 You're watching The Daily Decrypt, where currency competition is always the soup de jour. I am your host Amanda B. Johnson, and today's episode is brought to you by Bit Halo Black Halo. You may have heard the term prediction market, which is just a fancy way of saying people betting on the future outcome of a given event. And even fancier are prediction markets which live on blockchains. To find out how such a thing works, and to dapple in it myself, I gave a call to Nathan Hort, developer at BitShares. Here is a tutorial on how real prediction markets really work in BitShares right now. The reason I know about BitShares is because I was, um, Dan Larimer and I were the two architects of the graphene blockchain framework, which is what BitShares 2 is based on. So basically, I joined the core development team back when I joined just shortly before BitShares 1 launched. And we launched BitShares 1 and shortly thereafter decided we've learned a lot of really good stuff from this and we really can't maintain this code base for a whole lot longer. It had already drifted substantially from the original designs. And so we realized that it was necessary to start from scratch. So Dan Larimer and I set aside BitShares 1 and began developing the second iteration, which became the graphene blockchain framework. And that's open source on GitHub, and you can use it to launch a delegated proof of stake blockchain, basically, that it's very similar to BitShares, but you can just use that to launch a brand new blockchain. And so that's why I know about BitShares is because, well, I helped design it, so. Righteous. Right on. Well, if I get my light client open here, would you mind navigating me through the process of this prediction market thing? I see that there are already some markets open here in the wallet. Let me just get that going. Looks like some of them are betting on sports outcomes. Some of them are betting on political election outcomes. And so, yes, I mean, I would be interested to know basically how do I launch my own prediction market within BitShares? All right. So if you want to launch your own, then you're going to go to your profile, basically, your account page. Okay. And in the left side bar is going to be an assets item. Yep. I'm pulling that up. I do have a light client, but even then, I don't have the fanciest of computers or the strongest of bandwidth, so sometimes it takes a moment. I know the feeling I've been there. Yeah. Yeah. All right. So I have clicked on the assets tab as you instruct, and okay, here I am. All right. So somewhere in there should be a create asset option. Yeah. Yeah. Yeah, there it is. So if you want to make a prediction market specifically, there's going to be a little switch that says smart points. When you enable that, you get another switch that says prediction market. Okay. And so with those two switched on, you're just going to go through and set all of the other settings for your asset. None of those are prediction market specific. They're just general settings for assets. I can answer any questions you may have about any of those. Okay. Basically, once you create that asset, you've created a prediction market. Okay. And so let's use an example here. Let's say I want to make a bet that $1 will be enough to buy a car in one year. So what would I do to say, okay, if in one year a dollar buys a car, this is what happens. And if one year a dollar does not buy a car, this is what happens. Like how would I execute this here? All right. So the first thing you would do is you'd go to your description tab and you'd just fill in your, all of these names and descriptions and stuff like that. Got it. Exactly what this asset will do under what conditions. Okay. So, you know, you give it a short name that just is a quick and easy way for people to recognize that asset. And then the description you're going to detail out, okay, so if $1 is sufficient to buy this kind of car in this location, you know, as specific as it needs to be to make the answer unambiguous at the end. Then you'll fill all of that out in the description field. And that's just you basically covering your own rear because as the decider of the prediction market, you want to be able to do that as objectively as possible. Okay. So I will be the decider. I will be the feed that provides the results for this. Right. As the creator, if you are the decider, you might be able to delegate that. To someone else, I don't remember offhand. Okay. But I could find out for sure and let you know later. Yeah, actually, yeah, because, yeah, then there could be a sort of like, like we could pick someone who just has a great reputation for being like an honest person. Yeah. Okay. Sure. Okay. Just let it to a multi-sig, right? So, a multi-sig. Yes. So multiple parties could. Right. So I require three of these five accounts to agree or something like that. A multi-sig decider, delegated, got it. Okay. All right. So, yeah, you fill out all of that information, you hit create asset and boom, you've got an asset. It's listed in the markets and people can go and short sell it and they can buy it. So, do you know what those terms mean? Sort of not really. Like I see in these other prediction market assets that exist currently, they see something like, you know, if A happens, this token will be worth one bit share. But if B happens, it will be worth zero bit shares. Like, I don't understand how that value can be assigned. Okay. So, what you would do is you