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Topic: [WHITEPAPER] Decentralized Bitcoin Prediction Markets - page 2. (Read 26332 times)

newbie
Activity: 47
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BUT  this is not the issue I am talking about here.
The Truthcoin layer is utterly unnecessary for the PM! The prediction market (PM) exists in its own layer, following its own rules and inputs… The TRC layer is added below it only to take 50% of the trading fee. TRC does not provide backing or input feed to the PM layer.(or any other usefulness to the PM layer that I can think of) It exists to serve its own existence and follows its own rules for shares redistribution -rules that decide who will get more of the next round commissions from the PM’s trades…
Let me put in different way being right or wrong how the others will vote determines how much you will get from the next trading fees on the PM. I still do not get what utility of truthcoin entitles it (its holders) to those fees in the first place.

I don't understand what you're trying to say. Let me try to explain the chain of reasoning and maybe you can specify where you object.

Prediction markets are obviously useful, so that's not your problem.

Centralized prediction markets are useful, but not as useful as they could be - since just like all centralized services, they can be attacked, self-regulate into uselessness, or corrupt: IEM survives in the USA only by being useless, and Intrade illustrate both the weakness to attack (by the CFTC and US government in general) and corruption (embezzlement by employees drove it into insolvency).

Hence, a decentralized prediction market, where embezzlement is impossible, where USG cannot regulate it to death, is highly desirable and likely necessary if we are ever going to get very large liquid prediction markets with contracts on many things of importance to the world.

Now, it's relatively obvious how to implement most of a decentralized prediction market on a blockchain: the currency part is like Bitcoin, the contracts and purchases are doable with public keys. The one part which is not obvious is: how are contracts judged? This is very important since it's where the rubber hits the road and the prediction market is forced to mirror the real world and keep being anchored to facts. If the judging isn't done well, the prediction market will be completely useless.

You could have one person appointed to judge. They sign a message etc. But now you've reintroduced centralization and allowed for corruption or coercion: the judge can simply buy up a bunch of shares on the losing side, which will be cheap because they're going to lose, and judge the opposite of truth, and make a ton of money. If they've become trusted enough to judge many contracts, they get a nice big 'exit scam'. As the black-markets show with centralized escrow, this can sort of work, but it still isn't great, and it limits the growth of prediction markets: no one is going to invest, say, $10m of capital if it can all be stolen by one judge pulling an exit scam.

This sort of partially-decentralized prediction market might work, but it's not a very compelling vision and that may be part of why no one has done it. If you're willing to trust the judge not to scam you, you might as well go use Bets of Bitcoin or another Bitcoin betting service: they'll scam you at some point, but at least it'll be a conveniently-done scam.

How could you improve on this? Well, what if there were some way to 'spread out' judging across a lot of people? And incentivize them to judge honestly? And to defect against any conspiracy to manipulate votes? *That* is what Truthcoin tries to do. And that's the value that the SVD part of Truthcoin delivers: it removes the last and large part of centralization, producing a prediction market system you can genuinely rely on and not worry about being attacked by the government, embezzling employees, corrupt judges, etc.
full member
Activity: 122
Merit: 100

That seems like a severe oversimplification, akin to describing the stock market as nothing but 'buying based on how you think others will buy'. Yes, there's elements of a Keynesian beauty contest, but the fundamentals still exist: dividends are paid out or not, companies go bankrupt or not, and any traders who are totally unmoored from reality will discover that the hard way.

The easiest way to predict the resolution the majority will choose is to simply look at what the reality is. *Was* Obama elected? *Did* Putin invade Russia? etc. The truth is the Schelling point for all voters; how do conspirators know which way to vote on what contracts? Their communication will be unreliable and harder than the truthful voters, who merely have to look at a data source to decide; combined with the incentive for each of them to defect and screw over their co-conspirators, this produces a fundamental bias towards the majority voting for the true outcome, which produces a fundamental that voters must acknowledge or lose money, which anchors the prediction markets & prevents them from spinning off into navel-gazing.

Just like Bitcoin: if you can trust the majority of hash power (vote power), you're fine. If you can't, you're not.

