Information is worth pure money. At this moment, thousands of Bitcoins on Mt Gox are traded for around 70% of their value. Consequently, right now the information whether Gox is short in Bitcoin or not is worth
millions of dollars - if you were to know "Gox will allow withdrawals in 2 weeks again” you would sit on a gold mine. We from fairly believe that reliable
information should have a price - but a fair one. The best way to decide upon a fair price for a certain good is to let it be traded in a free market. This is the idea of a prediction market.
How does it work? A working prediction market should aggregate all data into the best available forecast. If you have newer or better information you can always bet against the current prediction, improving the forecast and get rewarded in the process. The key performance indicator will be the spread between betting on an event and betting against an event. Sports betting sites are traditional bookmakers and make money through this spread. You bet against the house and not against other users. If you bet on both outcomes equally you will get a return of 70% - 90% of your wager.
A prediction market needs > 98% return. This also means that the odds on a certain event can change over time when new information becomes available, akin to the price of shares in a stock market. A prediction market lets you sell your earlier predictions at a profit before the event has even taken place.
Other features a prediction market should have are:
- anonymous betting
- a transparent process of resolving a bet - optimally decentralized or at least with a provable track record
- funds protected with a transparent multi-sign no-trust-needed solution
- open access to all bet data
- get push notification on price changes (be warned if new information is out)
We can not offer such a market today but this is our vision of where we want to go and we have taken the first little steps to get there. We can not offer the decentralized aspects today - not even in the next month - but we are working on it! We have the basic functionalities of a prediction market implemented and will commence a beta testing phase very shortly. You can pre-register on
http://fairlay.launchrock.com/A first impression: