Prediction markets - the new "snake oil" or what?

[CIYAM]

To me the idea that "just because we label something as USD automatically now ties it to the value of the USD" is about as retarded as you can get.

Yet this is the very basis of these "prediction markets" that are sitting on some of the latest crypto platforms.

Let's see if anyone can actually really explain how this is supposed to work without resorting to anything complicated (as in don't try and pull the wool over everyone's eyes like the CDS stuff that blew up in 2009).

[Come-from-Beyond]

Let's see if anyone can actually really explain how this is supposed to work without resorting to anything complicated (as in don't try and pull the wool over everyone's eyes like the CDS stuff that blew up in 2009).

http://lesswrong.com/lw/dc7/nash_equilibria_and_schelling_points/

[CIYAM]

http://lesswrong.com/lw/dc7/nash_equilibria_and_schelling_points/

Far too complicated - so - now try and explain it in simple terms (if you can't then I would just say you have posted a useless link to some game theory math stuff which is what I'd expect from people trying to "con others").

(i.e. you did *exactly* what I asked poster's not to do)

[Come-from-Beyond]

Far too complicated

ELI5 version:

You and me decided to steal candies. We picked the lock to nanny's room and opened the box with candies. Unfortunatelly, the box was empty. We were staring at the open box when the nanny entered the room and saw us. She locked me in a closet and started asking you what happened and what we did to the candies (which were eatten by someone else before us). How can we prove that it wasn't we who had stolen the candies? Telling the truth is the only way to convince the nanny that we don't lie. If you version and mine will be the same then she will believe that someone else ate all the candies.

Is the idea clear?

[CIYAM]

If you version and mine will be the same then she will believe that someone else ate all the candies.

But the candies got eaten all the same (so who actually cares why?).

If the candies are gone then everyone just lost (it doesn't matter who is to blame especially when they are anonymous and there is no way to ever get back the candies).

It is no different to believing in a "ponzi scheme" (of course we didn't *know* that pirateat40 was actually running a ponzi scheme - but so what?).

[Come-from-Beyond]

But the candies got eaten all the same (so who actually cares why?).

If the candies are gone then everyone just lost (it doesn't matter who is to blame especially when they are anonymous and there is no way to ever get back the candies).

The candies are irrelevant, the point is to tell the truth (to publish the correct outcome of a prediction). You expect others to do the same for mutual benefit of all participants.

[CIYAM]

The candies are irrelevant, the point is to tell the truth (to publish the correct outcome of a prediction). You expect others to do the same for mutual benefit of all participants.

If the candies are irrelevant then why do we have candies (so you need to rephrase your argument without candies then)?

[Come-from-Beyond]

If the candies are irrelevant then why do we have candies (so you need to rephrase your argument without candies then)?

Candies can be replaced with anything. We could be caught by the police while smoking weed and be forced to explain where we got it from. If we want to get less years in prison then we have to tell the truth. If we lie we can't provide identical details and hence we can't convince the prosecutor that we want to become law abiding citizens.

[CIYAM]

Candies can be replaced with anything. We could be caught by the police while smoking weed and be forced to explain where we got it from. If we want to get less years in prison then we have to tell the truth. If we lie we can't provide identical details and hence we can't convince the prosecutor that we want to become law abiding citizens.

So how on earth does that relate to having BitUSD?

Saying that we decided to "short" it should somehow land us in prison (when there are no laws even covering such an idea)?

It seems people supporting this want to "go outside of the law" (as selling such things are) and then try and cling to the law when it all goes belly up.

People peddling this stuff should realise that the law is not going to back you or protect you (i.e. best to move to some country that doesn't care about such schemes).

[Come-from-Beyond]

So how on earth does that relate to having BitUSD?

Saying that we decided to "short" it should somehow land us in prison (when there are no laws even covering such an idea)?

It seems people supporting this want to "go outside of the law" (as selling such things are) and then try and cling to the law when it all goes belly up.

People peddling this stuff should realise that the law is not going to back you or protect you (i.e. best to move to some country that doesn't care about such schemes).

I don't understand how BitUSD works but I think it's because of my low IQ than of hypothetical flaws in BitUSD design.

PS: We could talk about prediction markets in general though.

