×
all 40 comments

[–]bdcs 4 points5 points  (0 children)

I can't recommend talking to Mike Hearn enough! I sent him an email a couple years back and he had a wonderful response that accelerated my project by months. He created the Bitcoin wiki Contracts page: https://en.bitcoin.it/wiki/Contracts

[–]yoCoin 2 points3 points  (6 children)

I wish stuff like this would get more votes than "F-U Mark Karpeles".

[–]LocalizedNegentropy[S] 1 point2 points  (4 children)

I agree, this community is very...diverse, isn't it? I guess its just my bad luck that I happened to post this during Gox-pocaplypse.

[–]yoCoin 0 points1 point  (0 children)

You should repost after the drama blows over.

[–]Anderkent 0 points1 point  (2 children)

I don't think reddit is the right place to post this, anyway. Or at least not /r/bitcoin; it's just too big.

I think the theory is very interesting, though a couple things seem weird. First, the 10000 Owners estimate seems very limiting; I didn't read through the branching section though so perhaps that resolves it.

Secondary, the 'vote what you think most people will vote' seems like it could suffer to the false consensus effect. That might not be the case for trivially checkable facts though, which is what you incentivise people to actually bet on.

[–]LocalizedNegentropy[S] 1 point2 points  (1 child)

I don't think reddit is the right place to post this, anyway. Or at least not /r/bitcoin[1] ; it's just too big.

I tried here and on bitcoin talk, where else should I try?

branching section .... perhaps that resolves it.

It does (I think). Also hopefully you are not confusing Owners with Users. Any Bitcoin user can trade within the PMs, or create PMs, he/she just can't vote on the outcomes.

That might not be the case for trivially checkable facts though, which is what you incentivise people to actually bet on.

Yes you understand it perfectly. Consensus failure is treated as "The Author's Problem", where traders would lose at most half of their money (by thinking the market price is 1 when in reality it resets to half post-failure). Authors, however, lose all of their money, so one would expect them to strategically respond to this incentive by not ever creating a market that would be difficult to adjudicate. So in theory I've pushed this problem backwards through time to the point of its creation, which is all I could think to do.

[–]Anderkent 1 point2 points  (0 children)

Well, I think the discussion on bitcoin talk was more interesting. To be honest, I'm not sure where you should go to get actual (technical/financial) support; however for general discussion and reinforcement I'd try lesswrong.com in addition to places that you've already posted. And the open thread on Hansons blog, perhaps?

Good job with the paper, it's clear you've thought this through :)

Edit: Saying 'I don't think reddit is the right place to post this, anyway' was a mistake from me; what I meant was "You're unlikely to get the support you're looking for in here; this is much heavier content than what reddit appreciates and rewards", not that you've made a mistake posting it here.

[–]ESRogs 1 point2 points  (0 children)

I agree. This is much more interesting than anything else I've seen on here in the past week, but somehow I missed it (only found it from /u/gwern's LW post), even though I check /r/bitcoin every day!

[–]SearchForTruthNow2 2 points3 points  (5 children)

Found this a while back.. Interesting. Not sure what kind of support are you looking?

[–]LocalizedNegentropy[S] 0 points1 point  (4 children)

Hi, thanks for your interest! Basically, in order, I'm looking to see a] if other people are even interested in this project, and b] to see if a core Bitcoin or Altcoin dev can contribute their skills.

I specialize in microeconomics/strategy, so although I coded the proof of concept on the GitHub, I just can't efficiently finish the actual software, even thought I know exactly what it should do.

I'd probably offer a code bounty with my own money if people were interested enough.

Thanks again!

[–]yoCoin 3 points4 points  (1 child)

/u/gwern and lesswrong would be interested -- but you probably know that since you cited overcomingbias.

[–]ESRogs 5 points6 points  (0 children)

Prediction validated. :)

[–]SearchForTruthNow2 2 points3 points  (1 child)

You can create a donation address. If it is on bitcoin block chain I ll contribute

[–]LocalizedNegentropy[S] 1 point2 points  (0 children)

Ok thanks! The paper has the official BTC donation address: 1M5tVTtynuqiS7Goq8hbh5UBcxLaa5XQb8

[–]mrmishmashmix 1 point2 points  (5 children)

I'm no developer but I'm certainly interested in prediction markets - I presume the major difference between what you're suggesting and what already exists (www.predictious.com etc etc) is the decentralised nature of the market. This is an excellent idea and I can see it providing many benefits in terms of futures markets and derivatives. However, could you explain why prediction markets would end contentious debates?

