000
But my point is that you can set up a competing corporation that does the exact same
markets for a very small fraction of the cost.

256
00:23:42,000 --> 00:23:48,000
And then it can just provide the exact same service because it's just going to copy
what the other corporation is doing.

257
00:23:48,000 --> 00:23:51,000
So as a result, the revenues of the more expensive corporation should be zero.

258
00:23:51,000 --> 00:23:54,000
And so the market cap should always be zero.

259
00:23:54,000 --> 00:24:06,000
Well, I think we can do a whole separate show because for what you just explained
with the tokens in Hivemind, I might debate you on that one as well.

260
00:24:06,000 --> 00:24:09,000
Or maybe that wasn't explained to me correctly.

261
00:24:09,000 --> 00:24:18,000
But the way I see it right now is that these tokens are really only there for that
initial market cap for people to exit.

262
00:24:18,000 --> 00:24:26,000
And there could have been a way to run a project like that without the speculative
nature on the company itself.

263
00:24:26,000 --> 00:24:35,000
And I always try to throw this example out there because it applies to like 90 plus
percent of all of these tokens and ICOs.

264
00:24:36,000 --> 00:24:50,000
Imagine the tech bubble or the tech rising up in the late 90s and all of these
projects like Amazon was expecting people to go buy Amazon stock to buy from Amazon.

265
00:24:50,000 --> 00:24:54,000
And then Netflix was encouraging people.

266
00:24:54,000 --> 00:25:04,000
You need to go and buy Netflix stock, something openly traded in the open market and
then speculate on the price of that at the same time as using it for our service.

267
00:25:04,000 --> 00:25:07,000
I completely agree with you. I don't think – so let me explain it one more time.

268
00:25:07,498 --> 00:25:15,498
That is the point of sidechains and you actually, you stole my example because
that's what I was writing about. I was just writing about Walmart bucks. Did you
actually say Walmart?

269
00:25:15,498 --> 00:25:24,498
I didn't use Walmart. I've been using eBay. My favorite is to convolute this even
more and we were about to talk about the convolution.

270
00:25:25,498 --> 00:25:35,498
My favorite is the convoluted example of this saying, well Netflix needs you to buy
Netflix stock to buy Netflix movies. But where do you buy Netflix stock?

271
00:25:35,498 --> 00:25:41,498
Well you can go buy Netflix stock on E-Trade, which is another dot-com startup which
has its own stock.

272
00:25:41,498 --> 00:25:45,498
And the New York Stock Exchange also has its own stock.

273
00:25:46,498 --> 00:25:55,498
So imagine this chain. So now I have to go buy E-Trade stock in order to use E-Trade
stock to buy Amazon stock in order to use Amazon stock to buy things on Amazon.

274
00:25:55,498 --> 00:25:59,498
That's the world we're currently living in. It feels like it.

275
00:26:00,498 --> 00:26:09,498
You're 100% correct. But the metaphor is 100% correct. But in this case, you are not
fully applying it.

276
00:26:09,498 --> 00:26:20,498
So you're right. The whole point of sidechains is that we shouldn't have to use
Walmart bucks at Walmart. We should be able to use fucking Bitcoin at Walmart or
Bitcoin at Circuit City or it doesn't exist anymore or whatever.

277
00:26:21,498 --> 00:26:25,498
Subway sandwiches or something. You don't need Subway or something.

278
00:26:25,498 --> 00:26:32,498
So when I do Bitcoin Hivemind, you will be using Bitcoin to participate as a
customer.

279
00:26:32,498 --> 00:26:39,498
But in order to be an employee, this thing has to do work. It has to do a job.

280
00:26:39,498 --> 00:26:45,498
You understand that it has to throw a switch that says whether or not Donald Trump
or Hillary Clinton was elected if you want to bet on that.

281
00:26:45,498 --> 00:26:50,498
At the end of the market period, someone has to decide whether or not it's a one or
a zero.

282
00:26:50,498 --> 00:26:56,498
So that's labor that someone needs to do and that is why you need to have a second
dimension.

283
00:26:56,498 --> 00:27:00,498
So let's see. Maybe we will jump right into that part.

284
00:27:00,498 --> 00:27:10,498
So that oracle, why isn't that oracle? You used to say CNN but considering what's
been coming out of the CNN, they might be losing that oracle status.

285
00:27:10,498 --> 00:27:19,498
So why can't it be something like a CNN, like Fox and not just one of them.

286
00:27:19,498 --> 00:27:28,498
You would basically have a matrix or even Twitter and you would need backups on top
of backups.

287
00:27:28,498 --> 00:27:33,498
And the results of something like this, they don't have to be in real time.

288
00:27:33,498 --> 00:27:36,498
I know everyone wants instant payments and transactions.

289
00:27:36,498 --> 00:27:43,498
But just like in sports, it's more important to get it right than to get an answer
quickly.

290
00:27:43,498 --> 00:27:45,498
I know you're 100% correct.

291
00:27:45,498 --> 00:27:48,498
I guess this is going to be my future initiative.

292
00:27:48,498 --> 00:27:50,498
There's going to be a third issue.

293
00:27:50,498 --> 00:27:52,498
There might be a third issue.

294
00:27:52,498 --> 00:27:59,498
And why do we need a decentralized oracle?

295
00:27:59,498 --> 00:28:01,498
That's going to be our first issue again.

296
00:28:02,498 --> 00:28:06,498
Why do we need to decentralize the oracle?

297
00:28:06,498 --> 00:28:09,498
What needs to be decentralized is the big question.

298
00:28:09,498 --> 00:28:14,498
I'm so happy that Bitcoin has given us decentralized money.

299
00:28:14,498 --> 00:28:19,498
But that doesn't mean that everything now will be more efficient because of
decentralization.

300
00:28:19,498 --> 00:28:20,498
I got the question. I get it.

301
00:28:20,498 --> 00:28:21,498
It's a great question.

302
00:28:21,498 --> 00:28:22,498
I'm just saying.

303
00:28:22,498 --> 00:28:25,498
If you start the sentence, I kind of have it in my mind.

304
00:28:25,498 --> 00:28:27,498
I wonder what questions you might be asking.

305
00:28:27,498 --> 00:28:30,498
That was in my library of potential.

306
00:28:30,498 --> 00:28:33,498
This is a question. I get this question sometimes.

307
00:28:33,498 --> 00:28:37,498
First of all, I feel like I've been scammed by the entire universe.

308
00:28:37,498 --> 00:28:39,498
Because I did this project.

309
00:28:39,498 --> 00:28:42,498
When I gave it the truth, it was just like the normal thing to do.

310
00:28:42,498 --> 00:28:43,498
There was just like DevCoin.

311
00:28:43,498 --> 00:28:44,498
Everything was coin.

312
00:28:44,498 --> 00:28:49,498
But no, it was like right exactly when the whole tidal wave of just like stupid coin
project.