[CIYAM]

PS: We could talk about prediction markets in general though.

Lets do that - I challenge that the very idea is basically nothing better than a ponzi scheme.

With zero regulation there is no reason for any party to "honestly" do anything (it is just a new way to relieve stupid people of their money).

[Come-from-Beyond]

Lets do that - I challenge that the very idea is basically nothing better than a ponzi scheme.

With zero regulation there is no reason for any party to "honestly" do anything.

It's regulated by laws of Game Theory. Bitcoin mining has been proving for 6 years that it's better to keep extending the longest branch of blocks. Despite of the fact that Selfish Mining would let to earn more bitcoins.

[CIYAM]

It's regulated by laws of Game Theory. Bitcoin mining has been proving for 6 years that it's better to keep extending the longest branch of blocks. Despite of the fact that Selfish Mining would let to earn more bitcoins.

That applies to Bitcoin mining but does not apply to "prediction markets" (so the two things are not the same).

Cheating Bitcoin requires a lot of effort (i.e. >50% control of the network) but cheating on a prediction market (that isn't working just like Bitcoin) does not.

Are you saying that these prediction markets are using Bitcoin (as I have seen no evidence of that in regards to BitShares)?

[Come-from-Beyond]

That applies to Bitcoin mining but does not apply to "prediction markets" (so the two things are not the same).

Cheating Bitcoin requires a lot of effort (i.e. >50% control of the network) but cheating on a prediction market (that isn't working just like Bitcoin) does not.

Are you saying that these prediction markets are using Bitcoin?

Both, Bitcoin mining and prediction markets, are "regulated" by the same laws.

Cheating Bitcoin requires 2 times less effort (25% of hashing power).

No, these prediction markets don't use Bitcoin.

[CIYAM]

No, these prediction markets don't use Bitcoin.

Then what exactly stops them from being manipulated (a theory won't do it - as we are talking about actual funds to corrupt it)?

[sidhujag]

Candies can be replaced with anything. We could be caught by the police while smoking weed and be forced to explain where we got it from. If we want to get less years in prison then we have to tell the truth. If we lie we can't provide identical details and hence we can't convince the prosecutor that we want to become law abiding citizens.

So how on earth does that relate to having BitUSD?

Saying that we decided to "short" it should somehow land us in prison (when there are no laws even covering such an idea)?

It seems people supporting this want to "go outside of the law" (as selling such things are) and then try and cling to the law when it all goes belly up.

People peddling this stuff should realise that the law is not going to back you or protect you (i.e. best to move to some country that doesn't care about such schemes).

Bitusd is not based on pm vitalik buterin pretty much proved it would break when applied to a constant peg.. Bitusd uses oracles to publish feeds and applies rules to short and long within a 10% band for short term volatility
http://bytemaster.bitshares.org/article/2014/12/18/What-are-BitShares-Market-Pegged-Assets/

[Come-from-Beyond]

Then what exactly stops them from being manipulated (a theory won't do it - as we are talking about actual funds to corrupt it)?

It's the same what stops from attacking a city by byzantine generals. If not all of them (or majority in case of prediction markets) agree on a particular day for the attack then the participants will lose the battle.

[CIYAM]

Bitusd is not based on pm vitalik buterin pretty much proved it would break when applied to a constant peg.. Bitusd uses oracles to publish feeds and applies rules to short and long within a 10% band for short term volatility

So it is not decentralised at all but relies upon centralised *oracles* - and who decides who those are?

[CIYAM]

It's the same what stops from attacking a city by byzantine generals. If not all of them (or majority in case of prediction markets) agree on a particular day for the attack then the participants will lose the battle.

I think you are confusing the very point of the consensus mechanism with something that apparently depends upon Oracles (read the last post).

[sidhujag]

Bitusd is not based on pm vitalik buterin pretty much proved it would break when applied to a constant peg.. Bitusd uses oracles to publish feeds and applies rules to short and long within a 10% band for short term volatility

So it is not decentralised at all but relies upon centralised *oracles* - and who decides who those are?

They are voted in.. Top 101 become delegates and get paid for it... Mostly developers right now. Part of the delegates job is to host full node in signing mode and publish price feeds. In effect its alot more decenteralized than mining pools.

https://bitsharesblocks.com/delegates