[–]LocalizedNegentropy[S] 1 point2 points  (1 child)

However, could you explain why prediction markets would end contentious debates?

Check out my PM_Applications.pdf paper in the GitHub for more details on those claims. In the paper I describe, for example, an extremely specific 'global warming' market, with the idea that the price would essentially represent the probability that "global warming is true". If anyone disagreed with this (low or high) probability, all anyone would have to say would be "Well, if you really believe that I can make you a very rich man/woman."

You could also check the 'Academia_IdeaFutures.pdf' paper I put in the 'Further Reading' folder where leading PM scholar Robin Hanson describes the idea at great length.

[–]mrmishmashmix 1 point2 points  (0 children)

Thanks very much for the links, I will check them out. With regard to the Global Warming example, I would argue that its still possible for the minority view to be more likely to occur than the majority view. Surely the prediction market would only give you the probability that this precise proportion of people are correct regarding their views on global warming, and crucially not the probability of a particular view on global warming being factually correct. In this sense, prediction markets will only be accurate when all that matters is the opinion of the majority, the most obvious example being elections. But I will read those papers as I'm sure you've addressed this issue many times before. Thanks once again!

[–]LocalizedNegentropy[S] 1 point2 points  (2 children)

I presume the major difference between what you're suggesting and what already exists (www.predictious.com[1] etc etc) is the decentralised nature of the market

You are absolutely correct. I love that we have predictious but trusting any third party, including a website, goes against Satoshi's vision of a P2P currency. Although Bitcoin is P2P it isn't used as such enough (yet).

[–]mrmishmashmix 0 points1 point  (1 child)

Just finished reading your paper - really interesting, essentially arguing that the efficiency of a market is the best way to predict future events and has many uses beyond simply prediction. I can see now that you wish to argue that the beliefs of the many are much more likely to be accurate when compared to the beliefs of the few. In most earthly instances I would agree: However, my background is in philosophy and maths. In both these disciplines there are counter-intuitive truths and it is a matter of historical record the instances where the majority of experts turned out to be wrong. I guess its not a huge criticism as a prediction market only gives you a probability and not a certainty. Its important to treat this figure as the majority opinion of the experts. Anyway I will try Robin Hanson's paper next. All the best.

[–]LocalizedNegentropy[S] 0 points1 point  (0 children)

Thanks for reading!

I can see now that you wish to argue that the beliefs of the many are much more likely to be accurate when compared to the beliefs of the few.

Almost, but not quite. My favorite quality of a PM is that anyone who feels that they don't really have anything to contribute (even an expert), has an incentive to be quiet. The PM could even be driven entirely by the single most informed person. Check out my PM_misunderstandings.pdf for more, as I knew these issues would come up (because PMs are too often poorly explained, not the fault of any interest person such as yourself).

Typically, "talk is cheap" (and you get what you pay for), but PMs make talk expensive (and therefore relevant).

[–]karred12 1 point2 points  (1 child)

You could probably use the inbuilt betting feature of the counterparty protocol to make bets and predictions (on top of the bitcoin blockchain). http://www.blockscan.com/broadcast.aspx There has already been a proof of concept of 'Super bowl' bets on this platform.

[–]miscreanity 0 points1 point  (0 children)

Yes, Counterparty is the only functional implementation currently. Bitbet.us is an alternative to Predictions, and if I recall correctly, a different betting method is used.

[–]wwuullff 0 points1 point  (1 child)

I really liked this. You should start an email newsletter with its progress. I think you should keep working on this as it could be really important in the future. People here were saying how things can be counter intuitive and will only reward the most popular belief. well it will at first, but imagine if people aligned their thinking correctly and counter intuitive results will somehow become the intuitive prediction of the mass. Something like this could change the world if it works. internet 2.0, not to mention AI implications. awesome!

[–]LocalizedNegentropy[S] 1 point2 points  (0 children)

Ok thanks!