313
00:28:49,498 --> 00:28:56,498
And then it's like I decentralized this thing right when Ethereum and BitShares were
doing like the decentralized everything nonsense.

314
00:28:56,498 --> 00:29:00,498
So I really feel like I completely understand the motivation of the question.

315
00:29:00,498 --> 00:29:02,498
I've just been very unlucky with the timing.

316
00:29:02,498 --> 00:29:04,498
I've been drowning it in.

317
00:29:04,498 --> 00:29:07,498
So first question, why decentralize the oracle?

318
00:29:07,498 --> 00:29:08,498
Or what will be the final state?

319
00:29:08,498 --> 00:29:10,498
Or what will be going on there?

320
00:29:10,498 --> 00:29:18,498
And so the reason is someone's going to throw this switch on whether or not Hillary
Clinton or Donald Trump wins in the election betting example.

321
00:29:18,498 --> 00:29:20,498
So they've got to throw the switch.

322
00:29:20,498 --> 00:29:29,498
And that means that however much money is being bet in the market is effectively the
amount of max minus min or whatever it is.

323
00:29:29,498 --> 00:29:37,498
There's amount of like free money in there that you could steal by making the trade
in the opposite direction and then throwing the switch the other way.

324
00:29:37,498 --> 00:29:41,498
So let's say it's worth a dollar if Hillary Clinton is elected.

325
00:29:41,498 --> 00:29:46,498
But Hillary Clinton is trading at one cent because it's November 10th and she
obviously didn't win.

326
00:29:47,498 --> 00:29:54,498
And so then you can buy in all those up for one cent on the dollar, throw the
switch, and just withdraw all the money.

327
00:29:54,498 --> 00:29:56,498
So that makes sense to you, right?

328
00:29:56,498 --> 00:29:59,498
Whoever is throwing the switch controls the money.

329
00:29:59,498 --> 00:30:10,498
But if the switch is being thrown by an algorithm that looks at CNN and Fox and NBC,
how can someone – why do we need reputation tokens?

330
00:30:11,498 --> 00:30:16,498
The algorithm will be thrown by something that's reported by CNN and Fox and NBC.

331
00:30:16,498 --> 00:30:22,498
It will just be – there will just be an intermediate layer of humans that are
watching those shows and reporting in.

332
00:30:22,498 --> 00:30:26,498
And the reason why you don't want to have – you can do it that way.

333
00:30:26,498 --> 00:30:28,498
I mean that's – it's interesting.

334
00:30:28,498 --> 00:30:34,498
It's an interesting question to me, but to me it's very similar to the way we have
exchanges.

335
00:30:34,498 --> 00:30:38,498
And they always get hacked because it's content under pressure as the BU guys would
say.

336
00:30:38,498 --> 00:30:40,498
There's this X amount of money there.

337
00:30:40,498 --> 00:30:43,498
As the project gets more and more popular, there's more and more money.

338
00:30:43,498 --> 00:30:51,498
And you just have to be that one disgruntled employee at Fox or the one guy at CNN
or the one guy who interferes with the network.

339
00:30:51,498 --> 00:30:57,498
I think it's a little more – it's not that simple because I have Alexa.

340
00:30:57,498 --> 00:30:58,498
I have Google.

341
00:30:58,498 --> 00:31:00,498
I can go, Google, who won the election?

342
00:31:00,498 --> 00:31:03,498
Google, who is projected to win the election?

343
00:31:03,498 --> 00:31:05,498
And there's no humans involved.

344
00:31:05,498 --> 00:31:07,498
It aggregates actual news.

345
00:31:07,498 --> 00:31:11,498
What's the difference between just having a human look it up on Google before typing
it in?

346
00:31:11,498 --> 00:31:13,498
And you can have software to automate that.

347
00:31:13,498 --> 00:31:20,498
I'm not against that at all where there are a bunch of questions and you just press
some button and your computer automatically fills them in and you just read them
through.

348
00:31:20,498 --> 00:31:30,498
Actually, I will tell you why because the difference is that human most likely is
not participating in that bet where under these reputation tokens,

349
00:31:30,498 --> 00:31:34,498
that human may be participating in that bet and that human is bribable.

350
00:31:34,498 --> 00:31:42,498
But when you ask Google and it aggregates globally, it's a monster pool that isn't
even covered by rap tokens.

351
00:31:42,498 --> 00:31:49,498
Think about what you are actually technically when you zoom in requiring the
software to do.

352
00:31:49,498 --> 00:31:52,498
The software has to run.

353
00:31:52,498 --> 00:31:55,498
You're on like a line of code, whatever, 1158.

354
00:31:55,498 --> 00:31:58,498
It's running and it says – what does it say?

355
00:31:59,498 --> 00:32:04,498
Look up Google, whatever, and search the question.

356
00:32:04,498 --> 00:32:05,498
Because think about this.

357
00:32:05,498 --> 00:32:07,498
It's going to be arbitrary questions, right?

358
00:32:07,498 --> 00:32:13,498
So someone is going to be able to type in stuff that's potentially nonsense or
potentially in a different language or potentially just a bunch of random
characters.

359
00:32:13,498 --> 00:32:18,498
And don't we trust Google and Amazon to decipher this properly with their AI?

360
00:32:18,498 --> 00:32:20,498
I agree with you that we do.

361
00:32:20,498 --> 00:32:23,498
I'm telling you that they are ultimately going to be, but there's going to be humans
in the middle.

362
00:32:23,498 --> 00:32:25,498
Okay.

363
00:32:25,498 --> 00:32:27,498
So we might disagree there.

364
00:32:27,498 --> 00:32:29,498
I think we should talk about it more.

365
00:32:29,498 --> 00:32:36,498
Ultimately, Google will be deciding as will Twitter, but someone will be going
through to make sure that the wording is right.

366
00:32:36,498 --> 00:32:40,498
And then the benefits and costs will accrue uniquely to them.

367
00:32:40,498 --> 00:32:43,498
But do you think a human is going through and doing this now?

368
00:32:43,498 --> 00:32:46,498
Well, I mean I don't know what you mean by that.

369
00:32:46,498 --> 00:32:51,498
When we decide whether or not Donald Trump won, we are as humans doing exactly that.

370
00:32:51,498 --> 00:32:55,498
Right, but who is aggregating that into a single answer?

371
00:32:55,498 --> 00:32:57,498
But we do aggregate.

372
00:32:57,498 --> 00:33:02,498
When we decide what's real in our world, we aggregate information.

373
00:33:02,498 --> 00:33:08,498
But no human is capable of aggregating it into a single answer that is trusted.

374
00:33:08,498 --> 00:33:16,498
But we do trust Google's algorithm to aggregate all of the answers into a
singularity that we then trust.

375
00:33:16,498 --> 00:33:26,498
This is the best way I could think of getting Google's answer into a smart contract,
for lack of a better term, into the blockchain or the sidechain in this case.

