With all of the focus on various Bitcoin and Ethereum projects right now, a lot of people are wondering what the fuzz is all about when it comes to prediction markets. Although the main purpose of these projects is to collect as much information about events is possible, it also gives digital currency enthusiasts a chance to bet on the event outcome. Crowdsourcing the probability of any event is an interesting new use case for this technology,
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Digital Currencies And Prediction Market Projects
Every single day, there is, at least, one event taking place which will have an impact on somebody’s life. Gathering enough information about these events is the biggest challenge, as it is impossible to speculate on the outcome otherwise. This is where the decentralized nature of Bitcoin and other digital currencies comes into the picture, as it allows anyone to create their prediction market for any event in the world.
According to Wikipedia, crowdsourced information gathering on events through the concept of prediction markets is at last as – if not more – accurate than any other institution predicting the outcome. This alone makes it well worth the time to explore the concept of a prediction market even further, which is exactly what platforms such as Hivemind and Augur are doing.
That being said, there is always the risk of inaccuracy, as market participants might not take all of the determining factors into consideration. Risk factors, for example, can potentially distort market probabilities, yet not all of the participants will take that information into account when using a prediction market.
But the bigger concern is whether or not a prediction market is legal, as it is classified as a form of gambling. Online gambling, in particular, is not legal in the United States – or in most states, at least- unless they use “play money”. However, things are different when digital currency is involved, as neither Bitcoin nor Ethereum is classified as “currency” in most states, indicating running a prediction market in these regions is perfectly legal, for now.
Until the regulatory landscape regarding digital currency changes, there is nothing wrong with the services offered by Hivemind and Augur. Given the decentralized nature of these project,s it will be hard to shut them down regardless, as there is no central point of failure.
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