I really do believe that this has huge potential to change the world...just as the Scientific Revolution transformed society by teaching us to value knowledge-from-evidence over knowledge-from-authority, so to can tools like these teach us not to trust the 'authority' of our own 'beliefs' and instead take knowledge from its strongest source.

[–]Bombjoke 0 points1 point  (1 child)

Hi Paul,

The first strong and fantastic implications that spring to my mind are the effects on the worlds of marketing, especially advertising, and news/media presentation including their choice of coverage. These things would (hopefully) be turned on their heads but you have not mentioned them in your bullet points. Have you thought-experimented what might happen here?

After all, what we believe en masse is in part a function of what these channels feed us. If the short term would we not expect garbage results out (to the extent that we have garbage in)?

[–]LocalizedNegentropy[S] 0 points1 point  (0 children)

Have you thought-experimented what might happen here?

Not enough! I think a big part of advertising and media is about telling people what they want to hear, or just cheering for a certain group or value-system. I'm not sure they would influence, or be influenced by, PMs, for the same reasons that I dont really think CNBC is connected to financial markets.

My hope is certainly that, if media/advert put forth a contentious point of view, interested parties make and trade in a PM which clarifies the current state of knowledge about that point of view.

What did you have in mind?

[–]blogospheroid 0 points1 point  (2 children)

Hi Paul,

Sorry , but I'm unable to read your .pdfs correctly. Is anyone else experiencing this issue?

Could you have a .txt or .doc version?

[–]LocalizedNegentropy[S] 0 points1 point  (1 child)

I'm unable to read your .pdfs correctly

Have you tried clicking the file link, then the square "Raw" button in the mid-right? (Do not click the central 'View Raw' link).

I was confused by this at first. GitHub is not really designed to publish/host files, and instead designed to easily compare different versions of text/code (but pdfs are compressed in an incomparable way hence gibberish results). You usually can't view pdfs you have to download and open them.

[–]blogospheroid 0 points1 point  (0 children)

Works. Thanks.

[–]zArtLaffer 0 points1 point  (5 children)

Use the combined knowledge and intellectual ability of mankind to construct and refine the most accurate possible prediction of the future.

This is the traditional role of prediction markets. Pretty fascinating at predicting "group" consensus with a group of people not just being polled. They were a self-selecting group that entered a poll because they were confident enough to put their money where their mouth was. For binary events, such as Romney vs. Obama's election, they were pretty good .... but really hovered around 45c/55c for a long time (out of a $1 pay-out). then rapidly shifted about a week or so before the election.

The government didn't know how to deal with them, so both the gaming (gambling) regulatory folks and the SEC ganged up and shut down prediction markets (esp. InTrade) in the US.

How do you think they will treat bitcoin? If it's money, your violating securities law (if not set up correctly). If it's not money (poker chips), you are violating gaming laws. And of course, the IRS doesn't care: they just want 40% of your winnings. Which is pretty crazy. You bet $0.60 for a $1.00 payout. And they take $0.40. No return. How do you see getting around this?

End debates about the contentious issues of today, such as climate-change, heritability of IQ, effect of GMOs etc.

I'm not sure this works. Heritability of IQ isn't something that the lay-person knows enough about to place a bet. CAGW, GMO, (vaccines), people "think" they know enough ... but really they have bubble-think opinions. And any market would have to be placed around a binary event. Such a specific statement being proved factual or counter-factual within a time-frame. So, "Global Average Temperatures as measured by satellite, and not urban "hot-spots", will go up 3decC by 2025." Or something. That is a bet I would take if someone wanted to bet on it. I'm not sure how to structure this with GMOs.

Prevent lying from anyone (even politicians, industry leaders) about a target claim.

This is "nice". But you get into he-said/she-said spin on interpretation of what the word "is" is, and what the facts are. You can see this with Avik Roy and Ezra Klein being selective in the facts they elect to present and how they package the facts to make their respective cases. Neither are objectively wrong, but they are playing red-team/blue-team and when you are debating policy, how do you see what's right/wrong? Some said that Obamacare(for example) was bad policy and it should die. Other's said that Republicans were lying/scare-mongering. Then the exchange nonsense happened. Republicans are like "See? We said it would fail" (they did). Democrats are like: "But you got the failure mode wrong" (they did). What would you do about this type of thing?