376
00:33:26,498 --> 00:33:29,498
Because I want you to tell me how you would actually do it.

377
00:33:29,498 --> 00:33:31,498
Your line of code is running.

378
00:33:31,498 --> 00:33:35,498
I have actual code that gets reports from humans, but you want to do something else.

379
00:33:36,498 --> 00:33:47,498
Is the code just going to dump the question text into Google and then do some kind
of word analysis on the results to see what the answer is?

380
00:33:47,498 --> 00:33:49,498
That's what you're going for.

381
00:33:49,498 --> 00:33:51,498
But I think that's what we already have.

382
00:33:51,498 --> 00:33:53,498
No, I don't think it is.

383
00:33:53,498 --> 00:33:58,498
Because if we did something like that, people can, you know, they will manipulate
the Googles.

384
00:33:58,498 --> 00:34:03,498
If it's worth enough money, if it's worth $100 million, people will try to
manipulate the Google search.

385
00:34:03,498 --> 00:34:07,498
You could be an employee at Google who changes it like at a certain time or
something.

386
00:34:07,498 --> 00:34:10,498
Because if the block is just going to evaluate at whatever…

387
00:34:10,498 --> 00:34:13,498
That seems a little too conspiratorial for me.

388
00:34:13,498 --> 00:34:19,498
No, we will have, like Rick Santorum added a new definition of his name and all this
other stuff.

389
00:34:19,498 --> 00:34:21,498
And it's now normalized.

390
00:34:21,498 --> 00:34:24,498
That definition is now the definition of that word.

391
00:34:24,498 --> 00:34:29,498
I know, but that might not have been the definition that people, if someone placed
bets on that, that might not have been what they had in mind.

392
00:34:29,498 --> 00:34:32,498
You know, this is a vulnerable point in my view.

393
00:34:32,498 --> 00:34:39,498
And so I think it's similar to exchanges where there's a lot of money if you can
just flip this bid one way or another.

394
00:34:39,498 --> 00:34:45,498
And you have to do something to address the fact that you have only one reporter.

395
00:34:45,498 --> 00:34:50,498
We might have to do this episode for Hivemind in the future.

396
00:34:50,498 --> 00:34:54,498
But let's get back to Augur here for a minute.

397
00:34:54,498 --> 00:35:02,498
So this was a side discussion as to whether the prediction markets themselves are
useful or not.

398
00:35:02,498 --> 00:35:06,498
And I am still not convinced that prediction markets are useful.

399
00:35:06,498 --> 00:35:09,498
And this is where Paul and I might disagree.

400
00:35:09,498 --> 00:35:20,498
But where we do agree is that Augur's implementation of this type of decentralized
prediction markets was definitely not the right way to go.

401
00:35:20,498 --> 00:35:24,498
So let's talk about their token specifically, the rep token.

402
00:35:24,498 --> 00:35:30,498
Do you know much about the mechanics? Is it a proof of work token? Is it a proof of
stake token?

403
00:35:30,498 --> 00:35:35,498
What is the distribution like? Do they get burned? Do they get infinitely created?

404
00:35:35,498 --> 00:35:38,498
Yes, I can. Because I think you're still confused there.

405
00:35:38,498 --> 00:35:45,498
This is the same metaphor as using Walmart bucks to shop at Walmart.

406
00:35:45,498 --> 00:35:55,498
But this is using Walmart shares to vote on the Walmart board of directors or
something or who should be hired to work as cashier at Walmart.

407
00:35:55,498 --> 00:36:03,498
So the tokens just exist the way Augur chose to do it, which is one way among a few.

408
00:36:03,498 --> 00:36:07,498
But they just basically 100% pre-mined, for lack of a better word.

409
00:36:07,498 --> 00:36:16,498
They just have them all out and they circulate like shares just as if someone had
done a – I don't know.

410
00:36:16,498 --> 00:36:22,498
I'm not really familiar with this particular thing. But if someone had done like an
IPO and that was all the shares they were going to issue.

411
00:36:22,498 --> 00:36:29,498
But those are two very different things, right? Like the internal Walmart bucks that
are used to decide internal things.

412
00:36:29,498 --> 00:36:31,498
Or shares. Shares at Walmart.

413
00:36:32,498 --> 00:36:36,498
Okay. So they're openly traded equity shares. Okay.

414
00:36:36,498 --> 00:36:37,498
Well, metaphorically.

415
00:36:37,498 --> 00:36:45,498
So do you know? So 100% pre-mined. So they will not create any more or they can
create more if they want to?

416
00:36:45,498 --> 00:36:46,498
I don't know. I have no idea.

417
00:36:46,498 --> 00:36:47,498
Nobody knows.

418
00:36:47,498 --> 00:36:49,498
Theoretically, they could not.

419
00:36:49,498 --> 00:36:54,498
And do these rep tokens get burned in any way kind of like the Ethereum gas?

420
00:36:54,498 --> 00:36:58,498
Or are they around forever unless you lose them by losing a private key?

421
00:36:58,498 --> 00:37:04,498
Well, I had a certain design in mind that they slowly started moving stuff there,
stuff there.

422
00:37:04,498 --> 00:37:09,498
But assuming that they kept this part the same, there's a total – what they really
represent is a percentage.

423
00:37:09,498 --> 00:37:17,498
So there's 100% of them. And if someone votes in a way that's not very consistent,
they will lose some of theirs.

424
00:37:17,498 --> 00:37:19,498
And everyone else will gain a little bit more.

425
00:37:19,498 --> 00:37:23,498
So it's a fixed pie and it's being redistributed.

426
00:37:23,498 --> 00:37:24,498
Based on misbehavior.

427
00:37:24,498 --> 00:37:26,498
But they are bearer instruments.

428
00:37:27,498 --> 00:37:29,498
They should be. I don't see why they shouldn't be.

429
00:37:29,498 --> 00:37:36,498
Okay, because remember Bo Shen got famously hacked recently for his Augur tokens,
right?

430
00:37:36,498 --> 00:37:40,498
So they do appear to be bearer instruments.

431
00:37:40,498 --> 00:37:45,498
So you could burn and lose your private key and then you lost your reputation.

432
00:37:45,498 --> 00:37:47,498
Yeah, if you don't vote, you also slowly start to lose yours.

433
00:37:47,498 --> 00:37:52,498
See, this is why – because this is a negative reputation problem as Nick Szabo and
others have pointed out.

434
00:37:52,498 --> 00:37:57,498
This is why you need the second token because you need something to take away from
people if they don't do a bad job.

435
00:37:57,498 --> 00:37:59,498
Because you can't give people a negative reputation.

436
00:37:59,498 --> 00:38:01,498
They just create a new identity.

437
00:38:01,498 --> 00:38:02,498
Right.

438
00:38:02,498 --> 00:38:06,498
So this is kind of the impetus for the second dimension.

