Tuesday, April 25, 2017

Gnosis' Prediction Market Scores $12.5m In 'Record-Breaking' Crypto Auction

Gnosis, a decentralized platform for prediction markets that uses “crowdsourced wisdom” sourced globally and built on Ethereum technology, has set a new record by raising $12.5 million (m) in a token offering via a Dutch auction, the first successful one of its kind in crypto, and the fastest crowdsale to date to sell out more than $10m.
The platform is touted as enabling anyone to create a prediction market for any event and get rewarded for accuracy, from sports betting to financial markets and weather prediction to politics.
With investors snapping up the supply of Gnosis (GNO) tokens - equivalent to 250,000 Ethereum (ETH) - in a mere twelve minutes after today’s launch at 1pm New York time, it becomes one of three to sell out in under fifteen minutes along with FirstBlood and SingularDTV.
Given a fixed start price of per GNO in Ethereum set at 0.6ETH, one Gnosis token was worth $30. With a market capitalization of around $300m one might consider this latest initial coin offering as uber exuberant.
News of the record-breaking fund raising token performance, which involved sending Ether to the token sale contract and receiving GNO tokens back within one week of sale’s conclusion, follows two years of development on the platform that started in January 2015.
Since that time there have been multiple iterations over the core parts of Gnosis. This has included smart contracts powering the framework, the general web interface and the gnosis.js library. Several integrations of Gnosis with other projects such as uPort, MetaMask or RealityKeys have also been tested.
Further, it has been developing other products such as the Gnosis multisig wallet, which is used by several projects (Golem, Weifund, Stable).
(Image credit: Shutterstock).
Prediction Markets
It is claimed that prediction markets, also known as information markets, decision markets, idea futures, event derivatives or virtual markets, are poised to become one of the most disruptive innovations in capital markets and data science since the start the Information Revolution.
Unlike a traditional financial market, prediction markets frame themselves in terms of questions about the future, typically with binary outcomes.
Initially proposed back in the early 1990s, prediction markets have however yet to attract mass attention in the area of forecasting and decision-making despite their documented efficacy for information aggregation. This is attributed largely due to over-regulation in many of the world’s leading financial sectors.
In terms of how it works, one could have asked last year: ‘Which presidential candidate will win the 2016 election?’. Shares are divided among pre-defined options (e.g. Donald Trump, Hillary Clinton,), with corresponding share prices equalling $1. Each option’s share price then reflects its probability of occurrence.
“With the invention of powerful, peer-to-peer computing technologies such as Ethereum and Bitcoin, the scientific exploration of market-based forecasting can proceed uninhibited and at a rate and scale previously unimaginable,” a statement contended in Gnosis’ recent whitepaper published earlier this month.
It added: “Our team believes undoubtedly that prediction markets will disrupt some of the largest existing industries in the near term. Looking forward, we expect that the Gnosis prediction market platform will form the basis for machine information economies on a global scale.”
That said, it was acknowledged that for a prediction market platform to “become truly disruptive”, it must be universal and draw from a global liquidity pool”. And, the platform “must be decentralized, permissionless, and trustless for such a liquidity pool to exist.”
Founded by Martin Köppelmann, who has been an entrepreneur in the blockchain space for over three years, and Stefan George, who has worked at tech companies in Silicon Valley and at Berlin-based start-ups, the two Gnosis co-founders have previously created and sold the largest Bitcoin prediction market, Fairlay.
Gnosis is also dubbed the first project founded within blockchain venture studio ConsenSys, a production studio and custom software development consultancy building decentralized applications (DApps), enterprise solutions and developer tools for blockchain ecosystems. These are primarily focused on Ethereum.
By deploying Ethereum blockchain technology, Gnosis is said to provide an open platform for anyone to predict the outcome of any event, and claimed it can “drastically simplify” the creation of customized prediction market applications for both individuals and enterprises.
World of Possibilities
Someone, for example, could create a market on the outcome of a political election or a company’s earnings forecast. People around the world could then predict the likelihood of outcomes, and Gnosis will aggregate predictions and make real-time market adjustments. Then when the event occurs, the market rewards participants who accurately predicted the particular event.