Encourage and compensate whistleblowers.

Interesting. How?

Provide ‘market advice’ on the relative impact of decisions on outcomes (“If we adopt X Fed policy, what effect on inflation can we expect?”).

I don't see many policy makers looking to prediction markets to sway their decisions soon. But how would you structure to be binary in a time frame? How do you un-entangle multiple causes that aggregate to a final effect?

Provide insurance (buying and selling) opportunities for catastrophic global disasters, earthquakes, hurricane, etc.

Interesting. How?

Allow tradable binary financial derivatives, for example on the BTC exchange rate, or the solvency of exchanges.

Uh. Sure. Securities stuff. Not prediction markets. Unless you see Black-sholes pricing models as predictors with their outputs in expected price to place a bet on a market event. "I bet $1 that this $1B will be worth $10B in 5 years."

Fun recreational gambling in real time, always at actuarially fair odds and low fees.

Back to the regulation question. Do it off shore? I'm actually working with a group to build an off-short (floating) global bitcoin lottery thing that plays every 24 hours.

Allows for the creation of ‘Trustless Dominant Assurance Contracts’ which allow financing of public goods such as lighthouse, roads, etc. with no counterparty risk.

Interesting. Still not prediction markets. But how? Also, I don't see the no counter-party risk part unless there is a big backer like AIG or a secondary market like Marsh-Mac, or a big-ass escrow account. Or a bond-type thing. Which ... has a counter-party.

Anyway: I like your enthusiasm. I like the applications you are pondering. I can not but help think (and yes, I've read your paper) that you haven't thought through the hurdles of implementation. Or are you simply looking at this as a theoretical economic game-theory model framework?

[–]LocalizedNegentropy[S] 0 points1 point  (3 children)

Thanks for your interest!

As you say, despite overwhelming support from huge industries and superstar academics, PMs just can't get legal support in the US, primarily due to lack of awareness and anticompetitve lobbying from casinos. So it may be permanently illegal to participate in this in the United States, but (hopefully) I still have a free-speech right to author a theoretical paper. The code I'm writing is also just a clarification of the math, and does not involve Bitcoin.

Notice that I put a PM_Applications.pdf paper in the docs folder which discusses the applications in greater detail, which answers many of your questions and will definitely give you a better idea of what I am thinking. I can try to summarize here, though.

Heritability of IQ isn't something that the lay-person knows enough about.

These people will either avoid placing their money in a PM (which is exactly why PMs work), or they will be sitting ducks for those traders who do understand. If enough ignorant people enter a market it may be profitable for a firm to hire professional researchers to investigate the market's claim.

It's interesting you bring up that global warming example, as it is more or less exactly what I used in PM_Applications.pdf.

Whistleblower creates a market on something surprising and slowly bets in favor of the surprise, uses leak to prove surprise = profit.

How do you un-entangle multiple causes that aggregate to a final effect?

Multidimensional markets can estimate a marginal probability. Check docs/PM_TypesAndUsage.pdf if you didn't already know this about PMs.

Insurance: use a market where people cant sell (only redeem for 0 or 1) and bet for example $1,000 @ 1% that your 100,000 house WILL be destroyed by earthquake.

"Will BTC price index trade above 1000 on date X?" "Will MtGox reopen deposits before date X?" It is intermediate-level finance to replicate a portfolio of continuous assets using discrete options: you simply hold/borrow cash to equate the portfolio's returns. I was playing around with this in docs/Notes/ContinuousEstimation.xlsx but it may be difficult to follow.

Sadly, as you say, US consumers may be left with expensive, unfair, boring gambling. Perhaps when the example is set in other countries we can bring the benefits home.

TDAC: Bet against construction to finance. Multiple success states such that good-provider can uniquely win market and claim funds.

I don't intend to administer any of these things personally, and they are untested and theoretical. Nonetheless, I don't see why they wouldn't, in general, work (and I have been described as 'pessimistic').

I am really not qualified to scale the hurdles of implementation, as hopefully I made clear in the paper. However, after asking around, some developers made a number of helpful suggestions, such as a specialized Altcoin with this specific purpose, use of Etherium, Open Transactions, or complicated-SNARK-blockchain. Sadly these ideas do not directly involve Bitcoin (most of my Bitcoin-related ideas were identified as impractical by the experts I contacted), but I remain optimistic about this.

