An Early Ethereum DeFi Staple with Little Competition Is Struggling After All These Years. How Is That Possible?!

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, we are constantly honing and refining our research and strategy towards crypto assets. As projects are constantly changing and evolving, it's essential to make sure our CORE Ratings remain appropriate and relevant.  Our dedication remains to provide accurate, fact-based ratings based on risk and quality to help investors and institutions reduce liabilities and make more intelligent financial decisions.  

Reputation (REP) ERC-20 token that serves as the backbone of the Augur ecosystem. Augur is a decentralized prediction market protocol built upon Ethereum which allows users to speculate on anything from political campaigns, sporting events, weather, etc. Those who hold REP stake their tokens during the validation stage of the prediction’s outcome. If a REP holder disagrees with the outcome reported, they can stake REP to challenge the result. These “reporters” are essentially declaring, with their REP, which market outcome actually matches the real-world outcome. REP can thus be viewed as a utility token whose purpose is the assignment of value to the trustworthiness of reporters in a prediction market. Simply put, REP is only used for reporting and disputing event outcomes within Augur, while Ether is the currency actually traded on the protocol with the addition of in the upcoming upgrade.

Augur Strengths +

• An early and well-known ICO leveraging Ethereum technology and network effects
• Reputable and development which continues to iterate on the product, including the launch of Augur Turbo in 2021
• Ample room to grow due to the potential users/total addressable market of a prediction market (gambling, sports betting, esports, political polls, weather. etc.)
• Very little active competition in the cryptocurrency prediction market space

Augur Weaknesses -

• Insignificant adoption and active users even after 4+ years and three iterations
• wealth centralization (~20 accounts control ~70% of supply)
• Even with v2 upgrade, the learning curve is steep as users must be knowledgeable about and comfortable using Ether, DAI, and REP
• Potential markets like gambling, assassination markets, etc. operate in gray zone and will undoubtedly face scrutiny from governments
• REP users must actively participate in market resolution or face penalties which could disincentivize many crypto users who prefer to buy and hold

Augur Links

• Block explorer 
• Where to buy?

Analysis Methods

reviews hundreds of different factors/metrics/parameters across ten Core Categories for evaluating value, potential, and risk for cryptoassets by a human-led team. While simply using data-scraping to aggregate on-chain/Github/node count/social media data is quick and helpful, it’s but only a small fraction of the whole picture. This algorithmic approach (the popular approach by many of the leading crypto “research firms”) is inadequate, lacking the necessary depth, context, and nuance needed to appropriately evaluate a crypto project. Most things in life are rarely so black and white, and the wild, new world of cryptoassets is no exception. 

For examples of why the data-scraping approach is insufficient, take a look at the examples below and answer for yourself.

• Project X has 25 developers and Project Y has 50. Which one has the “better” overall team?
• Project X has 200 Github commits in the last month while Project Y only has 20? Is Project Y stagnating? Is X gaming the system? Or does Project X have to do 10x the work because their original code was buggy? 
• Project X has a staking reward of 10% and Project Y 5%. But what about inflation? Or pay-out times/lockups? Or underlying currency risk? Is one losing value compared to the other? Which project offers the best risk-adjusted returns?
• Project X has 100 nodes and Project Y has 1,000. But are there master nodes? A permissioned system? Same consensus mechanism? What’s the node geographic distribution? The concentration of mining pools?

These are but a few examples of the problems one must solve to adequately evaluate a cryptoasset project. Our goal from day one has been to provide unbiased, high-quality, comprehensive research in order to deliver high signal-to-noise, practical and impactful information you can immediately use to your advantage. 

We are dedicated to providing accurate cryptocurrency ratings based on risk and quality in order to help investors and institutions to reduce liabilities and make more intelligent financial decisions.

This approach means having to constantly reevaluate blockchains over time as they build, grow, evolve, fork, etc. as new data becomes available. With this mindset and against the backdrop of LOTS of change for Augur in the last year, even after reevaluating the project, the CORE Rating for Augur (REP) has been held at a Neutral rating.

A Neutral rating is our lowest rating aside from outwardly problematic and scammy projects that warrant a Deficient rating. Neutral implies that while there are no glaring vulnerabilities or threats associated with the project, there also are no obvious advantages or superior aspects associated with the project.

Reevaluation Factors

Some factors that have evolved over the last 1-2 years that led to REP maintaining a Neutral rating include:

1. Near-zero traction after 4+ years

The TL;DR on Augur seems to be a lack of product-market fit. By most measures, Augur is a reputable, long-standing project with constant development and new product features. However, nothing it seems to do resonates with the crypto crowd. It has been an honest attempt to create a seemingly useful and powerful product but, as of today, no one wants it. The market simply does not value decentralized prediction markets at this time. In its defense, Augur is undoubtedly hampered by the fact that its service is outlawed in the US, crypto’s biggest market. When US users try and access their new Turbo product, they are met with the following response: “It appears you are trying to access trading from one of the following regions that aren't supported: the United States, the United Kingdom, Belarus, Cuba, Iran, Iraq, Cote d'Ivoire, Liberia, North Korea, Sudan, Syria, or Zimbabwe. You can still access REP migration

Below you can see two charts that illustrate Augur’s troubles finding product-market fit. In the last two years, as the crypto market writ large has been on a steady bull run where dozens of projects have garnered millions of users, Augur has >30k. In addition, the actual active, sticky users are near zero.

Source (both images): IntotheBlock

Augur launched an improved v2 in 2020, hoping that improved UI and other features would bring in users. On the contrary, v2 only saw the creation of five markets throughout Q3 2021. Outside of a blip around the 2020 election season, Augur and blockchain prediction markets overall have seen very little adoption.

Source: Messari

2. No clear winner in the space

There are but a few blockchain prediction markets that exist. Well-known alternatives to Augur include Polymarket. As of Q4 2021, Polymarket has the most markets and users but is still quite small compared to other mainstream blockchain markets like DeFi, NFTs, and gaming.

3. Even with no adoption, Augur keeps building

Despite the lack of success, Augur has shipped three different versions over the years and still has plenty of ambition on its roadmap. The roadmap includes integration with layer 2s, improved liquidity and user experience, as well as more emphasis on sports betting. As seen by the Github image below, the project is still being actively managed and developed.

Source:

One big new upgrade was the release of Augur Turbo, a new implementation on Polygon that uses on-chain data sources for near-immediate market and resolution data. With Augur Turbo, users get access to more market data and significantly faster settlement times. Additionally, Augur Turbo uses Chainlink’s battle-tested oracle network that enables anyone to create their own betting markets on Augur.

According to the roadmap, “Augur Turbo is the only betting platform in the world that meets all bettor needs, which include:

• No restrictions or suspensions — Augur Turbo is a set of audited and secure smart contracts. There are no humans in the middle to freeze funds or suspend accounts.
• Low fees — Trading fees on Polygon are a few pennies at the most. Augur Turbo is developed by a non-profit, which does not take any fees. At times, market creators or liquidity providers may set fees for certain markets.
• No limit betting — Augur Turbo smart contracts accept bets of any amount without limit.
• Daily markets and fast resolution across verticals — Integration with Chainlink provides support for daily markets for sports, crypto, politics, and current events.
• Decentralized and global — Augur Turbo smart contracts can be accessed by anyone from anywhere at any time.”