Köppelmann asserted: “Gnosis is part of a new wave of decentralized platforms, key to which is permissionless innovation. Having an open platform with verifiable behaviour introduces an incredible opportunity to bring a wide range of applications onto Gnosis, many of which we never anticipated.”
Unlike traditional polling, Gnosis collects information by financially incentivizing good information and disincentivizing bad information. While standard polling asks what participants want to happen, prediction markets ask what participants expect will happen.
By creating efficient markets for forecasting, the prediction platform aggregates all information sources “optimally and creates data layers for probabilities” as its founders described it, thereby giving each future outcome a quantified probability of occurring. It is revealed that this data feed can be utilized for any third-party application and can power Artificial Intelligence.
Auction Mechanism
Lead by Vitalik Buterin, the Russian-born Ethereum founder and chief scientist and Alex Van de Sande, the team spearheading the decentralized platform for prediction markets created a new auction mechanism - effectively a Dutch auction process - for the GNO token sale to take place.
Through this mechanism the price of the token was to be determined by how long it took for $12.5m USD in Ether (ETH) to be sent to the Gnosis sale contract. The theory went that ad it taken longer, the price per each GNO token would have been incrementally lower until the cap was reached.
And at the end of the sale, everyone would receive tokens at the lowest price a Gnosis token is sold for. While GNO tokens will only be sold for Ether, a Shapeshift integration will enable other crypto tokens to be used.
While the Gnosis sale was completed in swiftly fashion today, it is perhaps worth looking at some pointers from their recent whitepaper, which covers use of proceeds, the roadmap and future developments amongst other areas. There is much scheduled over this year and next.
The hefty 49-page document revealed that platform development will include “building upon and securing core smart contracts, additional frameworks such as a comprehensive oracle market, trading and management interfaces, service level app templates and customization tools, and integrations with future Ethereum infrastructure such as state channels and stablecoins.”
As to legal costs, legal requirements include “corporate set-ups in at least three locations for crowdsale, operations, and gaming licenses.” It was also disclosed that work was undertaken before Gnosis’ token launch with a US law firm to develop a legal opinion of the interpretation with US law.
It was revealed that “ongoing resources” will be required for gaming and possible financial use case legal work. As such a legal contingency fund will be “reserved in case of future issues.
Future Developments
The paper outlined various developments going forward to the third quarter (Q3) of 2018. For instance, reference is made in the Q2 this year for an additional office in Berlin. “Parts of the team will join the vibrant Ethereum community in Berlin, working out of the ETHDEV office,” it stated.
During Q3 2017 Gnosis will host a hackathon to support developers building apps on top of Gnosism. And, listed under a heading ‘CryptoEconomic’ experiments, it planned run a series of experiments to test the viability of Futarchy with support from the Ethereum Foundation.
The fourth quarter of 2017 is slated for the Gnosis AMA DApp with Twitter integration. Gnosis AMA (ask me anything) DApp allows anyone to ask the market for an estimate, for example: “Will Bitcoin hardfork?”, “When will Ethereum switch to Proof of Stake”. It is revealed that a “Twitter bot integration will make it possible to participate by tweeting.”
It is indicated that during Q2 2018 Gnosis will offer a standalone application based on Electron, while for Q3 reference is made to Gnosis mobile standalone client alpha and that a “fully decentralized prediction markets on mobile” will be provided.
Köppelmann, commenting after the record breaking token that had strong financial support from the Ethereum community, said: “We now have the resources to create a platform where anyone in the world can create, run and monetize their own prediction markets, from sports betting to financial markets, weather prediction/flood insurance to politics.”
Gnosis’ Advisory board includes Vitalik Buterin and Joseph Lubin, the latter being an Ethereum co-founder and founder of ConsenSys as well as a former VP of Technology at Goldman Sachs in their Private Wealth Management Division.
FOLLOW Roger, who has penned various investment stories over the years, on Twitter @AitkenRL, LinkedIn, ForbesGoogle+ He is involved with the Campaign For Fair Finance in the UK.

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