BUT  this is not the issue I am talking about here.
The Truthcoin layer is utterly unnecessary for the PM! The prediction market (PM) exists in its own layer, following its own rules and inputs… The TRC layer is added below it only to take 50% of the trading fee. TRC does not provide backing or input feed to the PM layer.(or any other usefulness to the PM layer that I can think of) It exists to serve its own existence and follows its own rules for shares redistribution -rules that decide who will get more of the next round commissions from the PM’s trades…
Let me put in different way being right or wrong how the others will vote determines how much you will get from the next trading fees on the PM. I still do not get what utility of truthcoin entitles it (its holders) to those fees in the first place.
newbie
Activity: 47
Merit: 0
Read the white paper! (several times) 
Great Idea! Well almost…

Let me get some things straight.
So the owners/voters try to guess what the others vote will be, and not what the actual outcome would be! Their incentive is vote with the majority not to guess correctly! If they want to gain by correctly predicting the outcome they must become traders! I.e. bet correctly not vote for the correct outcome.

That seems like a severe oversimplification, akin to describing the stock market as nothing but 'buying based on how you think others will buy'. Yes, there's elements of a Keynesian beauty contest, but the fundamentals still exist: dividends are paid out or not, companies go bankrupt or not, and any traders who are totally unmoored from reality will discover that the hard way.

The easiest way to predict the resolution the majority will choose is to simply look at what the reality is. *Was* Obama elected? *Did* Putin invade Russia? etc. The truth is the Schelling point for all voters; how do conspirators know which way to vote on what contracts? Their communication will be unreliable and harder than the truthful voters, who merely have to look at a data source to decide; combined with the incentive for each of them to defect and screw over their co-conspirators, this produces a fundamental bias towards the majority voting for the true outcome, which produces a fundamental that voters must acknowledge or lose money, which anchors the prediction markets & prevents them from spinning off into navel-gazing.

Just like Bitcoin: if you can trust the majority of hash power (vote power), you're fine. If you can't, you're not.
full member
Activity: 122
Merit: 100
Read the white paper! (several times) 
Great Idea! Well almost…

Let me get some things straight.
So the owners/voters try to guess what the others vote will be, and not what the actual outcome would be! Their incentive is vote with the majority not to guess correctly! If they want to gain by correctly predicting the outcome they must become traders! I.e. bet correctly not vote for the correct outcome.

The consequence of this is that their voting (as a whole, as a group) is completely unrelated to how well the market their supposed to care about performs. If they (as a majority) always get the prediction correctly or they are always wrong the actual (trading) market will perform as it wants- i.e. successfully or unsuccessfully based on totally unrelated factors (advertising, competition, fees etc.) factors pertaining to the trading market itself.
Which leads to the logical question – Why they are needed at all?
I have more points but let’s see if you will answer  this one first.
member
Activity: 115
Merit: 10
I've made a number of updates to the paper for clarity and accuracy. In particular, the Implementation Details section is much better and actually informs developers on how to implement the protocol (thanks to the individuals who wrote in to offer their comments).

I also "finished" the python version of the code for the consensus vote and trading, although there are almost certainly many bugs. The R code is more stable. All code is intended as proof-of-concept.
member
Activity: 115
Merit: 10
Are you Robert Shiller?

Nope. He's a True Empiricist and pretty cool guy though. Why do you ask?

(I signed my name "Paul", but of course if I were lying about that I wouldn't change my answer just because you've asked a second time).
full member
Activity: 207
Merit: 100
Are you Robert Shiller?
member
Activity: 115
Merit: 10
It might be better to use more standard terms... You can see a prediction market as a ensemble method https://en.wikipedia.org/wiki/Ensemble_learning which weights experts (users) by their cumulative score (money) on a series of predictions using a proper scoring rule of some sort. This interpretation has been explored by a number of papers: http://scholar.google.com/scholar?q=%22prediction%20market%22%20ensemble

That's a good idea. I'm intrigued by your link because although the content is very familiar to me I've never heard that term before. But clearly from your scholar search the fault is mine.
newbie
Activity: 47
Merit: 0
It might be better to use more standard terms... You can see a prediction market as a ensemble method https://en.wikipedia.org/wiki/Ensemble_learning which weights experts (users) by their cumulative score (money) on a series of predictions using a proper scoring rule of some sort. This interpretation has been explored by a number of papers: http://scholar.google.com/scholar?q=%22prediction%20market%22%20ensemble
member
Activity: 115
Merit: 10
OK, I took a look at the 'Misunderstandings' essay and have the following comments:

-- What is meant by a meta-tool?  This may mean different things in different contexts, so it would probably be a good idea to define it here.  Is it understood to be an amalgamation of all the available tools?

