{"id":20454,"date":"2019-03-08T21:16:17","date_gmt":"2019-03-08T21:16:17","guid":{"rendered":"http:\/\/ci027cfe7a00102697"},"modified":"2019-03-08T21:16:17","modified_gmt":"2019-03-08T21:16:17","slug":"decentralized-exchange-hodl-hodl-launching-bitcoin-based-prediction-market","status":"publish","type":"post","link":"https:\/\/bitcoinmagazine.com\/business\/decentralized-exchange-hodl-hodl-launching-bitcoin-based-prediction-market","title":{"rendered":"Decentralized Exchange Hodl Hodl Is Launching a Bitcoin-Based Prediction Market"},"content":{"rendered":"
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Hodl Hodl, a peer-to-peer cryptocurrency exchange, has announced that it is launching a prediction market on Bitcoin. Slated for launch in the spring of 2019, it would be the first Bitcoin-based prediction market to go live on Bitcoin\u2019s mainnet.<\/p>\n

A prediction market is a novel application of blockchain technology. The betting platforms allow users to secure odds, futures and outcomes with smart contracts. Two users place funds (traditionally, ether) into a smart contract to bet on futures for any given outcome; when the outcome arrives, the smart contract automatically pays out to the winner.<\/p>\n

Most prediction markets are built on blockchains with a more flexible smart contract language, like Ethereum. Augur<\/a>, for example, pioneered<\/a> the model when it launched in July 2018 as the first decentralized prediction market to make use of Ethereum\u2019s ERC-20 token contract. Other prediction markets have followed suit<\/a>, including Gnosis on Ethereum and Bhodi on QTUM.<\/p>\n

Despite Augur\u2019s frontrunning status, Hodl Hodl believes that it can improve on aspects of the platform\u2019s operations \u2014 specifically, in its solution to the \u201coracle problem:\u201d How, for example, does the smart contract know who wins the World Cup, if bitcoin closed above $3,850 by midnight on March 8, or who won an election?<\/p>\n

You need software and people (oracles) to feed this data to the smart contract. The inherent counterparty risk becomes an issue of trust and accuracy: How do you keep oracles honest and how do you verify their inputs? To mitigate this risk, Augur leverages decentralized oracles. Multiple users are in charge of inputting data\/results to make sure that the reported results of an outcome are accurate and that the smart contract pays out to the winning prediction.<\/p>\n

Decentralizing the sources of inputs, in theory, should ensure that every prediction market\u2019s payout is consistent with real-world outcomes, but some opponents argue that there aren\u2019t enough participants on these decentralized platform to prevent bad actors from gaming the system.<\/p>\n

\u201cWe’re approaching this slightly differently,\u201d Roman Snitko, Hodl Hodl\u2019s chief technology officer, told Bitcoin Magazine<\/em>. \u201cThe oracle [is] the two parties participating in a contract. In case of a dispute, Hodl Hodl steps in with its third key and is able to influence the decision.\u201d It is the company\u2019s belief that, whereas a decentralized system for judging bet outcomes can be influenced by bad actors, a peer-to-peer contract might be more ironclad.<\/p>\n

To contrast with the established model of prediction markets, on February 27, 2019, Hodl Hodl announced<\/a> their own prediction market, the first to be built on the Bitcoin blockchain. Additionally, their oracle system, according to Snitko, \u201cis not decentralized \u2014 we have a central server. But we’re non-custodial. In the case of a prediction contract, both parties lock bitcoins in a 2-of-3 [key] escrow. Both of their keys are required to send the locked funds somewhere \u2014 unless they both sign the release transaction, bitcoins cannot be moved from there.\u201d<\/p>\n

Under this system, there is no incentive to try and dispute the outcome of a bet, as the funds will not be released if the two parties disagree. If someone fudges the results of an outcome and both parties claim the coins, a tiebreaker ensues.<\/p>\n

\u201cIn case of a dispute,\u201d said Snitko, \u201cboth parties may actually never come to a decision to unlock the funds, in which case Hodl Hodl can step in and use its third key along with one of the parties keys to unlock funds in their favor. Hodl Hodl cannot unilaterally move bitcoins to wherever it wishes to because we still need one of the user’s keys (which we don’t have) to sign the release transaction.\u201d The company warns, however, that forcing the impartial mediator to step in may negatively impact a user\u2019s ability to convince other users to enter new contracts.<\/p>\n

One solution to this problem could be having a third party mediator who, unlike Hodl Hodl, is not a stakeholder in the situation in any regard. Snitko is entertaining the idea, telling Bitcoin Magazine<\/em> that \u201cin the future we might have a user group called \u2018mediators\u2019 who would take on the role Hodl Hodl currently performs in case of a dispute \u2014 with a third key.\u201d He added, however, \u201cit’s probably wrong to call that party an oracle, as the decision is not made by that single party.\u201d<\/p>\n

\u201cAt launch,\u201d he said, \u201cwe want to keep it as simple as possible and then see what needs to be improved.\u201d<\/p>\n

Bitcoin Magazine asked Hodl Hodl to explain how its reputation system works but has not yet received a response.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Slated for launch in the spring of 2019, it would be the first Bitcoin-based prediction market to go live on Bitcoin\u2019s mainnet.<\/p>\n","protected":false},"author":2545,"featured_media":20455,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[3435,91,556,298,3166,3242,3434,621,867,525,1852,3383,1283,101,721,1279],"class_list":{"0":"post-20454","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-augur","9":"tag-bitcoin-magazine","10":"tag-blockchain","11":"tag-cryptocurrency","12":"tag-decentralized-exchange","14":"tag-escrow","15":"tag-ethereum","16":"tag-futures","17":"tag-gambling","18":"tag-hodl-hodl","19":"tag-mainnet","20":"tag-oracles","21":"tag-p2p","22":"tag-prediction","23":"tag-smart-contracts"},"author_data":{"id":2545,"name":"Landon Manning","nicename":"landon-manning","avatar_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/12\/img_2749-96x96.jpg"},"featured_image_url":"https:\/\/bitcoinmagazine.com\/wp-content\/uploads\/2024\/11\/decentralized-exchange-hodl-hodl-is-launching-a-bitcoin-based-prediction-market.jpg","_links":{"self":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/20454","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/users\/2545"}],"replies":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/comments?post=20454"}],"version-history":[{"count":0,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/posts\/20454\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media\/20455"}],"wp:attachment":[{"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/media?parent=20454"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/categories?post=20454"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bitcoinmagazine.com\/wp-json\/wp\/v2\/tags?post=20454"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}