Multiple Teams Creating Bitcoin-based Prediction Markets

NEW YORK (InsideBitcoins) — Truthcoin is a concept for decentralized prediction markets created by Paul Sztorc in late 2013. At the core of the system is an attempt to create a low-trust oracle that could be used to resolve bets on the blockchain. Sztorc has stated that this oracle could be the basis for superior versions of everything from Bitshares to Ethereum, and that he’d like to eventually see the concept implemented as a sidechain to bitcoin. In a recent update to the Truthcoin website, it was revealed that multiple teams are working on various implementations of the Truthcoin protocol. These teams plan to complete their work around April or June of this year.

Building Truthcoin as a sidechain

Paul Sztorc
Paul Sztorc

Sztorc has been in touch with Blockstream (the company currently working on a sidechains implementation for bitcoin), but, unfortunately, the final version of sidechains is not ready yet. Bitcoin core developer and Blockstream co-founder Gregory Maxwell recently stated that a demo, federated version of sidechains would be available in “a few months,” but it does not appear that anyone is working on a Truthcoin implementation for that beta stage of sidechains development.

Instead of working on a  sidechain directly, the Blockstream team recommended that Sztorc simply work on an altcoin. It should be noted that this is not actually an altcoin in the traditional meaning of the word. Sztorc explained:

“Following my conversations with members of Blockstream, I was encouraged to build an altcoin as technically similar to Bitcoin as possible — while they produce software which transforms altcoins to sidechains. They advised me not to worry about the technical details at all until they are finalized in (at least) March. So the current sidechain-hopefuls resemble altcoins (in the same way that the bitcoin testnet resembles an altcoin).”

In other words, Sztorc is taking the view that altcoins are only useful for testing purposes. This is a common criticism of altcoins in general. Many have claimed that they are nothing more than a combination of testnets and casinos. Sztorc is making it clear that he is not attempting to launch an altcoin that is supposed to gain any sort of speculative value on its own.

Avoiding an altcoin or appcoin

bitcoin 2.0When I asked Sztorc about sidechains more directly, he was quick to admit that he’s “very excited” about the concept. He went on to describe his discontent with many of the projects that are attempting to create new tokens of value around some new kind of blockchain-based application:

“I think the 2.0 space has, frankly, screwed up the 1.0 space by distracting talent, diverting money, misallocating infrastructure, and — most of all — confusing our message to the public (regarding bitcoin’s ability to store value, as the unique Internet money). People want to try ‘the cool, new, Internet-money’ they heard about on the news, not participate in some ultra-technical, lifestyle-consuming grand-software-experiment for nerds. When we started all of these 2.0 projects, we stopped giving people what they were really ready for, what they really wanted (Bitcoin 1.0).

“On top of that, it’s just become a ‘prove how smart you are’ waste-of-time to stay on top of the latest crypto-fashions. I’m afraid it has become difficult for me to believe that these projects are knowledge-accumulating ‘research.’

“I am hoping that sidechains will ‘crack the whip’, sink all of these other projects, and re-coordinate everyone (especially laypeople) on bitcoin (where they belong). My guess is that, if this doesn’t happen, the whole space will be weighed down by this cancerous, uncontrolled growth in all directions. My guess is also that, if this does happen, it will coincide with another 10x increase in the bitcoin exchange rate.”

A version of Truthcoin for Ethereum

Although Sztorc is not a fan of altcoins or appcoins, he has been willing to help anyone who sends him questions regarding the Truthcoin protocol. On the Truthcoin website, he’s stated, “I do not have an exclusive relationship with any team, although I have preferences like anyone else.”

One of the teams working on a Truthcoin implementation is attempting to build it on top of Ethereum. The project is called Augur, and Sztorc has been happy to help this team of developers whenever they have any questions, but he does not seem too bullish on the concept of Ethereum in general. When sharing his view on Vitalik Buterin’s creation, Sztorc stated:

“I am still waiting for people to tell me what they plan to use Ethereum for.”

This echoes a comment recently made by Greg Maxwell on Reddit where he stated, “I’d love to see an example of something interesting and useful done there that can’t be done in bitcoin, but I haven’t.” Mike Hearn, another bitcoin core developer, shared similar sentiments in the same comment thread. The Augur team has stated they originally intended to build their Truthcoin implementation as a “sidecoin”, but they eventually made the move to Ethereum mainly due to reasons summarized in a recent blog post by Joey Krug:

“With Ethereum, we don’t have to deal with low-level networking or security, that all falls under the Ethereum project’s purview (which has many more resources than we do at the moment)!  Of course, we still have security concerns within our contracts and our protocol, but it severely limits the scope.  It’s also much simpler than say building on Bitcoin core; we can write smart contracts in a programming language like Serpent or Solidity and compile down to EVM opcodes (which are also much more robust than Bitcoin’s opcodes). Finally, building on Ethereum allows extremely quick iterations: instead of taking weeks or months to make small changes we can make and test them within days.  This means we can build our software faster and improve upon it quicker than any other method, which after enough iterations, allows us to build the best possible platform for prediction markets.”

Whether the Ethereum or sidechain implementation of Truthcoin is more useful remains to be seen, but it’s likely that the cryptocurrency community will be able to test out both of them in early 2015.

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