439
00:38:06,498 --> 00:38:08,498
So this is why I'm interested in your scam thing.

440
00:38:08,498 --> 00:38:11,498
I want to know if you learned all the scams are different in a totally different
way.

441
00:38:11,498 --> 00:38:14,498
I believe they're all going to be different.

442
00:38:14,498 --> 00:38:18,498
I think I would really get bored with this podcast if they all turned out to be
exactly the same.

443
00:38:18,498 --> 00:38:22,498
There's got to be one core, I think, of selling a dream to people or ignorant people
or something.

444
00:38:22,498 --> 00:38:24,498
I think that it is.

445
00:38:24,498 --> 00:38:28,498
It is that core that you will be rich kind of.

446
00:38:28,498 --> 00:38:30,498
Yeah, I'm really interested in learning.

447
00:38:30,498 --> 00:38:31,498
I'm going to watch the whole thing.

448
00:38:31,498 --> 00:38:33,498
I really want to know the conclusions at the end.

449
00:38:33,498 --> 00:38:35,498
We're getting there.

450
00:38:35,498 --> 00:38:36,498
We're getting there.

451
00:38:36,498 --> 00:38:40,498
So, again, to me – so do you think this token is secure?

452
00:38:40,498 --> 00:38:42,498
It's on Ethereum.

453
00:38:43,498 --> 00:38:50,498
I know what happened with the Bo Shen situation is that, yeah, you keep your tokens
on an exchange and you can get socially engineered.

454
00:38:50,498 --> 00:38:53,498
That's not the kind of security we're talking about, right?

455
00:38:53,498 --> 00:38:59,498
We're talking like blockchain security energy going in, like in the case of Bitcoin.

456
00:38:59,498 --> 00:39:03,498
And for the moment, in the case of Ethereum, right, there is mining going on.

457
00:39:03,498 --> 00:39:04,498
There is security.

458
00:39:04,498 --> 00:39:08,498
It's when you get to this proof of stake model that I don't know where the security
is.

459
00:39:08,498 --> 00:39:11,498
Yeah, I think proof of stake is stupid, and we can talk about that.

460
00:39:11,498 --> 00:39:12,498
There's so much to say.

461
00:39:12,498 --> 00:39:14,498
But I'll just briefly comment.

462
00:39:14,498 --> 00:39:22,498
So this token is kind of free-riding in Ethereum land, just as mine would free-ride
within the sidechain land,

463
00:39:22,498 --> 00:39:27,498
and the sidechain land would be MergeMine, so it would itself be free-riding off of
Bitcoin land.

464
00:39:27,498 --> 00:39:34,498
And so the token is not its own like proof-of-work token in that sense.

465
00:39:34,498 --> 00:39:40,498
And in that sense, it should be as secure as your ability to keep your private key
the same, assuming that there are like no bugs and stuff.

466
00:39:40,498 --> 00:39:48,498
But obviously, with the case of BoChen, what apparently happened was someone was
just not securing their private key.

467
00:39:48,498 --> 00:39:55,498
And you have to buy all of these initial rep tokens from Augur themselves.

468
00:39:55,498 --> 00:39:58,498
Yeah, they just 100% sold them all.

469
00:39:58,498 --> 00:40:04,498
So this is a very decentralized way to create a decentralized environment.

470
00:40:05,498 --> 00:40:09,498
That was when I was like, this project is not – these people are crazy,

471
00:40:09,498 --> 00:40:14,498
when they were just going to do that sale of all of them kind of immediately before
really doing any work.

472
00:40:14,498 --> 00:40:26,498
And kind of just that's the core of the mistake is just to take all the money up
front and not do the work, I think.

473
00:40:27,498 --> 00:40:30,498
Okay, so we covered this already.

474
00:40:30,498 --> 00:40:40,498
And again, maybe I'm not following because I still have – my biggest problem with
these prediction markets is why do you need –

475
00:40:40,498 --> 00:40:48,498
I just don't see a reason to decentralize the oracle because I find decentralization
to be fairly inefficient.

476
00:40:48,498 --> 00:40:51,498
And perhaps we can do another show.

477
00:40:51,498 --> 00:40:52,498
We can talk about it.

478
00:40:52,498 --> 00:40:53,498
How much time have we been doing?

479
00:40:53,498 --> 00:40:55,498
We are about –

480
00:40:56,498 --> 00:40:57,498
Yeah, we're about 40 minutes in.

481
00:40:57,498 --> 00:40:58,498
We have about 20 minutes to go.

482
00:40:58,498 --> 00:40:59,498
We are towards the end.

483
00:40:59,498 --> 00:41:00,498
So it's not that bad.

484
00:41:00,498 --> 00:41:01,498
I think it's a good thing.

485
00:41:01,498 --> 00:41:13,498
So I'm still not convinced that we need to decentralize an oracle because I think
that the trusted third parties will rise to the top.

486
00:41:13,498 --> 00:41:16,498
And remember, it's not a single trusted third party.

487
00:41:16,498 --> 00:41:21,498
It's a combination of perhaps 50 trusted third parties.

488
00:41:22,498 --> 00:41:35,498
And now you're looking at a majority of trusted third parties being corrupted, and
you can set that majority threshold to anything you like, 55 percent, 60 percent, 70
percent.

489
00:41:35,498 --> 00:41:42,498
And if there is major contention, then it goes to some additional processes because
guess what?

490
00:41:42,498 --> 00:41:51,498
If you want something – if there is real better instruments on the line, perhaps
instant payments is not the best way to go.

491
00:41:51,498 --> 00:42:00,498
You might have to get paid out on your bets on a delay when you have a very
complicated bet that isn't – it's a little bit subjective.

492
00:42:00,498 --> 00:42:08,498
Well, I think that was the second part of your thing that we didn't get to before,
which is that I don't – there is no instant.

493
00:42:08,498 --> 00:42:21,498
They're all resolved in the future at once, but you could potentially be betting on
something where the election happens on November 10th or whatever, and then it's not
resolved until January 1st a few weeks later.

494
00:42:21,498 --> 00:42:25,498
Or like in 2000 when it took like when they tried to go to the Supreme Court.

495
00:42:25,498 --> 00:42:28,498
Who knows when it would have gotten resolved?

496
00:42:28,498 --> 00:42:32,498
Well, I think someone resigned, and they – I guess they didn't resign.

497
00:42:32,498 --> 00:42:37,498
No, we're not going to get into what happened in 2000, but they missed their time
window. Let's put it that way.

498
00:42:37,498 --> 00:42:41,498
Okay, but I agree with you, and it's not designed that way for that reason.

499
00:42:41,498 --> 00:42:51,498
But you're asking why does it need to be decentralized, and you're saying that
instead basically Google can run the prediction markets or someone else can run the
prediction markets or some consortium of information providers.

500
00:42:51,498 --> 00:43:06,498
Right. I mean what I'm looking at basically you can't have a third party that is
trusted to build an algorithm with open source code that aggregates certain specific
third parties.

