Web3 with Sam Kamani
365: How Augur Protocol Is Bringing Truly Decentralized Prediction Markets Back
10 Mar 2026
Chapter 1: What is Augur Protocol and why is it significant in decentralized prediction markets?
augers back, we're bringing a fully decentralized, trustless and permissionless protocol back into space. There's a million dollar incentive for somebody to force this prediction market to resolve in the wrong direction. You have to think, okay, so there's a lot of money at stake in manipulating the actual prediction market resolution.
So what is the mechanism that's protecting us from that happening? Augur is a really old school project. It first launched in 2016. It was the first ERC20 token, the first ICO that managed to raise a lot of money. Hello, innovators, entrepreneurs, and risk takers. Welcome to another episode of Web3 with Sam Kumani Podcast.
And today on this podcast episode, I am interviewing Augurs from the Augur Network. And they are one of the OG chains or platforms or infrastructure
for blockchain they have been in existence for a multiple number of years and today he is going to be sharing on what they are building when it comes to prediction market and how they are building the underlying layer that prediction markets can be built on top of so he's going to be sharing about his white paper that they have recently released
Chapter 2: How did Augur's early history shape its current trajectory?
and as always nothing that we talk about here should be taken as investment advice and please like share subscribe and follow with all that out of the way let's get into it welcome to the show it is great to have you here and to be talking about everything that you guys are building so yeah so tell me a bit about um how did you get involved with augur and and also um augur's journey because i understand it has been in existence for a while like in the pre
ICO boom era end of 2016, 17. So yeah. Augur has been one of the first main projects in crypto. You know, it was the first ICO, it was the first ERC20 token. It was the first raise and they did well. So it ran for about four years. They launched a V2 afterwards. It really brought prediction markets and decentralized oracles to the forefront of crypto.
And it was a reason that a lot of people got into crypto in the first place. It attracted a lot of kind of people to go in and see the value of what was possible, right? Prediction markets are very important and it was great to bring that out. I got involved in Augur personally in 2020. So this is about when it started getting a little bit weaker when DeFi summer happened.
Augur was on the Ethereum L1 chain. So really the fees kind of made everything difficult. So nobody wanted to pay $40 in gas fees to place a $20 wager, for example. So kind of the usage really slowed down after that. And people kind of forgot about it. They stopped using Augur. Polymarket came around, they were on the Matic network at the time.
So now it's the Polygon network and they kind of solved the scale problem. But what they didn't bring to the table was the initial kind of journey of Augur. The initial, anybody can create a market.
anyone can participate in market resolution and that will kind of bring us to the next level right so i kind of saw that and i really like that concept of it so i got really involved in the auger community for about four to five years before i decided that listen this needed to exist again inside the crypto space yes the crypto space in about the early 2020s was still kind of
finding what it was trying to do.
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Chapter 3: What challenges did Augur face during the high-fee Ethereum days?
We had the tokens, we had the self-yielding coins, if you remember all that stuff. Yes, indeed. But we kind of went a little bit away from the decentralization ethos, right? So all the projects coming out, we're kind of making those trade-offs. And they were saying, we will decentralize at a later point. First, we want to come in. First, we want to build a product. We want to monetize.
So we want to attract the user base. and then we'll move into decentralizing things. And unfortunately, what I saw in the space was that the latter half of it never actually happened. So they attracted a lot of money, a lot of capital, they built these products, but they never got to the decentralization.
And really what Augur brought to the table was no multisigs, no vetoes, no centralized points of failure, just a pure open market approach to prediction markets and prediction markets resolution. And the design itself was really beautiful. And I said that this needs to exist inside the space. There was still money left over from the initial ICO days.
And it was slated for future auger development. But it was kind of just sitting there, right? So I thought now was the time to bring this thing back to life. Now was the time to kind of remind the space what true ethos are, what true decentralization is. Without all these backstops, without all these kind of wishy-washy things that kind of wouldn't happen. And they agreed.
In about 2025, for the purpose of reviving Augur, it's continuing the experimentation of the Augur Oracle. And ever since then, we've kind of been working pretty hard. We have two development teams and we just kind of put out a white paper about our recent design and how we're going to do things moving forward. That's the short story of where we are today. Amazing, amazing.
I do have a lot of questions around that white paper. But before we get into that, I would love to share my experience being in this industry all these years. And I absolutely remember back in 2017-18 era, there was the CryptoKitties craze. I don't know if you remember.
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Chapter 4: Why is decentralization crucial in the crypto space according to Phil?
And because of that, you would have a like a nft in the game that you might want to send someone or do something with it that would the nf itself would be 60 and then the cost of on running it on the ethereum network would be 120 right because it was so busy and congested, because the infrastructure wasn't scaling. This is pre-merge. And I remember the DeFi summer and all that.
Even that was pre-merge and things were very challenging. And that did throttle a lot of progress back. But now guest fees are becoming a lot more reasonable and things are a lot more scalable. So I do think that this is the right time for things such as prediction market. Tell me a bit,
about the white paper and everything that you guys, or not everything, but some of the things that you guys talk about in that and what's so novel about it. Yeah, for sure. So when people think about prediction markets, they think when they're betting on something with a prediction market, they're betting on what's actually going to happen. But that's not really the case, right?
Because what they're actually betting on is how will the people running the market resolve this particular prediction market? The problem, what happens is there's a lot of money at stake in manipulating the resolution source. For example, there's a prediction market. Will the sun rise tomorrow? Yes or no? You and I both know that it's going to happen. Yes.
And we will all bet on yes, because why would anyone bet on no for something that is not guaranteed, of course, but I think we'd have bigger problems if the sun didn't rise tomorrow. So that's what happens. So let's say there's a million dollars that goes on. Yes, the sun will rise.
