P2P Prediction Market Framework

New York City, New York, United States United States
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Company description
Uncertainty about future events makes us all part owners of a portolio of event derivatives. Event derivatives are simply bets on the outcomes of future events -- one common example is a political future, which might represent a bet on the probability of a given election outcome. One option might return $1 per unit if Hilary Clinton is elected, and nothing if she is not. This is not only a way for political junkies to speculate and political outsiders to hedge their risks -- it's an easy way to calculate the probability that an event will actually occur. I believe that there is an enormous opportunity to create a market that allows participants to define their own event futures and transact with trusted third parties. To begin, I'd offer four broad market categories: * Voting rights markets: finance boils down to two activities: it's the the science of turning future uncertainties into present certainties through stocks, bonds, futures, and derivatives; and it's the art of seperating ownership and control. The historical connection between voting rights and equity ownership is more or less accidental, and is fluid due to scale (no IBM shareholder has a serious chance to influence IBM's future) and circumstance (those voting rights don't do much good if the company misses an interest payment on its bonds). I believe that there should be a simple, standard means of trading share voting rights independent of economic rights, so control can be valued independent of a company's economic future. * Trust markets: the primary barrier to commerce is trust in counterparties. You can have a barter market without trusting the people you're dealing with, but once currencies and long-term obligations come into play, trust is essential. There ought to be a middle ground between letters of recommendation and Moody's ratings -- a quantifiable measure of the odds that a given indivudal or institution will meet its obligations. And there's no better way to set up such a measure than via prediction markets. * Technology futures: all web 2.0 startups are essentially a bet on Moore's Law. They presume that the cost of hardware will continue to drop, to the point that small groups can focus on rapidly developing features rather than on honing high-performance code. They need a way to hedge that bet -- as does every business relying on a current paradigm or hoping for a new one. * Meta-markets: although there are many prediction markets available already, few of them offer any hedge against their own failure. For example, a Tradesports portfolio wouldn't be worth much if US regulators confiscated the gains -- and a Hollywood Stock Exchange bet would be hard to cash out if the servers crashed on Oscars night. I'd like to offer a market that lets users hedge against the failure of other markets. Not only is this service valuable, but it's most valuable to 'power users' eager to push these markets to their limits. The theme of each of these opportunities is that we face risks, and that when we think of these risks as derivatives, it's easy to see that we can and should be able to hedge our bets or double down. Like index futures and mortgage-backed bonds, this is not so much a new market as an old market that can become a larger one with a bit of standardization. Unlike those markets, this is an opportunity of unlimited scale, in which everyone has a stake.
Business model