Having reliable, auditable, public protocols which can operate without the blessing of the world’s existing governments is precisely the point.
Killer examples include any products or services which would provide a net positive value to society but are currently outlawed within various geographic territories for superstitious reasons and/or to protect existing industries from competition.
Prediction markets are an excellent example here: a substantial body of research now indicates that 1) prediction markets are superior to all other strategies in predicting any quantifiable event (because they are “meta tools” which inherently incorporate the best information from all strategies) and 2) non-private markets can’t be used for manipulating elections, sponsoring assassinations, or incentivizing real-world action of any sort. (In any prediction market with a public order book, any attempted “action-incentivizing position” can be consumed by arbitrage until all that remains is a measure of the event’s real probability). For several decades, researchers from dozens of universities have lobbied for relaxing the ban on prediction markets in USA, with little progress to show. Until that ban is lifted (which could take decades longer), blockchain-based prediction markets will have no domestic competition.
Also worth noting: even in the presence of legal, centralized prediction markets, decentralized prediction market protocols may still be competitive because they require far less counterparty-risk, allowing them to safely support higher volumes and larger positions.
> non-private markets can’t be used for manipulating elections, sponsoring assassinations, or incentivizing real-world action of any sort. (In any prediction market with a public order book, any attempted “action-incentivizing position” can be consumed by arbitrage until all that remains is a measure of the event’s real probability)
Source(s) for this?
I know prediction markets will have far-reaching consequences when they aren’t or can’t be constrained anymore.
The mere presence of a payout for low-probability is a broad change. Maybe I’m not being paid to kill someone via the market directly, but I am naturally incentivized to collect information about the world, gain power, and then use my power to bet on and make low-probability events happen.
Another question - How do we solve the decentralized oracle problem without relying on decentralized votes that could be biased due to past voting behavior or their vested interest in the outcome of a truth vote?
> Some worry that censorship-resistant prediction markets will be used to encourage assassinations (and other crimes); this concern does not hold up to a sober examination. “Assassination markets” (AMs), as originally proposed by Jim Bell, are irreconcilably different from Prediction Markets (PMs). My experimental method for funding public goods with PMs has features which render it incompatible with crime. Furthermore, markets would generally present an excessively-complex, risky, and convoluted form of criminal financing. Truthcoin presents a (peaceful) alternative for accomplishing ideological goals, which features greater persuasiveness as well as lower cost. I conclude with a short discussion covering [1] recourse for those affected by AMs (of any kind), [2] features of Truthcoin designed to amplify the inherent impracticalities of AMs, and [3] the (necessarily relevant) total net effect of Truthcoin on political assassinations, general crime and general human welfare.
The linked paper does a thorough job of explaining this scenario, but to summarize: yes, in the absence of other market participants you might try to bet on low-probability events and make them happen. But because it's a public market, anyone can see the anomalous "predictions" you have made, and "free ride" on or even "front run" your position, including your accomplices (who can also sabotage you). On net, your position will be mostly consumed by arbitrage, your payout will be inconsequential compared to the capital required, and the probability "returned" by the market will remain accurate.
Decentralized prediction markets also offer global liquidity, so the counterparty can be located anywhere on earth. Also the friction and fees should be much lower. If someone in Mongolia wants to bet a million dollars against someone in Colombia today, it’s extremely hard to do without a blockchain (think about the fees and time to wire the money, who would you be wiring it to, etc). Prediction markets are not just for gambling, by the way. They could be used for earthquake insurance, for example.