would say, you're going to make this asset and you're going to say in the description the same as they did. If a car becomes purchasable for $1, then this token, your prediction market token will be worth one bit share. Am I like going to collateralize all of these? Is that where the bit share comes from? You are not, but the people engaging in the prediction market will. Will. Got it. Okay. Okay. Okay. Okay. All right. So, basically, in order for the prediction market to work, there have to be people on both sides of the decision, right? Somebody has to say, yes, I think the car will be sold. There will be a car sold for $1 and somebody else has to say, no way, that's not going to happen. Got it. And so, the person, depending on which way you create the asset, right, so you say this asset will be worth one bit share if you can buy a car for $1, then the people who think that they're going to be able to buy the car for $1, they want to buy your asset. The people who think that it won't be, that you won't be able to buy a car for $1, they're going to want to sell your asset. Now, of course, initially, there's no asset, right, none exists. And so, the people who want to sell it, they have to short sell it into existence. And what does short selling mean? I am not kidding that I don't actually know what that means. That's fine. Before I touched bit shares, I had no idea any of this stuff, so yeah, that's perfectly normal. So a short sell refers to, in bit shares specifically, it's a sell where you don't have the asset you want to sell, but you do have something to collateralize it. So in this case, it would be bit shares, right? So your prediction market is based on bit shares. It either resolves to one bit share or zero bit shares. And so the sellers will say, okay, I will put up the bit share that it might resolve to now in escrow, which is held by the blockchain, trustlessly. And in return for that, the blockchain gives me the asset. So let's just call this car coin for the sake of simply referring to it. So you create car coin, the asset, and somebody says, okay, there's no way a car is going to sell for a dollar. That's just crazy talk. So I'm going to put up a bit share into collateral, and the blockchain gives them back one car coin. So now they take that car coin to the market and sell it. And maybe they sell it for half a bit. So when they sell that car coin for half a bit share and somebody else says, no, I think a car is going to sell for a dollar, I'm going to buy that for half a bit share. So they pay half a bit share. The seller gets that half a bit share today, as soon as that trade executes, they get that half a bit share and they're good. They've got their half a bit share. The buyer now has a car coin. And it's still undecided whether a car coin is worth one bit share or zero bit shares. Let me think. I might have gotten the sides of the bet backwards. But anyway, somebody is happy when it goes to one bit share, and somebody is sad when it goes to one bit share. So coming back to what is the short sell, basically, you put up the collateral and the bit shares, the blockchain creates and gives you car coin that's collateralized by those bit shares. And the blockchain remembers that you've got that collateral and that collateral is backing the car coin. Okay. So to short sell is to put up the value, to put up some collateral and then to sell a form of that value. So if I want to take people's money because I'm like, yeah, a car is going to sell for a dollar. I really want them to bet against me so that I can take their money. I first have to put up my own money to even give these tokens value and then people can bet accordingly. Now the thing with the prediction market assets that's different from a standard smart coin is that with a prediction market asset, you know beforehand the maximum amount that the prediction market asset could be worth in collateral. So the most one car coin can be worth is one bit share. It cannot be possibly more than that. So because of that, you as the collateralizing party, the person who's making the short, you know that if I put up one bit share, then I've supplied the absolute maximum amount of collateral that could be required. So in that case, now the blockchain has enough collateral to resolve that car coin to bit shares at the end when the decision is made. It has enough information to do that or it has enough money to do that, sorry, regardless of what the value comes out to be. I feel like I really want to just like create like a, hey, this is the prediction market I created for anybody who wants to come try this out because I'm not sure I'm going to be able to make the neuron pathways in my brain required to fully understand this unless I just like issue one. Yeah, absolutely makes total sense. So, yeah, if you go through and create all of that asset, then it'll be listed in the market and you'll be able to buy it. If you don't want to do that right now, you could take one of the existing ones in the market and just play around with it. And play around with it. Right. Okay. This is money that's being dealt with, right? We're dealing with real bit shares here. So you will probably lose some money just playing. You underestimate me from the beginning. I mean, I know you'll lose something because you got to pay fees, but. Because I have what? Because you have to pay fees. Oh, there are fees. Okay. All right. Okay. Naturally, be aware of that. Like, yeah, especially if you're going to create an asset, make sure that you're, you know, aware of the fee you're going to pay. Okay. When you're filling out the asset settings before you hit create asset, it does tell you the fee at the bottom there, but you below the create asset button. Okay. Um, the biggest effector of your fee is going to be your symbol. Um, short symbols are super expensive. Like a three character symbol is over a million bit shares right now. I think. And what? Okay. Yeah. Yeah. Um, and longer symbols are less. So I think if you max it out, um, you'll get your fee down to somewhere in the neighborhood of 7,000 bit shares. 