In 2009, the invention of Bitcoin (BTC) laid a new technological foundation for the rapid development of PMs. BTC was based on blockchain — a system of distributed data recordings of all financial transactions put through the network (with almost no possibility of deleting or altering these records).
After a while, it became clear that blockchain’s capabilities are not limited to money transfers. A blockchain can store data regarding other people’s actions, for example, about their agreements. This function was first introduced by Ethereum (ETH) in 2014 and was called ‘smart contracts’, which are self-executing contracts that don’t require users to trust each other or use traditional legal procedures. In theory, smart contracts could be tailored for virtually anything, including settling bets on certain events. For example, two people can bet a dollar each on Clinton or Trump becoming the POTUS. After the election, the network uses oracles to fetch the correct results, and a smart contract automatically transfers the funds to the winning party.
When comparing blockchain-based prediction markets to websites such as Intrade.com, perhaps the most important advantage the new technology brings to the table is decentralization. The lack of a single server or an administrator solves two problems at once.
PM on a blockchain can’t be easily taken down, as there’s no single point of failure.
PM on a blockchain is better protected from any sort of tampering with the results.
As blockchain-based PMs are not owned or controlled by any party, no one can manipulate the outcomes to their advantage. On top of that, the blockchain technology enables PMs to leverage two very important features:
Full transparency of participants’ bets.
High degree of anonymity.
The former helps further protect the network from distortion or manipulation, while the latter allows users to freely express the most unpopular and frowned upon opinions, to be as honest as possible.
The first blockchain-based PMs started to appear around 2014, soon after Ethereum was created. Right now, Augur (REP), which was co-founded by Zack Hess, is probably the most famous one. In this article we will focus Zack's most recent project — Amoveo (VEO). Having learnt a lot from his previous endeavors, Zack took a lot of what his previous projects were doing wrong into account, making improvements on all fronts.