501
00:43:06,498 --> 00:43:07,498
This is.

502
00:43:07,498 --> 00:43:11,498
That have been trusted, but then where does the wrap token come in?

503
00:43:11,498 --> 00:43:15,498
It weights people by – what if there's –

504
00:43:15,498 --> 00:43:19,498
But I don't think it should be individual people dependent. That's my issue.

505
00:43:19,498 --> 00:43:27,498
But you see – okay, so I know that's what we should really talk about instead, but
you understand – so like why was – do you know why Intrade was closed down in 2012?

506
00:43:27,498 --> 00:43:32,498
Intrade, that was where people can like bet on – they make any questions and they
can –

507
00:43:32,498 --> 00:43:38,498
Not even any questions, so we're not even there. It was only elections and there was
some oil futures and some other things.

508
00:43:38,498 --> 00:43:41,498
I don't know why they were closed down, but I'm curious now.

509
00:43:41,498 --> 00:43:50,498
Yeah, well, it was regulatory pressure from the – well, it's actually kind of
ambiguous, but they also had some accounting irregularities, so that may have also
contributed.

510
00:43:50,498 --> 00:43:52,498
Also, their CEO, Client Matt Everston, died.

511
00:43:53,498 --> 00:44:05,498
Well, I see. I don't buy the argument that something like that had pressure from the
government, because I think Wikileaks had pressure from the government for a long
time, and they can still publish whatever they like without decentralization.

512
00:44:05,498 --> 00:44:07,498
It is decentralized, though, what they publish.

513
00:44:07,498 --> 00:44:11,498
It's not – they don't go to like Google and say release all this together.

514
00:44:11,498 --> 00:44:20,498
It's not Bitcoin decentralized, right? It's decentralized in that they have enough
servers that they won't be shut down at once. Wikileaks.

515
00:44:21,498 --> 00:44:22,498
I guess. I don't know.

516
00:44:22,498 --> 00:44:27,498
It's decentralized to a point, but it's internally decentralized.

517
00:44:27,498 --> 00:44:37,498
Well, there are a lot of ways of answering this question. One is to just go back and
say every time prediction markets have been tried in the past, they have, in fact,
been forced to close.

518
00:44:37,498 --> 00:44:41,498
And it's arguable why, but I would argue it's for regulatory reasons.

519
00:44:41,498 --> 00:44:46,498
It is for regulatory reasons, but it's also because the people putting them together
are like visible people.

520
00:44:46,498 --> 00:44:50,498
I'm sure if Assange got to do it all over again, no one would know his name.

521
00:44:50,498 --> 00:44:54,498
Only the visible people. You want it to only be Google and CNN that are the oracles.

522
00:44:54,498 --> 00:44:55,498
Well, not the –

523
00:44:55,498 --> 00:44:57,498
That's even more visible than one individual.

524
00:44:57,498 --> 00:45:02,498
Well, the website, Intrade, they could have still kept going.

525
00:45:02,498 --> 00:45:12,498
There is only regulatory pressure to shut you down if there is a point where that
regulatory pressure can go to.

526
00:45:13,498 --> 00:45:16,498
Yeah, but there is if it's CNN and Google and whatever.

527
00:45:16,498 --> 00:45:19,498
Well, they can't shut them down from not telling you who won the election.

528
00:45:19,498 --> 00:45:30,498
Yeah, but okay. So what you want is something that parses – okay, so actually I
think maybe we're zooming in more on your question.

529
00:45:30,498 --> 00:45:31,498
My view of the world, yeah.

530
00:45:31,498 --> 00:45:35,498
So the questions, you want them to be machine readable.

531
00:45:35,498 --> 00:45:36,498
Correct.

532
00:45:37,498 --> 00:45:43,498
But I'm not sure that that's possible because they are – I mean it depends on how –

533
00:45:43,498 --> 00:45:50,498
if we have artificial intelligence software that's comparable to human reading
ability, then it wouldn't really be a big difference.

534
00:45:51,498 --> 00:46:05,498
The questions might not – I think there has to be a reliability to the mapping of
the question to the answer,

535
00:46:05,498 --> 00:46:08,498
which is actually more reliable if humans are doing it than computers are doing it.

536
00:46:08,498 --> 00:46:10,498
So I guess we probably don't agree on that.

537
00:46:10,498 --> 00:46:16,498
We don't agree on that, right, because in my mind, who in the world is betting on a
question that isn't machine readable?

538
00:46:17,498 --> 00:46:27,498
How much of a gambler are you that you are focused on – if you are placing a bet on
a question that is not machine readable in today's age

539
00:46:27,498 --> 00:46:34,498
and now extrapolate that in five years or ten years when we have computers driving
our cars, flying our planes,

540
00:46:34,498 --> 00:46:38,498
you want to start gambling on questions that are not machine readable?

541
00:46:39,498 --> 00:46:46,498
You understand it's worse than that though because what if Google – again, we have
to go zoom into what you actually want.

542
00:46:46,498 --> 00:46:48,498
So the line of code is executing.

543
00:46:48,498 --> 00:46:52,498
I mean what if Google changes their IP address or what if someone interferes with
the –

544
00:46:52,498 --> 00:46:57,498
what if there's like a denial of service between this blockchain and it's trying to
reach Google?

545
00:46:57,498 --> 00:46:58,498
What if Google goes out of business?

546
00:46:58,498 --> 00:47:03,498
So this is going to be something that's going to run for maybe 10 or 20 or 30 years.

547
00:47:03,498 --> 00:47:06,498
I mean there was no YouTube in 2005 or whatever.

548
00:47:06,498 --> 00:47:07,498
There was no Twitter.

549
00:47:07,498 --> 00:47:08,498
Agreed.

550
00:47:08,498 --> 00:47:09,498
So Twitter could be here.

551
00:47:09,498 --> 00:47:10,498
It could be gone.

552
00:47:10,498 --> 00:47:12,498
I don't think Twitter makes any money.

553
00:47:12,498 --> 00:47:14,498
I don't know what their plan is.

554
00:47:14,498 --> 00:47:22,498
It's not just easy to just say type this into the search engine of the time and get
the answer back.

555
00:47:22,498 --> 00:47:26,498
But if you want to write that, I think that may be –

556
00:47:26,498 --> 00:47:27,498
No, I don't want to write it.

557
00:47:27,498 --> 00:47:34,498
I think that's been written many times by Amazon and by Google and by all the speech
recognition software.

558
00:47:34,498 --> 00:47:35,498
No, no.

559
00:47:35,498 --> 00:47:38,498
It's got to get into a database in the blockchain.

560
00:47:38,498 --> 00:47:40,498
So you have to have this – turn on some algorithm.

561
00:47:40,498 --> 00:47:42,498
Well, I'm not sure you need a blockchain here.