7,000. Yeah. I must really want to do this. I must really want to, I must really have a confident prediction that I think a lot of people would not agree with. So it's not so much, um, as the, as the creator of the prediction market, it's not intended that you are a speculator. Ideally, you, like, if people use your asset, you're going to make money either way. Oh, and how is that? Do I get, do I get a portion of like trading fees or something? Right. Oh. So as people are using your asset and buying and selling your asset in the markets, um, you end up collecting some fees off of that. And the goal there is then to make it so that the creator and the decider of the prediction market has no skin in the game. Um, if the decider has a financial motive, right, to say, well, I know technically like cars did sell for a dollar, but I took the side that says they won't. Yeah. We don't want to have that situation. Um, and of course, you know, you can do everything you want to mitigate that such as, um, using a multi-sig and stuff like that. But ultimately the asset is designed to avoid a incentive to cheat for the decider. Now, of course, the decider could always go into the markets and speculate anyways, and nobody can really know that he did it because he could just use some other account, but it's designed so that that's not necessary. So as the creator of the prediction market, you should be able to make a profit, um, if your prediction market is popular, regardless of what anyone else does shoot. Okay. And do I set those fees ahead of time? Like the trading fees or are those default in the system? Um, you will set those ahead of time. Those should be in the smart coin options tab, I think. Okay. I see here, uh, a feed lifetime in minutes and the minimum number of feeds. What's, what's the feed bit? Okay. So feeds are for normal smart coins. Um, you don't need feeds for a prediction market. Hmm. Okay. Um, so if you go to the flags tab, you can set the market fee and, uh, you're going to want to switch on the enable market fee and then you can set the percent that you want to charge on each trade in the market with your asset. Okay. How much you get. Um, and is there like a standard because it's asking me like the percentage that I want to put in, um, what do I want to consider in choosing this percentage? So, um, probably about the, I mean, you can charge whatever you want, and basically it's just a question you're saying, like, I think people are going to find my asset or my prediction market, um, engaging enough that they're going to pay this fee, um, because they want to use the prediction market. Um, but, uh, the other thing you could do is you could go to the, uh, prediction markets list and just look at what some of the other fees are that people are charging and just kind of get an idea for, um, what are successful prediction markets charging right now. Now, one thing you do have to be aware of here is that the fees that you're collecting are in your asset, they are not in collateral. Okay. Um, which actually does sort of make you a speculator. So as the issuer, what you're going to want to do is sell that, um, asset as you accrue it in fees, you're going to want to sell it back into the market to whoever is buying for whatever price and get the collateral out. And you probably want to do that before you, um, decide it because otherwise you have exposure to the decision. Hmm. So the fees are paid in car coins. Right. Hmm. Okay. All right. Well, I mean, I think, I think that, uh, tells me what I need to know, so I guess I'll just do some more dappling here. Well, thank you for your time, Nathan. And, uh, yeah, that's it. Thank you. All right. All right. Bye-bye. Bye. Today's episode is brought to you by BitHalo BlackHalo, a double deposit escrow client that is compatible with Bitcoin and Blackcoin. In addition to double deposit escrow functionality, you'll also find that BitHalo BlackHalo contains a built-in marketplace. You can download the client for yourself at blackhalo.info or bithalo.org. And now friends, I'll tell you, I did not create the car coin prediction market asset token today. That didn't seem like a wise way to spend BitShares, but there undoubtedly are wise ways to spend BitShares. So give, I would be interested to hear your ideas for a prediction market that could be created using this software that, hey, maybe some of us would want to come and join and pay you some trading fees or something. Leave your ideas in the description, comment section below. Have a good day. Today I've spoken with Roger Vier, the one and only Bitcoin Jesus. It's a decentralized prediction market, which is really exciting. And basically what it has the net effect of doing is we can, with this tool, we'll be able to harness the wisdom of crowds. And it basically gives us, it's almost like a window into the future.