SaaS Interviews with CEOs, Startups, Founders
764: He Raised $5.3m in Token Offering on Etherum Blockchain to help you bet on future events
27 Aug 2017
Chapter 1: What is Augur and how does it operate on the Ethereum blockchain?
He's playing an active role in the cryptocurrency space as it matures, building his company, Augur.net. They raised five point or the equivalent of 5.3 million bucks back many, many months ago, cashed out on a bunch of that to make things like payroll. But again, they're building this ecosystem built on the Ethereum blockchain, right?
Where you can go and essentially create markets and ledgers in those markets to bet against, you know, certain future outcomes, whether that's, you know, a sports related thing, a finance related thing, really Jack, any related thing in the future. This is The Top, where I interview entrepreneurs who are number one or number two in their industry in terms of revenue or customer base.
You'll learn how much revenue they're making, what their marketing funnel looks like, and how many customers they have. I'm now at $20,000 per top. Five and six million. He is hell-bent on global domination. We just broke our 100,000-unit soul mark. And I'm your host, Nathan Latka.
Chapter 2: How can someone without crypto experience participate in Augur?
This is episode 764. Coming up tomorrow morning, we hear from bestselling author Cameron Herold. And I asked him, Cameron, what allows you to charge $80,000 per year for one consulting gig? If you're a consultant, influencer, author, speaker, you don't want to miss that one tomorrow morning.
Chapter 3: What is the process for creating a market on Augur?
Hello, everybody.
Chapter 4: What is the significance of the REP token in Augur's ecosystem?
My guest today is Jack Peterson. He is the co-founder of a company called Augur. Jack, are you ready to take us to the top? I'm ready. All right. So tell us what Augur does. What's the business concept and how do you make money? So Augur is a decentralized prediction market platform. We operate or our platform exists on the Ethereum decentralized network.
And I'm happy to go into some detail about what Ethereum is and kind of how that works. Yeah, just to put context here, guys.
Chapter 5: How do users place bets on Augur and what is the market structure?
So this has to do obviously with kind of the rising tide of kind of blockchain, Bitcoin, cryptocurrency. So relate your company, Jack Auger, back, you know, how does it relate back to Ethereum, which is a block? It's basically a blockchain, correct? Yeah. That's right. Ethereum is a blockchain.
Chapter 6: What challenges does Augur face before going live?
So what makes Ethereum interesting is so Bitcoin is, you know, was sort of the first blockchain. And it's basically it's just intended for sending payments around. Right. Ethereum is a blockchain that is. Interesting because it's somewhat more flexible. It's a blockchain that you can upload programs to.
Chapter 7: How did Augur raise $5.3 million through their token offering?
And then people on the network can execute these programs by basically paying a small fee. And that's what Augur is. Augur is actually – it's a set of these programs or smart contracts on the – decentralized Ethereum network, the blockchain. And if you guys want to learn, Jack, I'll give a real quick connection. We actually had one of the founders of Ethereum on. His name is Anthony Delorio.
He was ex-Toronto Stock Exchange. That was back in episode 758 about a week ago. So go listen to that if you want more of the backstory on how Ethereum was created. And Jack, pick us back up now. Tell us specifically how you interface with Ethereum. So we are a set of smart contracts, or Augur is a set of smart contracts on top of Ethereum.
So anyone can upload programs, aka smart contracts, to Ethereum, and then anybody on the network can run them. And that's actually what – that's all Augur is. It's a set of – I think we have about 30 of these smart contracts that – They have all of the business logic and data storage and so forth needed for Augur. Basically, it's sort of like a decentralized database.
Sell my audience right now. Assume you're on a webinar with 10,000 people. Why would somebody listening right now go use Augur? Well, they couldn't yet. We actually are not live yet. We are finishing up our public beta test. It's been going on for about a year now. Our smart contract code is undergoing security audits. Tell me how they would use it if it was live. Okay. Yeah.
