Crippled architecture and technical bugs allow dishonest Augur users to cheat on other players.
Augur is a popular predictions platform where users can make various bets and earn money if their predictions are accurate. Based on smart-contract technology, it is supposed to create an innovative and secure way to make bets with a high level of fraud protection. However, as evidenced in practice, it is not as perfect as it was imagined.
How to Outsmart a Smart Contract
Social media users report that scammers exploit the system vulnerability to earn a quick buck at the expense of other participants in the prediction market. Basically, they create a prediction market with an unlikely outcome that contains a minor mistake or inconsistency in a description that can be easily overlooked by an inattentive user.
At the end of the day, the market is rendered invalid due to the mistake. When it happens, the Augur system distributes all funds placed into the market evenly between the participants so that everyone receives an equal share of the return, irrespective of the prediction they made.
Knowing from the start that the bet is invalid, the market creator start gambling on an obviously losing outcome. When the market is canceled, they receive a share of funds that is much bigger than the money that was actually invested. In other words, they are always in profit — which is next to impossible in gambling where the outcome is never guaranteed.
The Augur Team Keeps Calm
While Augur developers admit that the system is not perfect when it comes to dealing with invalid markets, they claim that social media tends to make a storm in a cup of tea. Thus, responding to a Reddit thread with scam accusations, Augur’s founder Joey Krug explained that the problem is not as widespread as it is pictured.
According to Krug, a bunch of scammers plaguing the Augur platform and defrauding innocent people is a gross overstatement — as there is only one known person involved in creating confusing markets. Moreover, this user, known as Poyo-Poyo, usually draws attention to the mistakes in his own markets and forces them to be invalidated.
1) Almost all of these purposefully confusing markets are being created by one person, not a bunch of people. The activity on those markets is also by one person / address. https://t.co/9jLIeGqun9
— Joey Krug (@joeykrug) March 20, 2019
Also, he added that they are going to fix this issue in the next major update scheduled for release in summer. The new version will allow betting directly on whether the market is valid or not. Numerous invalid bets would serve as a red flag for other users and deter them from taking part in the market.
This issue has triggered an interesting discussion on the merits of decentralization, where a system must be robust enough and capable of self-regulation. Governance is a tough task in a decentralized world where there is no trusted third party to hold scammers accountable.
What do you think of Augur platform? Do you believe it is sustainable enough in its current state? What do you think of the developers’ response to the problem? Let us know what you think in the comments below!
Images courtesy of Shutterstock, Twitter.