Augur, a new blockchain-based market platform, is receiving a lot of media attention because people are using it to predict the death of celebrities. But despite fears that the rise of the "assassination markets" may inspire real killings, the most urgent problem Augur presents is something completely different.
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In reality, people have seen this kind of "sinks of death" decades ago, and blockchains, with their decentralized networks and (potentially) anonymous transactions, act as an ideal platform. Augur's open source software is based on blockchain-based software programs called smart contracts to allow users to set their own forecasting markets that automatically group cryptocurrency bets and distribute winnings without identifying participants. Perfect to arouse interest in firing someone by granting a payday to anyone who does the act, at least in theory. Predictably, the Ethereum-based protocol, launched on July 10, has already led markets to predict the demise of Donald Trump, Jeff Bezos, Warren Buffett, Betty White and others. But these markets have seen very few transactions and the amounts wagered have been miniscule, making it unlikely to inspire someone to engage in improper play.
However, Augur could already facilitate illegal activities that could prove to be much more problematic.
Forecasting markets are generally not allowed in the United States. Federal and state laws prohibit online gambling and "in many ways the dividing line between forecasting and gambling markets is unclear," says Aaron Wright, a professor at the Cardozo School of Jurisprudence from New York. In addition, some Augur contracts allow users to bet on the future value of something, such as Ether's cryptocurrency. It seems very similar to a type of investment called a binary option, which is illegal to list without the approval of the Commodity Futures Trading Commission. In 2012, the CFTC sued Intrade, an Ireland-based forecast market, accusing it of allowing US users to trade binary options, and eventually a judge blocked Intrade from offering contracts in the United States. US.
Of course, Augur already has the CFTC's attention. But even if the agency decides that Augur is breaking the law, how will you enforce this decision? The creators of Augur say they have no control over what their users choose to do with the protocol or the ability to shut it down. This creates an "endemic" problem to blockchain technology, says Wright, who recently co-wrote a book on the subject: "If you do not have a very concrete intermediary, that is a company or a group of people who manage market – how do you enforce the laws and prevent this activity from occurring? "
When Napster, Limewire and other peer-to-peer file-sharing networks started to launch music, movies and other files on the Internet two decades ago , they created similar headaches. But anyway, it was an entity that could be sued for copyright infringement. "Software like Augur, which is open source, freely downloadable and run on a blockchain, presents truly new challenges," says Wright.
This does not mean that laws can not be applied, but only that they must be applied in different ways. For example, if officials were to declare that Augur was facilitating illegal activities, they could try to prosecute people who developed software, just as malware developers were held responsible for their creations, says Wright. It would probably be able to fight the protections of the First Amendment. Prosecutors could also try to direct users who keep the protocol running. Called "reporter", they use Augur's negotiable cryptovalevo, REP, to report results and are rewarded with multiple tokens if their reports are consistent with the broader consensus. There are potentially other avenues, says Wright: "Just because there is no center does not mean there are no indirect ways to attack illegal activities."