So basically you'll just go to augur.net and there will be a link to access the app. And our aim is for it to be, you know, the experience to be as very similar to just accessing a regular website. You know, ideally you won't really be you won't be too aware that you're using this special decentralized application. What Augur actually is, is it's a prediction market platform.
And what that means, basically, it's a venue to bet on anything. You can bet on any real world event. So the example I like to use is politics. Politics has historically has been sort of the prediction market niche. And the way this works is you might have a market on Augur for something like, you know, Will Donald Trump win the election? I mean, this is a past event.
So, you know, you could create— Anything in the future. Who's going to win the NFL next year? Yeah, who's going to win the Super Bowl next year? How much rain will there be in San Francisco this year? What will the stock price of IBM be, opening bell of 2018? Really, it can be anything. It's sort of bounded only by what users can come up with.
So you create a market and then the market itself functions basically like any other trading market. So you can trade, you know, you can buy and sell shares of the event. The idea is, so say we're betting on, I don't know, who's going to win the Super Bowl. Let's be really specific here because I'm a little lost and my audience is definitely lost. Let's say, OK, no, that's not good.
No, that's OK. But it's OK. This is like a new thing. This is more me struggling to ask the right questions than it is you explaining it. So it's not it is not your fault. Let's assume I go to August and I'm literally I guess I click a button and I say I am going to bet a thousand bucks that the Patriots win the 2018 Super Bowl. How do people take the story from there?
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Chapter 8: What advice does Jack Peterson give to aspiring entrepreneurs?
So, so now you can, the way it works is, uh, you can buy or sell shares of any of the outcomes, right? So the way this works is, um, basically if you want to place a bet on something, you, you buy shares of it. So I buy 10 shares that they're going to win by 20. The Patriots are going to win the Subaru by 20 points. Yeah. So you, you could, if, if that was the market, then yeah, you could, uh,
You could buy 10 shares of that. And the way that the shares work is – so say that those shares are currently – maybe they cost $0.40 a share. Who sets the price? Yeah. The people in the market set the price. So you're actually – you're not trading like with Augur. You're trading with other participants in the market.
Normally, the person who initially creates the market will set up an order book, right? So they'll have initial buys. so what will the, so let's say I set up the market and the, the, is the order book basically like I'm going to write 10 different outcomes. They went by 20 points, they lose by 10, they win by one, it's a tie.
And then I assume, and then I say the number of shares kind of per bet and come up with a price point for each just randomly. Um, so you, For the Super Bowl specifically, I mean, one sort of one way to set it up that might be sort of intuitive is you could say just who will win the Super Bowl in 2018. And you could have like the Patriots.
I'm not a football guy, so I'm not sure who's likely to win. But like, you know, the Patriots, the Broncos, the Redskins, the Falcons, the Redskins. And so say there's, you know, five different outcomes and then maybe all the catch all other outcome, too. And so if I'm if I think that so. So say you set up the market.
And you have some idea of how likely you think all these different outcomes are. So you set up the order book initially for each of those outcomes. So you've provided some liquidity to the market. Now, say I come to the market, and I'm convinced that the Broncos are going to win.
But you've set up the market initially so that the Broncos, say, have a 30% chance of winning, or the Broncos are priced at $0.30 per share. Which should mean that they have a 30% chance of winning. I'm like, well, that's underpriced. I think they're a sure thing. So I could place a bet on the Broncos by buying shares of that outcome. And the idea is that if the Broncos actually end up winning—
Well, I'm buying whatever people have for sale, but say it's just you. Just keep it simple. You have some shares available at $0.30, and maybe you also have some shares available at $0.40, $0.50 if you're the person who set up the market. Yeah, I could buy as many of those as I want. It's as sure as I am that the Broncos will win. And the way it works is if the Broncos—
If the Broncos actually end up winning, and the idea is that a share becomes worth $1 or one ether per share owned. And if the Broncos don't win, then the value of one share of Broncos will close at zero. So you're really betting on how likely the outcome is to happen.
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