Hodl Hodl, a peer-to-peer cryptocurrency exchange, has announced that it will launch a forecasting market for Bitcoin. It is the first market for Bitcoin-based forecasts to hit the market in the spring of 2019.
A forecasting market is a novel application of blockchain technology. With the betting platforms, users can secure quotas, futures and results with intelligent contracts. Two users put money (traditionally ether) into a smart contract to bet on futures for a particular outcome. When the result arrives, the intelligent contract is automatically paid out to the winner.
Most forecasting markets are based on blockchains with a more flexible, intelligent contract language such as Ethereum. For example, Augur was at the forefront of introducing the model when, in July 2018, it was the first decentralized forecasting market to use Ethereum's ERC 20 token agreement. Other forecasting markets followed suit, including Gnosis at Ethereum and Bhodi at QTUM.
Despite Augur's runner-up, Hodl Hodl believes that he can improve aspects of platform operations, especially with respect to solving the "oracle problem". For example, how does the smart contract know who will win the World Cup when Bitcoin closes at $ 3,850 at midnight on March 8, or who won a poll?
You need software and people (oracle) to deliver this data to the Smart Contract. The inherent counterparty risk becomes a topic of trust and accuracy: how do you keep oracles honest and how do you review their inputs? To reduce this risk, Augur uses remote oracles. Several users are responsible for entering data / results to ensure that the reported results of a result are accurate and the smart contract pays off for the winner's forecast.
The decentralization of sources of inputs should theoretically ensure that the payoff of each forecasting market is consistent with real world outcomes. However, some opponents argue that there are not enough participants on this decentralized platform to prevent bad actors from playing the system.
"We are doing something different," said Roman Ditko, Hodl Hodl's Chief Technology Officer Bitcoin Magazine, "The oracle [is] the two parties that take part in a contract. In case of a dispute Hodl Hodl intervenes with his third key and can influence the decision. "The company believes that a decentralized system for assessing wagers can be influenced by bad players. The peer contract could be a bit more angular.
In contrast to the established forecasting model, on February 27, 2019, Hodl Hodl announced his own forecasting market, the first built on the Bitcoin blockchain. Moreover, according to Ditko, "their oracle system is not decentralized – we have a central server. But we are not caring. In the case of a predictive agreement, both parties disable bitcoins in a 2-of-3 [key] Crooked. Both keys are needed to send the blocked money somewhere. If both do not sign the release transaction, bitcoins can not be moved from there. "
In this system there is no incentive to deny the outcome of a bet, as the money will not be released if the two parties disagree. If someone deceives the results of a result and both parties claim the coins, a tiebreaker follows.
"In a dispute," said Ditko, "both parties can never make the decision to release the money." In this case, Hodl Hodl can get in and use his third key along with one of the parties' keys to release the money their favor Hodl Hodl can Do not move Bitcoins unilaterally to any location, as we still need one of the user's keys (which we do not have) to sign the release transaction. "However, the company warns that the impartial broker will be forced to shut down in May The ability of a user to persuade other users to enter new contracts has a negative impact.
One solution to this problem could be to have a third-party agent who, unlike Hodl Hodl, is by no means a player in the situation. Ditko entertains the idea, tells Bitcoin Magazine "In the future, there might be a user group called" Mediator "who would take over the role that Hodl Hodl is currently playing in a dispute – with a third key." He added, however, "It's probably wrong to call this party an oracle, since the decision is not made by this single party."
"At launch," he said, "we want to keep it as simple as possible and then see what needs to be improved."
Bitcoin Magazine asked Hodl Hodl to explain how his reputation system works but has not yet received a response.
This article originally appeared in Bitcoin Magazine.
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