What this actually means is somebody can come in and say, hey, I'm going to bet that the sun won't rise and I'm going to try to take the million dollars of the people that bet that the sun will rise. Now, the way I can do that is I have to make the prediction market lie. I have to make it resolve that the sun did not rise, even though that the sun did rise. So this is the question.
The question is, what is the cost for me to make the prediction market lie? And that cost has to be compared to the benefit of doing it. For example, in our example, there's a million dollar incentive for somebody to force this prediction market to resolve in the wrong direction. So now you have to start thinking.
You have to think, okay, so there's a lot of money at stake in manipulating the actual prediction market resolution. So what is the mechanism that's protecting us from that happening? And there's a couple of different ways to do it. Goes from kind of the more naive ways, which is we're just gonna trust the developers of the project not to misresolve it, right? But the problem with that is,
That works when you got thousand, million, maybe 10 million on the line. But when you got billions of dollars, like these big election markets that we're talking about, you're putting a lot of trust into this resolution mechanism. So if it is just a multi-sig from the developers of the project,
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Chapter 5: How does Augur's new oracle design enhance prediction market security?
implicitly has an Oracle component to it. So the question is then, what is this Oracle component? Is it just a multisig? Is it some sort of a decentralized governance design with, for example, token voting? You can have people that want to vote with tokens and you can just say majority rules and that is the resolution.
Or is it more of an open market design where you have a permissionless structure for people to come in and kind of be able to put money behind what they believe the truth actually is. So what Augur brought to the table initially in 2016 is exactly that. It's a decentralized Oracle design that allows people to participate in Oracle resolution. And they do it in a couple of ways. So there are
the escalation game component to it and there's also the forking component to it an algorithmic fork this is what auger really kind of innovated right they brought the algorithm forking in so back to this kind of question prediction markets oracles how do they resolve what is the cost of it what we want to do in the industry is we want to say our design has the highest cost of manipulation so if you want to manipulate the oracle
it will cost you the most of any other Oracle system out there right now. And there's a couple of them. So the way we measure that is something called the security margin, the economic security margin. And we normalize it against the FDV of the token, for example. If you're using one token for your resolution and your token is worth 10 million in market cap, how much will it cost for me
as a percentage of the market cap to manipulate the oracle. For example, in majority rules voting, if we just have a majority rules token, right? Yeah. Then it'll cost us 51% of the market cap in order for me to buy 51% of the token and then resolve the prediction markets however I want. Right? Yes.
So if we're trying to defend a $1 million prediction market with a token voting design that has a 51% security margin, we need to have more than $2 million in FDB. Yes. Because the way we create economic security in crypto is we try to make the cost of an attack greater than the benefit of this attack.
And if you can do that, and it's not an easy thing to do, it's a very difficult problem to solve and there's many ways to do it. But if you can always keep the cost of an attack higher than the benefit of the attack, then no one's going to attack and we're fine and dandy and we're good, right? So the question is, How do we do that, right?
So like I mentioned, there's shelling point voting, there's shelling point designs, there's token voting designs, there's vetoes, there's multisigs, there are security councils, right? It's trusted security councils, but then there's also the auger design. And what the auger design is, the auger design makes truth profitable. So that's how we do it.
We make truth the equilibrium that all honest participants, if they want to earn money, they should be betting on truth. And the way it works in practice, in reality, because I know I've said a lot of kind of hard times. Give an example. Give an example. Explain it. Yes, yes. For sure. So let's say we go back to our market. Will the sun rise tomorrow? Yes or no? Right.
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Chapter 6: What is the escalation game and how does it work in Augur?
go to the people that are answering the question. Now, a percentage of those fees get burned. So there is a lot of burning within the protocol. There's a lot of rep that gets sent to a zero with address. And this drives value to every single rep token holder because the supply gets reduced.
So there's burns and then there's fees, but there's no revenue generated because we're just trying to keep everything at a minimum and we're trying to maximize quite lean. Yes, yes, exactly. Yeah, exactly. Fantastic. And what does the next 12 months at Augur look like? What's the key plan over next 12 months? Right.
So what we did with Auger Littus, Auger Littus is one of our development streams. We have two development streams. So when we rebooted the Auger kind of ecosystem, I guess we decided to do two things. So the first one was we decided to separate the prediction markets from the Oracle because initially Auger was both. It was prediction market on the Oracle.
So we decided to separate them and just package the Oracle by itself and sell that as a B2B service for other prediction markets just to solve the resolution. So the next 12 months, what it looks like is we will approach these prediction market projects and basically say, hey, you're running your prediction market. You're good at that. You're good at getting users. You're good at getting things.
But we know you don't like to do resolution because doing resolution in-house actually is a hard job and it carries a lot of risk because
at some point sooner or later if you run a prediction market project you're gonna be put into a situation where half of your community thinks you should have done it this way and half of your community thinks it should have done it another way yes and you're gonna have this confrontation and controversy and Especially the bigger you get, the harder it gets. Exactly.
So you don't want these PR disasters. You don't want this risk of resolution. You don't want to do the research and hire this big team just to resolve these markets and kind of do all this. So you want to outsource resolution. You want to kind of abstract it away to somebody else that has a good design, a permissionless design, and let them take the heat. Let them handle the resolution.
And we're just going to pay you guys. You guys do resolution. Give us the answer. We'll use that answer to resolve our own prediction markets. Amazing. So that's what Augur Littus is. Augur Littus is a generalized modular oracle. It's essentially oracle as a service. So we just allow anybody to ask the Oracle a question.
It's going to sit on Ethereum and anyone can go in and pose a question to the Oracle, pay a fee and really get the answer as long as they provide a valid set of parameters. And yeah, all these prediction market projects, we just make it easier for them to outsource resolution. Lovely.
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