562
00:47:42,498 --> 00:47:46,498
Again, now we're getting into the philosophical discussion of prediction markets in
general,

563
00:47:46,498 --> 00:47:49,498
so we are slowly moving away from Augur.

564
00:47:49,498 --> 00:47:50,498
That's fine.

565
00:47:50,498 --> 00:47:51,498
I think it's good.

566
00:47:51,498 --> 00:47:52,498
Yeah, no.

567
00:47:52,498 --> 00:47:53,498
It is a good discussion.

568
00:47:53,498 --> 00:47:55,498
We can keep going with it a little bit longer.

569
00:47:55,498 --> 00:47:56,498
I think we should keep going with it.

570
00:47:56,498 --> 00:47:57,498
Yeah.

571
00:47:57,498 --> 00:48:02,498
Okay, we can talk about why it needs a blockchain, which is a separate conversation.

572
00:48:02,498 --> 00:48:08,498
But I think it's actually taking us afield of the original question, which is how to
actually do this.

573
00:48:08,498 --> 00:48:15,498
And conditional on you wanting to do this, you need some algorithm for producing the
answer,

574
00:48:15,498 --> 00:48:17,498
for the bits that are flipped at the end.

575
00:48:17,498 --> 00:48:19,498
So I think you would agree on that.

576
00:48:19,498 --> 00:48:25,498
Maybe we should switch to your other question, which is why do people want to have
basically bearer instruments

577
00:48:26,498 --> 00:48:33,498
that are instead of Bitcoin, there are some token that's either worth some amount if
Hillary Clinton is elected or some amount if not.

578
00:48:33,498 --> 00:48:36,498
Why do we need an additional token?

579
00:48:36,498 --> 00:48:38,498
No, it's not an additional token.

580
00:48:38,498 --> 00:48:40,498
Each market is its own – their own shares.

581
00:48:40,498 --> 00:48:45,498
So it would be millions of – well, not millions, but thousands of tokens.

582
00:48:45,498 --> 00:48:52,498
One could be worth a dollar if Hillary Clinton is elected or zero dollars, U.S.
dollars worth of Bitcoin if she's not.

583
00:48:52,498 --> 00:48:57,498
And you can have synthetic markets that replicate the Dow Jones Industrial Average,

584
00:48:57,498 --> 00:49:06,498
but they would be in – this is sort of like a synthetic derivative or something that
is worth the S&P 500

585
00:49:06,498 --> 00:49:13,498
that would be as private and fungible on a blockchain as Bitcoin is.

586
00:49:13,498 --> 00:49:17,498
But it would be – whatever price it would have today would be exactly what the Dow
Jones Industrial Average is.

587
00:49:17,498 --> 00:49:20,498
You could have it in dollars. You could have it in yen or something else.

588
00:49:20,498 --> 00:49:22,498
You can do all kinds of extremely fancy things.

589
00:49:22,498 --> 00:49:30,498
But the major application of prediction markets is fixing collective action
information aggregation problems,

590
00:49:30,498 --> 00:49:38,498
so like basically voting on the CEO or voting on the president where – and there's a
lot we can say about this,

591
00:49:38,498 --> 00:49:42,498
which is its own thing, but people have tried for years to get something like this
to work,

592
00:49:42,498 --> 00:49:52,498
and this is like the closest that I think I'm aware of anyone coming to having an
actual way of advising people

593
00:49:52,498 --> 00:49:57,498
on who to vote for that's not like inherently biased in one direction or another.

594
00:49:57,498 --> 00:50:02,498
So I have a lot of use cases for this project specifically, and we can talk about
that.

595
00:50:03,053 --> 00:50:14,053
That's a different – if you go to the bitcoinhivemind.com, I have an applications
paper that's like several pages long about what I would use this for and why people
might use it, decide to use it.

596
00:50:15,053 --> 00:50:22,053
But that's a separate question from how does it work, why does it work, or why would
we want it. It's a different question from how to get it to work.

597
00:50:22,053 --> 00:50:23,053
How to implement it.

598
00:50:23,053 --> 00:50:34,053
Right, and how to implement it is actually confusing if you want it to run for a
long time or be robust to something like Google changing its IP address or going out
of business or something like that,

599
00:50:34,053 --> 00:50:44,053
or if someone can't connect to Google but someone else can or they connect on
different days or something. So that was the best way I could think of to do it.

600
00:50:45,053 --> 00:50:56,053
I do see your point, we just do philosophically disagree there. We both agree that
Augur's implementation of this is unlikely to work and terrible.

601
00:50:56,053 --> 00:51:06,053
We also slightly disagree in that I don't use this case for a decentralized
prediction market in general, but Paul clearly does.

602
00:51:06,053 --> 00:51:14,053
So we might save that for a future discussion. But going back to Augur, where do you
think Augur goes from here?

603
00:51:14,053 --> 00:51:23,053
I think it's the same path that everyone has taken where the market cap just slowly
fades away and eventually the people who are involved, since they're smart people,

604
00:51:23,053 --> 00:51:30,053
they'll find other things to do and as you said, a lot of people left immediately as
soon as they got the payday.

605
00:51:30,053 --> 00:51:35,053
It's like you cram for the pop quiz, you cram for the exam and then you take the
exam and then you just forget about it.

606
00:51:35,053 --> 00:51:46,053
Now that I think about it, we should throw the names out of the people originally
involved with Augur and programming because we'll need to know if these people
surface again in other projects in the future.

607
00:51:46,053 --> 00:51:53,053
We all know Jeremy Gardner was one of their big promoters that went around doing
presentations.

608
00:51:53,053 --> 00:51:56,053
Yeah, he was kind of young. I feel like Vitalik kind of…

609
00:51:56,053 --> 00:52:04,053
And Joey Krug is the current CEO. Was he one of the founders? Was he the CEO from
the start?

610
00:52:04,053 --> 00:52:12,053
Yeah, he was one of the people who really understood it better or maybe one of the
only people who understood it at all. So there's that angle.

611
00:52:12,053 --> 00:52:15,053
And who was their lead C++ programmer?

612
00:52:15,053 --> 00:52:16,053
Jack Peterson.

613
00:52:16,053 --> 00:52:17,053
Jack Peterson, is he still with them?

614
00:52:17,053 --> 00:52:18,053
I think so.

615
00:52:18,053 --> 00:52:21,053
Okay, so we're not even joking.

616
00:52:21,053 --> 00:52:22,053
I think he's still in charge.

617
00:52:22,053 --> 00:52:27,053
Was there anybody else that was critical to it from the beginning that may or may
not still be there?

618
00:52:28,053 --> 00:52:32,053
Other than Vitalik. They had some marketing people.

619
00:52:32,053 --> 00:52:39,053
Yeah, but marketing people. I don't blame marketing people for a lot of the stuff.

620
00:52:39,053 --> 00:52:41,053
I agree with you completely.

