An analysis of irregularities discovered in the Augur decentralized prediction market platform has identified a number of design flaws. Namely, it identified a potential attack vector based on discrepancies between a market’s expiry date and its outcome date.
How A Prediction Market Works
A prediction market would seem an ideal use-case for blockchain, harnessing the trustless nature and lack of centralized control. Augur uses the Ethereum blockchain, and allows an individual to create a prediction market based on any definable event.
The market creator defines the topic, end date, and potential outcomes, plus an adjudicator if so desired. Trading (denominated in ETH) continues until the event-end, at which point Augur token holders (or designated reporter) determines the outcome. Token holders stake their Reputation (REP) on the outcome and receive settlement fees.
Houston, We Have A Problem (or Two)
Aside from potentially-illegal markets, covering topics such as assassinations and terror attacks, there are some key…