This presentation explores how blockchain technology could help to improve prediction markets. Several new initiatives have been launches recently such as Augur en Gnosis.

1. Predicting the future
with the blockchain?
Maurits Kreijveld wisdomofthecrowd.nl
Dutch Future Society
Amsterdam, November 25th, 2016

2. Who predicted Trump?
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3. Predict the future?
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Intelligent system of experts, super forecasters or
as many diverse sources as possible (crowd)?

4. Forecasting tool
wisdom of
crowds
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prediction
markets
blockchain
technology

5. Wisdom of crowds
A group can make better
decisions (estimations,
judgements) than its smartest
individual
group = crowd, people,
experts, machines, …
Collective intelligence
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6. Wisdom of crowds
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average, mean or median?

7. Wisdom of crowds
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‘pooling knowledge’

8. Wisdom of crowds
ranking of a website =
how many links are
pointing to it and
the authority of those links
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9. Wisdom of crowds
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early detection, weak signals

10. Criteria for wisdom
• Diversity of opinion
• Independence
• Decentralization: draw on local information
• Crowd isn't defining its own questions
• Can be evaluated by a simple result
(e.g. the weight of the cow)
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11. Challenges
• Social media and networks create group think,
echo cambers, herd instinct, imitation …
• Motivation without a reward (money, reputation)
• Quality: reliability of information, participants
• Aggregation: turn private judgements into
collective decisions
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12. Aggregation
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game theory
reputation
market median
consensus
average
pooling

13. Prediction market
A market to sell and buy
shares in the outcome of
an event
Price = probability of
an event occurring
Idea futures,
event derivatives
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14. Prediction markets
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15. Prediction markets
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16. Advantage
• Incentive: money, reputation
• Market: interaction (negotiation) of opinions and
estimations
• Speed: ‘immediately’ responds to new information
• Accuracy: proven to be better than conventional
forecasting and polls
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17. Predict the future?
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18. Challenges
• Liquidity: enough trade to form wisdom
• Strategic behavior: stock market bubble,
anticipation of price fluctuations, manipulation
• Group think among elites and experts,
ignoring information, influence of polls and media
• Centralized: dependent on the marketplace maker
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19. Blockchain
A shared registry of transactions,
stored in the network of participants
(distributed and encrypted)
Registry (a ‘ledger’) =
history of all transactions
Tracking ownership, value, identity
of physical and virtual goods
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20. Blockchain
• Trust machine based on mutual distrust,
reduces uncertainty, no central control
• Validation, no cheating: reliable and honest
• Transactions can be clausulized
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21. Application: Bitcoin
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22. Forecasting tools
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augur = a priest that reads
the will of the gods from the
flight of birds
gnosis = knowledge, insight
hivemind = collective consciousness,
a group acts as one organism
https://www.youtube.com/watch?v=yegyih591Jo

23. Advantages (1)
• Robust: can not be shut down, go out of business
• Trust: no central point of control or manipulation
• Transparent: all transactions are logged
• Efficient: can be run automatically,
increase use and stimulate liquidity
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24. Advantages (2)
• Open access, no restrictions or barriers to join:
increase diversity of participants (people and
machines!), new applications
• Improve accuracy:
decomposition of questions
• Reduce strategic behavior:
could allow for local prices
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25. Perfect forecasting tool?
wisdom of crowds
tap the collective
intelligence
diverse opinions on
the future
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prediction markets
improved incentives
smart aggregation
mechanism
blockchain
improved usability and
diversity
improved reliability and
accuracy
improved market
+ +

26. Discussion
Can this be a tool for professional futurists?
Compare to other tools (Delphi, surveys,…)
What can or should be improved?
Usability and limitations?
wisdomofthecrowd.nl
CC:BY Joey Kyber