--  I don't think the amoeba analogy is necessary.  I believe what you are trying to say is that a prediction market tends to weight more accurate sources of information (what you call tools) higher than less reliable ones.

-- Myth 2 appears to be debunking the idea that PMs are inaccurate.  Fig 4 seems to show that it reflects truth better than a naive expectation.  But is a graphic needed here?  Aren't you simply saying that PMs work?

-- I can't understand what Fig 5 is conveying or the myth it is supposed to debunk.  It seems to be trying to explain whether or not an individual with certain characteristics (expert, student, loser, fearful) will take action.  While this may be an attempt to classify behaviour as it relates to certain traits, I don't see how this has any immediate consequences or implications for a PM.  I also don't understand what is meant by 'Talks'.

Ok, thanks. This helps a lot.

I know I rushed that essay so its very help to see its weakest parts from a new perspective (many of your questions are actually not where I expected the weak points to be).

To answer your questions: yes meta-tool is a tool which "works on" (uses) a set of tools (so the PM 'includes' all of the predictive tools we use today). Amoeba is necessary I think, because if a new method is proposed it is 'absorbed' by the PM (I want to distinguish the PM (which is the blob) from the individual knowledge-sources (circles)). I'm surprised this didn't work, I think I will double that figure for two different questions to show the flexibility concept I was after. Fig 4 is attempting to indicate the proper interpretation of a PM price (the 'naive expectation' is someone's interpretation of a PM, for example : http://blog.foreignpolicy.com/posts/2012/06/28/can_we_stop_paying_attention_to_intrade_now , where the author apparently feels that 73% is magically 100%, but I thought that was clear so it is actually very helpful to learn that you did not take away that message).

I knew Fig 5 didn't really work when I made it. Basically it concerns people who "talk", or complain about, the current price. If these people truly disagreed (had better knowledge) they could trade on this information, but I argue that instead these individuals lack awareness of their own un-knowledge. This part will need a tune up.

The first Myth was directly to address that conversation we had about why exactly PMs work so well (because they integrate everything that people believe to work), and if we can continue to expect superior performance from PMs.
newbie
Activity: 56
Merit: 0
OK, I took a look at the 'Misunderstandings' essay and have the following comments:

-- What is meant by a meta-tool?  This may mean different things in different contexts, so it would probably be a good idea to define it here.  Is it understood to be an amalgamation of all the available tools?

--  I don't think the amoeba analogy is necessary.  I believe what you are trying to say is that a prediction market tends to weight more accurate sources of information (what you call tools) higher than less reliable ones.

-- Myth 2 appears to be debunking the idea that PMs are inaccurate.  Fig 4 seems to show that it reflects truth better than a naive expectation.  But is a graphic needed here?  Aren't you simply saying that PMs work?

-- I can't understand what Fig 5 is conveying or the myth it is supposed to debunk.  It seems to be trying to explain whether or not an individual with certain characteristics (expert, student, loser, fearful) will take action.  While this may be an attempt to classify behaviour as it relates to certain traits, I don't see how this has any immediate consequences or implications for a PM.  I also don't understand what is meant by 'Talks'.
member
Activity: 115
Merit: 10
Enormously interesting. Top of my reading list.

Cool, please let me know if you have comments/questions.
member
Activity: 115
Merit: 10
This event was brought to my attention: http://blog.predictious.com/2014/03/01/we-wont-be-adding-a-contract-on-the-assassination-of-mt-gox-ceo/

This so-called contract is a flavor of "Public Good", which is called a Public Bad by those (such as myself) who feel society would be worse off if the contract helped enable the activity it describes (as crimes of all kind are an attack on the public).

As an aside, the version proposed on that website presumably did not include the LMSR or Schelling-Partition features that I describe to ensure that the provider of the good would actually be the unique recipient of the required money.

Of course the Truthcoin version could-and-would have those things, but I've thought about this in the past and never considered it to be realistic problem for the following reasons:

1] Firstly, the branches can claim in advance that they will vote .5 on anything they find to be violent or immoral, meaning the market fails to resolve into a State, and anyone who paid to list the Decision/Market gets less (probably zero) money. The branch has effectively 'specialized' into 'non-violent markets'.

