There has been an increase in the amount of various blockchain-based prediction markets in recent years. Starting from Stox, Aeternity and ending with Augur and Gnosis.
However, many of the cryptocurrency community participants still biased regarding the bright future of the prediction markets technology. One way or the other, not everybody skeptical on this tech, given the fact that one of the first bitcoin hedge funds Exante has rolled out on Nasdaq an index called DeFix, which full of Decentralized Finance (DeFi) projects including prediction market blockchains like Augur, Gnosis and etc.
In such a big diversity, it is a difficult question to answer which project contains a lot of potentials and whether we should wait for another tech bubble? In order to answer those questions, we have reached out to Zack Hess, the guy who designed Augur with Aeternity and the main developer of a new blockchain-based prediction market called Amoveo (VEO).
iHodl: You helped work on Augur and Aeternity but moved forward to develop your own vision in Amoveo. What's the most important difference you see between Amoveo and these other projects?
Zack Hess: Aeternity gave up on trying to have a secure oracle system. They have dropped out of the competition for the market of financial derivatives. At this point it isn't clear what problem Aeternity is trying to solve, it seems like a mish-mash of random features that they decided to put together. Augur is still trying to make markets for financial derivatives, they are still trying to compete with us.
Some differences between Amoveo and Augur are:
- Augur bets are on-chain. Which causes problems related to gas costs, privacy, security against front running, and scalability. Amoveo bets are inside state channels, so all these problems are solved.
- Augur's security requires the value of their subcurrency to be high. So Augur can only be secure if enough trading fees are being paid to the people holding Rep. This makes Augur expensive, and it makes Augur vulnerable to parasite contracts. In Amoveo we don't have any trading fees, there is no subcurrency that needs to stay valuable, and we are not vulnerable to parasite contracts.
iHodl: The cryptocurrency VEO which is native to the Amoveo project is minted in a similar way to Bitcoin. Do you believe the Amoveo is decentralized similarly to Bitcoin? If not, what would make VEO decentralized in your view?
Zack Hess: Amoveo is decentralized similar to bitcoin. But PoW, the consensus mechanism used by Amoveo and Bitcoin, it is less effective for small currencies that do not yet have ASICS. Eventually, when Amoveo is more popular, it will have ASICS and be as secure and decentralized as Bitcoin.
iHodl: Your recent discussion of a PoS vulnerability includes bribery as a way to destabilize PoS systems. Is proof of stake doomed to fail? Do you think the PoW run by Amoveo consensus mechanism is scalable and sustainable?
For many proof-of-stake designs, if you build something like colored-coins on top of their protocol, this is a kind of parasite contract that can cause the entire system to collapse.— Zack Hess (@zack_bitcoin) September 7, 2019
Because it becomes impossible to measure the ratio of value staked vs value transferred.
Zack Hess: The very best mathematical models of security currently available to us say that PoS can not be secure. But maybe in the future, we will have better models for security, and then we will find out that PoS is possible.
I don't have a lot of confidence that PoS is possible or impossible. Cryptocurrency is a rapidly changing field, it is difficult to predict what it will look like in 10 years.
Lately, we have been considering changing Amoveo to use a PoS/PoW hybrid system. We are thinking of having a hard-coded white list of who is allowed to run a mining pool. And that we will add more mining pools to this list by the hard update as needed.
This can prevent hashrate rental attacks, which will be an issue until we have ASICS.
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