621
00:52:41,053 --> 00:52:47,053
And a lot of them don't even have to know what a Bitcoin is. They're just being
paid. It would be nice to have some checks and balances on that.

622
00:52:48,053 --> 00:52:55,053
Who are the people who are really responsible for the scam taking shape would
probably be Vitalik, actually.

623
00:52:55,053 --> 00:53:03,053
And even I would say Eric Voorhees a little bit because no one would give them any
money, but then Eric decided to give them money.

624
00:53:03,053 --> 00:53:10,053
And at the time, it might have been difficult to understand why Eric would be
involved in something like this.

625
00:53:10,053 --> 00:53:16,053
But he is running ShapeShift, so it's possible that he wanted that inventory to be
moved.

626
00:53:16,053 --> 00:53:20,053
He wanted more pumping for Ethereum, I don't know.

627
00:53:20,053 --> 00:53:24,053
Or any coin, right, for that matter. Any coin that could get popular.

628
00:53:24,053 --> 00:53:33,053
To keep up his point of view of the multi-token marketplace world or something. So
that's possible.

629
00:53:34,053 --> 00:53:43,053
So it's unfortunate that people do a fake capitalism where building anti-capital is
seen as terrible.

630
00:53:43,053 --> 00:53:50,053
On a final note, only because I do have it in my notes, my view has always been, and
again, Paul might disagree with that last note,

631
00:53:50,053 --> 00:53:55,053
is that to me, you have to understand what you are trying to decentralize.

632
00:53:55,053 --> 00:53:59,053
And payments are a major thing that need to be decentralized.

633
00:53:59,053 --> 00:54:03,053
But again, payments in things that may be censored.

634
00:54:03,053 --> 00:54:09,053
And gambling in general is censored in some part of the world and is not censored in
other parts of the world.

635
00:54:09,053 --> 00:54:15,053
So where gambling is not censored, you don't need any of it.

636
00:54:15,053 --> 00:54:23,053
If you are gambling on something that the thing you're gambling on is censored due
to regulation,

637
00:54:23,053 --> 00:54:27,053
Bitcoin gives you an avenue to get around that.

638
00:54:27,053 --> 00:54:32,053
If gambling is legal in your area, let's say sports, you don't even need Bitcoin.

639
00:54:32,053 --> 00:54:37,053
You can just use other means, though credit cards are still a problem because of
chargebacks.

640
00:54:37,053 --> 00:54:39,053
But wire transfers are not.

641
00:54:39,053 --> 00:54:41,053
So now we're getting into a thing.

642
00:54:41,053 --> 00:54:48,053
Okay, so what if gambling on itself is very, very illicit?

643
00:54:49,053 --> 00:54:58,053
Like you're gambling on whether somebody will successfully CryptoLocker the CEO of
Microsoft.

644
00:54:58,053 --> 00:55:00,053
So something like that.

645
00:55:00,053 --> 00:55:02,053
So some kind of a question where…

646
00:55:02,053 --> 00:55:04,053
In the crime markets.

647
00:55:04,053 --> 00:55:06,053
Right, some kind of an illicit market.

648
00:55:06,053 --> 00:55:10,053
So basically, if let's say, for example, the U.S. government legalizes gambling,

649
00:55:10,053 --> 00:55:13,053
but then they go, uh-uh, not that question.

650
00:55:14,053 --> 00:55:18,053
Gambling is legal, but not on that specific question.

651
00:55:18,053 --> 00:55:23,053
So to me, this is where decentralization plays a very good role,

652
00:55:23,053 --> 00:55:29,053
where not just the currency that is used to gamble needs to be decentralized,

653
00:55:29,053 --> 00:55:37,053
but the question itself is in danger of being censored and removed.

654
00:55:37,053 --> 00:55:44,053
So I guess this is the potential of in-trade where the questions themselves were
under scrutiny of regulation.

655
00:55:44,053 --> 00:55:49,053
But that also has to do with, well, they just didn't start their centralized company
correctly.

656
00:55:49,053 --> 00:55:56,053
They could have structured their company, their website, like Wikileaks did,

657
00:55:56,053 --> 00:56:00,053
in a way that can't be shut down and there's nowhere to send your subpoenas.

658
00:56:02,053 --> 00:56:04,053
I guess that's kind of ambitious.

659
00:56:04,053 --> 00:56:05,053
That would be nice.

660
00:56:05,053 --> 00:56:07,053
But again, Wikileaks doesn't somehow, right?

661
00:56:07,053 --> 00:56:08,053
I would have liked if someone would do that.

662
00:56:08,053 --> 00:56:12,053
I'm not willing to take that level of risk personally and set up the Silk Road
version.

663
00:56:12,053 --> 00:56:13,053
I don't think that…

664
00:56:13,053 --> 00:56:15,053
Right, but somebody always is.

665
00:56:15,053 --> 00:56:16,053
Someone could do it.

666
00:56:16,053 --> 00:56:18,053
Well, you see, this is the same problem, though.

667
00:56:18,053 --> 00:56:24,053
If you have a tradable reputation token and you build a business, like you build
Silk Road,

668
00:56:24,053 --> 00:56:30,053
you can then sell the reputation and cash out all the goodwill you've engendered.

669
00:56:30,053 --> 00:56:32,053
You can cash out on it without blowing the system up.

670
00:56:32,053 --> 00:56:34,053
So this is another advantage of the reputation token.

671
00:56:34,053 --> 00:56:35,053
So that might be true.

672
00:56:35,053 --> 00:56:41,053
But again, even if you do that, that question has to be posted somewhere on the web,
correct?

673
00:56:41,053 --> 00:56:43,053
It goes into the blockchain, literally.

674
00:56:43,053 --> 00:56:44,053
Which blockchain?

675
00:56:44,053 --> 00:56:47,053
In my case, the sidechain.

676
00:56:47,053 --> 00:56:50,053
Okay, so in your case, the sidechain of the Bitcoin blockchain.

677
00:56:50,053 --> 00:56:52,053
Someone will broadcast an actual message that has this question in it.

678
00:56:52,053 --> 00:56:53,053
Okay.

679
00:56:53,053 --> 00:56:55,053
Oh, and one last question I totally forgot.

680
00:56:56,053 --> 00:56:58,053
Since Augur is…

681
00:56:58,053 --> 00:57:00,053
And I always wanted to know this.

682
00:57:00,053 --> 00:57:05,053
Since Augur is built on top of Ethereum and Ethereum hard forks…

683
00:57:07,053 --> 00:57:08,053
Yeah, I know.

684
00:57:08,053 --> 00:57:09,053
It's totally stupid, right?

685
00:57:09,053 --> 00:57:10,053
And how do you even…

686
00:57:10,053 --> 00:57:12,053
The thing is, there's so many ways we can…

687
00:57:12,053 --> 00:57:14,053
I mean, I would love to have like a whole other hour.

