A Blockchain for Facts

Here’s how it works: After one group of people joins a prediction market and bets on an outcome, Augur pays others to identify that outcome—to verify what happened. But it doesn’t just pay them a flat fee. On its blockchain, Augur houses its own cryptocurrency, a digital token that encourages people to get things right. “If you’re not telling the truth, you stand to lose a bunch of money,” Krug says.
Augur calls its digital token the Rep. This cryptocurrency doesn’t let you buy and sell stuff. It tracks your reputation—that is, how often you tell the truth. People bet their Rep tokens that they are indeed telling the truth—reporting the facts as they actually are. If most others agree, the system returns their tokens and pays them in cash. It’s a way of aligning everyone’s aims in the same direction, the sort of arrangement that so often characterizes the new breed of business built atop a blockchain. Because it’s tied to real money, the Rep token ensures that everyone is pulling in the same direction—toward the truth.

There’s always the risk that the majority will deny the facts, somehow overriding the monetary incentive. Enormous bribes could be a problem, for instance. “There may be cases where you benefit by cheating,” says Miller. “If everyone goes toward the truth, you have an incentive to go along with the truth. But if everyone deviates from the truth, there is incentive to deviate.” Still, many people seem to have faith in the idea. The Rep now enjoys a $89 million market cap, up from $50 million at the end of February.

Ultimately, Krug hopes to create a service that feeds more than just prediction markets. Augur’s reporting engine, he believes, could serve as the foundation for other applications that rely on real-world data. As he explains, it could help automate any financial contract, from options and derivatives to insurance contracts and credit default swaps. Should you be paid because a company defaulted on its debt? Check the Augur blockchain to see if the company really did.

If Augur gains true scale, other possibilities arise. If, say, Trump’s national security adviser steps down and Augur’s Rep-funded “reporters” verify his resignation, that fact gets burned into a blockchain. Any application can then make use of this digital fact, from Wikipedia to Facebook to Google search results. In an age when fake news bounces around Facebook’s echo chambers and presidential tweets see no difference between online hoaxes and the careful reporting of the New York Times, the possibility of creating a digital market for facts becomes a powerful idea.

Like so many ideas that bubble up from the world of bitcoin, the concepts behind Augur are both strange and perhaps overly optimistic. The instability of the Ethereum tokens that people use to make bets on these markets could undermine their accuracy, says David Rothchild, a researcher at Microsoft. And the Augur reporting engine, lacking a critical mass of participants, remains unproven. But in an age when so many people feel so unsure about not just the future but the facts in the present, such big ideas are at least worth a try.