2] Assuming a crazy branch, the contract needs to specify a time horizon "...killed before 2015". Too long (10 years) and the assassin will go unpaid for an inconvenient amount of time, and too short and the target can bet on surviving and "outlast" the time period, becoming richer. Incidentally anyone on a 'crazy branch' (Owners, Authors, Traders) would almost certainly be tracked by the NSA/FBI/Military and would (and should) be prosecuted for breaking numerous existing laws and disturbing the peace of society.

3] If those ideas don't appeal to you, you can simply bet on your own death, then fake your own death. It's inconvenient (and possibly traumatic to friends/family), but you get paid pretty well (money from your enemies, no less) and it beats dying. Modern law enforcement will even help you do this (so I read).

4] I have even more ideas, involving life insurance, buying up the branch (easier than it sounds), counter-exploitation of crazy branch, etc. Many roads lead to failure.

I don't really believe that people want this man dead, its normal to say (even believe) extreme things when you are angry. The site probably thought it would make "good press", as it is quite dramatic. I just don't see PMs as encouraging this behavior, as most murders are for extremely personal reasons (sexual jealousy, religion, political extremism) and not economic ones (rich people have way more to lose by going to prison).

PMs are new, and people don't understand them, which leads to fear.

Other thoughts: http://www.sirc.org/articles/policy_analysis.shtml
legendary
Activity: 1458
Merit: 1006
Enormously interesting. Top of my reading list.


member
Activity: 115
Merit: 10
OK Paul, if this is directed at me I will take a look at your writeup.
Yes, PM_Misunderstandings.pdf (not the whitepaper), where I tackle the effectiveness of PMs head on. I kind of rushed it and the formatting isn't great but let me know. Its very short but there I believe PMs are extraordinarily misunderstood. That paper was written for a general audience, specifically people who have heard of PMs but aren't yet converts.


I do want to comment on the valuable guidance that can be provided by experience.  I accept your claim that predictive markets should work based on pure logic.  But it doesn't hurt to have that logic backed by some experience
Of course you are right. All theories should survive the gauntlet of experimentation; this is the insight of the scientific revolution. I am trying push the envelope.


Over the years of reviewing grant proposals and refereeing papers, I've learned to recognize some red flags.  One of them is: "This idea is simple enough that somebody should have thought of it and tried it by now."
That is true, but people have been using bets to argue for centuries, as I just pointed out. Today, several people have standing challenges with no odds against, such as James Randi's prize (essentially a price floor at 100%). This seems to be persuasive.
Mitt Romney, barely a year ago, wagered 10 grand on live international television to rebut a comment from Rick Perry. This was less persuasive. Why might that be? If you aren't aware of this post, I found it so inspiring I committed the list to memory: http://www.overcomingbias.com/2013/07/why-do-bets-look-bad.html
newbie
Activity: 56
Merit: 0
OK Paul, if this is directed at me I will take a look at your writeup.  Understand that I'm not a finance/economics professional.  I'm in the physical sciences. 

I do want to comment on the valuable guidance that can be provided by experience.  I accept your claim that predictive markets should work based on pure logic.  But it doesn't hurt to have that logic backed by some experience -- you've done this by citing examples of predictive markets that are more than a century old!

Over the years of reviewing grant proposals and refereeing papers, I've learned to recognize some red flags.  One of them is: "This idea is simple enough that somebody should have thought of it and tried it by now."  It's extraordinarily rare to encounter a situation where a lot of smart people are pondering a problem and have something straightforward get overlooked.  This is especially true in business and finance, where fortunes -- not just scientific prestige -- are at stake.

Innovators will often attempt to make an extension of an established, working concept.  This is how I perceive Bitshares.  I don't need to understand the nuances of predictive markets, but if I accept that they work in the classic (binary) formulation it seems obvious to look for extensions and extrapolations.  Relax a parameter or two.  An exchange that doesn't require price feeds or deliverables is easier to implement than one that does.  Such an exchange provides advantages that should have made it spectacularly successful even if run by a central authority.  Experience tells me that since nothing like this already exists, the likelihood of it working on a decentralized blockchain is, well, open to speculation.
member
Activity: 115
Merit: 10
Prediction markets have been around for half a century.  They are known to work.

