Cryptocurrency news website Coindesk reported recently on the ICO of Ethereum-based prediction market Gnosis, a platform which enables users to bet on future events by asking and answering questions regarding potential outcomes of events. Raising over $12 million and ending in the first 15 minutes. The only other ICOs which have sold out in such a short time have been First Blood, a blockchain eSports platform, and blockchain entertainment studio Singular DTV.
Ironically, the format that this crowdsale took – called the ‘Dutch style auctioning system’ – was intended to encourage drawn out investment, as the price per token fell with time, making it cheaper to invest by waiting. As is so often the case when dealing human behaviour, this didn’t pan out. Instead, investors rushed to buy tokens as soon as possible, despite the high price.
The sale was limited to a set value of ether or a set number of tokens, whichever came first. Due to the price of the tokens starting out high and the huge rush to buy them, this led to the value cap being reached with less than 5% of the tokens being sold – leaving the vast majority of tokens under the control of the platform founders. This has given rise to an awkward situation where the potential value of Gnosis could be stated at over $300 million (if the remaining 95%+ of the tokens were given the same value) but less than $13 million has actually been invested.
This has prompted a backlash from a number of people on irrational or reckless investors, or the failure of the Gnosis team to limit the amount of tokens it could retain control of; others believe it shows the potential that investors see in blockchain technology and prediction markets in particular. Coindesk noted that the value of the Gnosis platform has therefore started out at double that of Augur, a decentralized trading exchange platform that rewards users for correctly predicting events.
Gnosis seeks to use the ‘wisdom of the crowd’ in order to predict events in an alternate approach to listening to the opinion of experts and polls who have proven wrong on a number of hot topics recently, including Brexit and the US elections. The scope of prediction markets covers many different areas and Gnosis intends to provide a platform for building decentralized prediction market applications that humans or AI can leverage. It will also utilise oracles - where software, hardware or humans can highlight and authenticate real world events and submit the data to the blockchain to enable a better reflection of real-world events.
The founders of Gnosis see the platform having a big impact on the gambling sector, disrupting a number of competitors: sports betting exchanges like Betfair; regular bookmakers such as William Hill; option markets like Nadex; and potentially other financial markets. The level of interest and potential suggested by such a successful ICO – even when it was designed to dissuade from this kind of rapid investment – may indicate that existing businesses in the gambling industry have cause to worry. The fact that one of the other top three fastest selling ICOs was another gambling platform reinforces this idea.