688
00:57:14,053 --> 00:57:16,053
I can maybe even do the Ethereum one if you're interested.

689
00:57:16,053 --> 00:57:22,053
Because there's so many aspects of Ethereum that are not conducive to anything at
all stable.

690
00:57:22,053 --> 00:57:28,053
Because even assuming that Ethereum's design is finished and the implementation is
finished,

691
00:57:28,053 --> 00:57:30,053
neither of which are correct at all.

692
00:57:30,053 --> 00:57:31,053
Agreed.

693
00:57:31,053 --> 00:57:34,053
Especially because they're going for like this open heart surgery of like proof of
stake.

694
00:57:34,053 --> 00:57:38,053
But open heart surgery and like putting in like a frog or something instead of a
heart

695
00:57:38,053 --> 00:57:41,053
and just kind of like hoping that it will work or not change back to what it was
before,

696
00:57:41,053 --> 00:57:43,053
making it all pointless.

697
00:57:43,053 --> 00:57:45,053
So we can talk a lot about that.

698
00:57:45,053 --> 00:57:48,053
But even assuming it's all stable and it works,

699
00:57:49,053 --> 00:57:55,053
then the contracts that are more efficient use of the Ethereum blockchain resources,

700
00:57:55,053 --> 00:57:57,053
those will tend to just crowd out.

701
00:57:57,053 --> 00:58:05,053
They'll make the gas price go higher and higher and they'll tend to just crowd out
all the other smart contracts on Ethereum.

702
00:58:05,053 --> 00:58:11,053
And eventually, they will only have like the one optimal contract will just be
expressed like X times or whatever.

703
00:58:11,053 --> 00:58:15,053
And that's sort of desirable, but it's also not at all what was promised

704
00:58:15,053 --> 00:58:20,053
or what kind of a lot of people's expectations are that it's like some super
computer or something.

705
00:58:20,053 --> 00:58:25,053
It's a 90s phone level computer and it is at best.

706
00:58:25,053 --> 00:58:29,053
And there's just like so many things about it that are just absurd.

707
00:58:29,053 --> 00:58:36,053
It's a 90s level computer with 2025 levels of data storage capacity.

708
00:58:36,053 --> 00:58:37,053
Yeah.

709
00:58:38,053 --> 00:58:39,053
Yeah.

710
00:58:40,053 --> 00:58:51,053
Well, I mean, the only way to kind of describe Ethereum is to say that a bunch of
people got their hands on something evolved, right?

711
00:58:51,053 --> 00:58:56,053
Like we had like the first multicellular fish evolved out of the primordial soup,

712
00:58:56,053 --> 00:58:59,053
and they got their hands on it and they opened it up and they looked at the DNA

713
00:58:59,053 --> 00:59:02,053
and they just threw it all out and they just started from scratch with like little,

714
00:59:02,053 --> 00:59:05,053
what are they, A, T, G, C, or whatever.

715
00:59:05,053 --> 00:59:07,053
And they just started plugging that in.

716
00:59:07,053 --> 00:59:10,053
And then they just turned that on and they tried to grow a new fish.

717
00:59:10,053 --> 00:59:13,053
And then like, I don't know, that sounds like a totally pointless endeavor to me.

718
00:59:13,053 --> 00:59:15,053
Well, we'll leave it on that note.

719
00:59:15,053 --> 00:59:23,053
I just realized that doing one of these for Ethereum is going to be way more
complicated than potentially Ethereum itself.

720
00:59:23,053 --> 00:59:26,053
So expect multiple parts.

721
00:59:26,053 --> 00:59:28,053
Perhaps we can get Paul back.

722
00:59:28,053 --> 00:59:34,053
And we will talk about the idealized prediction market some more.

723
00:59:34,053 --> 00:59:36,053
And perhaps we can go into that issue in the near future.

724
00:59:36,053 --> 00:59:37,053
All right.

725
00:59:37,053 --> 00:59:38,053
So we will wrap this up.

726
00:59:38,053 --> 00:59:46,053
I hope you enjoyed our little fireside chat on Augur, which turned into the
prediction markets in general, which is good.

727
00:59:46,053 --> 00:59:47,053
We had some agreements.

728
00:59:47,053 --> 00:59:49,053
We had a few disagreements.

729
00:59:49,053 --> 00:59:52,053
Paul, why don't you tell everyone where they can find you and your work.

730
00:59:52,053 --> 00:59:57,053
And please send me any additional links that I will put below in the description.

731
00:59:57,053 --> 00:59:58,053
I will.

732
00:59:58,053 --> 00:59:59,053
Thanks.

733
00:59:59,053 --> 01:00:00,053
You can find me.

734
01:00:00,053 --> 01:00:01,053
I'm Truthcoin on Twitter.

735
01:00:01,053 --> 01:00:03,053
So it's easier than spelling my name.

736
01:00:03,053 --> 01:00:05,053
And Truthcoin.info is my blog.

737
01:00:05,053 --> 01:00:08,053
And the project is bitcoinhivemind.com.

738
01:00:08,053 --> 01:00:10,053
It's linked from Truthcoin.info.

739
01:00:10,053 --> 01:00:16,053
And that is if you thought Augur was a good idea, then bitcoinhivemind is what you
probably really wanted.

740
01:00:16,053 --> 01:00:20,053
And if you're a Bitcoin user, you will not have to.

741
01:00:20,053 --> 01:00:26,053
In order to use it, you will not have to participate in any weird Ethereum or Augur
crowd sales.

742
01:00:26,053 --> 01:00:31,053
You can just use it with your Bitcoin, so there's no need for anyone to even think
about that.

743
01:00:31,053 --> 01:00:35,053
I'm going to do that the right way, so you don't need to worry about that.

744
01:00:35,053 --> 01:00:37,053
Thanks very much, Tone, for having me on.

745
01:00:37,053 --> 01:00:38,053
I had a great time.

746
01:00:38,053 --> 01:00:40,053
Thanks for being on the show.

747
01:00:40,053 --> 01:00:42,053
And once again, my name is Tone Vase.

748
01:00:42,053 --> 01:00:45,053
You can find me on Twitter as Tone Vase.

749
01:00:45,053 --> 01:00:47,053
My blog is libertylifetrail.com.

750
01:00:47,053 --> 01:00:50,053
I do podcasts on the World Crypto Network.

751
01:00:50,053 --> 01:01:02,053
And, of course, this channel where you just saw a part of this Crypto Scam series,
in addition to my regular economics and trading videos, which I try to do at least
once a week.

752
01:01:02,053 --> 01:01:03,053
All right.

753
01:01:03,053 --> 01:01:07,053
On that note, we will get back to the conference here in Miami.

754
01:01:07,053 --> 01:01:09,053
We're at TNABC.

755
01:01:11,053 --> 01:01:16,053
And we'll catch you on Crypto Scam.

756
01:01:20,053 --> 01:01:22,053
Thank you.