[–]zArtLaffer 0 points1 point  (2 children)

not qualified to scale the hurdles of implementation

I see the hurdles being regulatory, not technical. Even when the SEC shut down the Iowa Market, which was not a proxy for the gaming industry, it seemed that somebody had an axe to grind.

I know you can discretize continuous markets and a lot of standard derivatives contracts do this. What I like to do is look for situations where the underlying assumptions of black-sholes do not apply, which means you can place tiny bets on large movements that you can tell will almost certainly occur and clean up because the options are "mis-priced" by the "market" which is just a whole bunch of people using that equation (or a variation thereof) to use computers to come to the wrong conclusion.

Even simple things like watching twitter blow up in Egypt after Tunisia, you could tell that within a week or two the price of the government bonds of Egypt would explode. They did. If you can predict a local uprise that will affect local bonds before the "market" figures it out, you are in the money! :-)

I like your insurance one, but the person who takes the other side of the bet is a counter-party. I'm still not sure how you support the claim that you are eliminating counter-party risk in a set of transactions. I'll re-read your paper. It may turn out that you and I are defining "counter-party risk" differently.

Anyway: Lots of good stuff to think about. Thanks for making this more broadly available/known.

[–]LocalizedNegentropy[S] 0 points1 point  (1 child)

It may turn out that you and I are defining "counter-party risk" differently.

Yes I think you are right...I was originally using the term to describe an agent holding 'your' money such as InTrade.com or a Bank which would have to trust to administer the prediction market. I was not referring to traders who own a different portfolio of States within the same market as you. With traditional insurance the agent plays both roles hence our confusion.

[–]zArtLaffer 0 points1 point  (0 children)

Ah. In the world of insurance, you have paid the insurance company to take over your risk. In the world of banking, with letters-of-credit, there are always counter-parties. In the world of derivatives, there is always a counter party (someone who takes the opposite bet from you at a price).

Then you end up with hedge-funds at both side of a bet at different prices and secondary (re)insurance markets. So ... it gets tricky without diagrams quickly!

[–]LocalizedNegentropy[S] 0 points1 point  (0 children)

Regarding red-team/blue-team point: As you know from the whitepaper, if 'neither are objectively wrong' about the claim it is likely to be vauge and recieve .5 votes, some more or less random 1's and 0's perhaps, and therefore land finally in the .5 slot, voiding out the Decision and its Market.

Forcing a clear defintion is another great thing about PMs. They let us know exactly what it is we are arguing about.

[–]marky_marcus 0 points1 point  (0 children)

Love the idea -- once I work through the entire whitepaper I'll get back with some feedback.

[–]theRube 0 points1 point  (1 child)

I wish this would happen and succeed so badly. Truly one of the killer apps for bitcoin and would be revolutionary if it got to scale.

I just found this after wondering myself about prediction markets and cryptocurrency and the existing platforms leave much to be desired.

Going to look into it more and fantastic area to be doing work in, I'm jealous.

[–]LocalizedNegentropy[S] 0 points1 point  (0 children)

Thanks! I've been in contact with a few people who are interested in 'making it happen', one in particular, and we might be able to bang it out in a short period of time.

It looks like this project will also (which I really hadn't intended or even thought about) solve the cryptocurrency "value-stability" problem.

Check out our new forum at forum.truthcoin.info (its sleepy now, for the holiday weekend I think, but I'll be making some posts later today).

[–]0_Minnie_0 -1 points0 points  (1 child)

Sounds like an interesting project. You may be interested to hear what Counterparty is trying to do (providing trustless, decentralized bets on feeds -- anything from coin prices, to weather conditions, to Super Bowl results.) Funding can also be achieved through issuance of assets, which represent shareholder interest. Alternative approaches are definitely welcome though; so far bitcoin lacks a truly robust derivatives market.

[–]LocalizedNegentropy[S] 0 points1 point  (0 children)

As far as I know, the Counterparty feeds are completely non-trustless. Ie, you have to trust the feed-provider to provide accurate info. Is that wrong?