Year 1907:
Quote from: Vox Populi ("The Wisdom of Crowds") by Sir Francis Galton, Nature (1907), No. 1949, Vol. 75, 450-451. (http://wisdomofcrowds.blogspot.com/2009/12/vox-populi-sir-francis-galton.html)
"A weight-judging competition was carried on at the annual show of the West of England Fat Stock and Poultry Exhibition recently held at Plymouth, A fat ox having been selected, competitors bought stamped and numbered cards, for 6d. each, on which to inscribe their respective names, addresses, and estimates of what the ox would weigh after it had been slaughtered and " dressed." Those who guessed most successfully received prizes. About 8oo tickets were issued, which were kindly lent me for examination after they had fulfilled their immediate purpose." (emphasis added)

Year 1651:
Quote from: Robin Hanson (http://hanson.gmu.edu/gamble.html)
We need only revive and embellish a suggestion made back during the utopian scientific revolution. Chemical physicians, excluded by the standard physicians from teaching in the British schools, repeatedly offered challenges like the following (circa 1651):

"Oh ye Schooles. ... Let us take out of the hospitals, out of the Camps, or from elsewhere, 200, or 500 poor People, that have Fevers, Pleurisies, etc. Let us divide them into halfes, let us cast lots, that one halfe of them may fall to my share, and the other to yours; ... we shall see how many Funerals both of us shall have: But let the reward of the contention or wager, be 300 Florens, deposited on both sides: Here your business is decided." (emphasis added)
-Debus, A. (1970) Science and Education in the Seventeenth Century, MacDonald, London.

But my feeling is that we do not need to rely on experience to assert that "PMs work". I believe that, actually, it is a logical requirement that PMs are the optimal predictive institution. I wonder if you'll read my draft "PM_Misunderstandings.pdf" in the /docs folder. I'm not completely happy with the clarity of that document so you might be able to offer suggestions (in addition to finding it interesting).
member
Activity: 115
Merit: 10
Mr Larimer, I respectfully request that you keep any comments you make here related in some way to Truthcoin. I do not feel that your comment sets a good example of relevance. I realize that you'd like to talk about your project, but you have whole websites for that and I just have this one thread.

That aside, I have some comments about your post.

1) A prediction market does not need to have a 0 to 1 range, though this is one form for a binary event.
I feel that there is a definitional problem at hand.

I personally am using the term 'prediction market' to refer to an institution for trading special shares, which have a final value purposefully connected to the outcome of an event. As individuals speculate on this final value, a current market price informs the current probability of the event taking place. Other types of PM, for example "1$ for every Republican Senate seat", are just accounting rearrangements of the same structure. There is no requirement to literally limit PMs to an (0,1) range, but logically they would only trade between zero and the purposefully selected final value. This definition is supported by the economic literature, which we could consult, as well as sentance 3 of the relevant wikipedia article: "For example, a prediction market security might reward a dollar if a particular candidate is elected, such that an individual who thinks the candidate had a 70% chance of being elected should be willing to pay up to 70 cents for such a security."

I feel strongly that BitShares would not create PMs, so defined, whereas Truthcoin would. This isn't to say an alternative institution wouldn't have value, wouldn't aggregate information via trades, or wouldn't operate in a similar way (however, you cannot claim that BitShares will do these things "because it is a PM").

2) All trades are voluntary with the exception of a margin call on the short position when collateral runs low.
This reads like a BitShares advertisement, when my intent was merely to answer a question regarding a comparison. Truthcoin does not have margin calls and cannot force any trades, whereas BitShares can, as you restate here for some reason.

3) Once the market reaches a consensus that BitUSD should track USD players on both sides are placing a bet on the future consensus relative to the current consensus.   When the future comes, they will continue to place the same bet.  This process requires a bootstrap phase where an order book can be published without executing trades as well as a min market depth before trading can begin.  This establishes the initial consensus.
4) Given the fact that the BitAssets are created only by pairing short/longs both sides must agree to the price. 
Truthcoin has none of this, and all markets are immediately (and permanently, thanks to LMSR) tradeable.

What I would do if I were to build a more general purpose prediction market chain is the following:

1) Select a hand full of trusted data feeds
2) Create a BitAsset on the trustworthiness of the producer of the feeds... keep number of producers small so market depth is meaningful.
3) The BitAsset would be market pegged to below 1 for untrustworthy and above 100 for trustworthy. 
4) All prediction market bets based upon the data feeds would be settled only if the BitAsset of the producer of the feed retained a high degree of trust.

Now someone can simultaneously make a bet and hedge on the trustworthiness of the feed.  This would eliminate voting from the mix.
I doubt this would work because a data feed 'producer' would have a direct incentive to make longshot trades, falsify the feed, and rake in lots of money. Likely there would be many cases where the funds gained from the attack vastly exceeded those needed to keep the BitAsset pegged above 100. In fact that would probably cost nothing, as traders would anticipate the attacker to engage actively in the short-run manipulation required to keep the price at 100. Either way, this is not a proposal for a PM, it is a sketch of how one might assess data feeds (which themselves may or may not be involved with a PM in a yet-unexplained way), and it has nothing to do with Truthcoin and is therefore completely off topic.

Finally, as I already explained, the scope of this project is not continuous observations of time-series variables, but instead human-specified binary True/False event-occurances.
hero member
Activity: 770
Merit: 566
fractally
This is a good discussion and I do not want to derail the work presented in the OP as it is good work.   Here are some general concepts to consider:

1) A prediction market does not need to have a 0 to 1 range, though this is one form for a binary event. 
2) All trades are voluntary with the exception of a margin call on the short position when collateral runs low.
3) Once the market reaches a consensus that BitUSD should track USD players on both sides are placing a bet on the future consensus relative to the current consensus.   When the future comes, they will continue to place the same bet.  This process requires a bootstrap phase where an order book can be published without executing trades as well as a min market depth before trading can begin.  This establishes the initial consensus.
4) Given the fact that the BitAssets are created only by pairing short/longs both sides must agree to the price. 

So if there existed a trusted data feed, then it is possible to operate in thiner markets.   I do not believe BitShares functions well in thin markets.

What I would do if I were to build a more general purpose prediction market chain is the following:

1) Select a hand full of trusted data feeds
2) Create a BitAsset on the trustworthiness of the producer of the feeds... keep number of producers small so market depth is meaningful.
3) The BitAsset would be market pegged to below 1 for untrustworthy and above 100 for trustworthy. 
4) All prediction market bets based upon the data feeds would be settled only if the BitAsset of the producer of the feed retained a high degree of trust.

Now someone can simultaneously make a bet and hedge on the trustworthiness of the feed.  This would eliminate voting from the mix.
newbie
Activity: 56
Merit: 0
Agreed.  I spent a large amount of time searching and sifting through the often disjointed forum posts in an attempt to understand Bitshares.  Here's my takeaway:  We are being told to think of it as a futures market except that i) it runs until t=infinity without any kind of settlement/termination date and ii) there is no threat of delivery; no real asset exists that changes hands during the process.  Understand that there are no price pegs in Bitshares aside from a blind faith that market forces will properly value a string of alpha-numeric characters that are purportedly linked to a real-world asset or commodity.

How is the price determined?  Assume we have a medium of exchange (Bitshare) and an appropriately named BitAsset, eg. a BitUSD.  Also assume that a Bitshare has a non-zero value.  The BitAsset (I can't emphasize enough that this is ONLY a name -- there is no casual link to the physical asset) can be priced by the Bitshare.  Because a Bitshare has value greater than zero, there must be a ratio (exchange rate) between the BitAsset and Bitshare.  We can rightfully conclude that the BitAsset must have a value greater than zero Bitshares and less than infinity Bitshares.  Given that, we are then told the only logical conclusion is the market finds the true price, i.e. what exists in the real world. 

I can follow this line of reasoning until the claim that their "prediction market" forces a convergence between the price of a BitAsset and its real world price.  Why not some other finite price that depends on where the bid-ask prices pile up?  Again, the BitAsset is just a name.  Nobody trading on this exchange will ever take direct ownership of the commodity or asset it's purportedly tracking as in a stock market or Forex.  I see Bitshares as collective herd mentality at best and wide-open to manipulation at worst.

Prediction markets have been around for half a century.  They are known to work.  The extrapolation being proposed in Bitshares (relaxing the requirements for delivery and no settlement date) should have been thought of by a financial entrepreneur at some point.  I see no reason why decentralization and a blockchain are needed to implement it.  Yet there are no examples I can find to suggest anything like this has ever worked. 

What do I know?  Bitshares may work splendidly.  It may work splendidly for a while.  I sure can't prove that it won't.  But I (and others) don't understand it and for that reason I'm staying away.

There are other criticisms concerning the claim that holders of any BitAsset will earn a guaranteed 5% return, but that's a separate discussion and peripheral to the proposed pseudo-prediction market.  I don't want to hijack the thread, but I think it's important to distinguish between the various prediction market models being proposed for blockchains.
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