However, the transition from the abstract to the concrete has not exactly been smooth, both from the perspective of UI as well as that of functionality. Key issues have surfaced around conflict resolution and ambiguity. In the case of centralized prediction markets, ambiguity and conflicts are unilaterally resolved by the company that creates the markets. If you do not agree with the interpretation of an outcome with your centralised betting exchange you can always take them to court where presumably, folks trained in interpreting such ambiguity in the written word can attempt to make a decision based on the context, as well as precedence. Who plays the equivalent role in a situation where ‘code is law’, which higher court shall settle disputes resulting from ambiguous interpretation of events that are determined at their end point in the austere math of code but are defined in the beginning in the inevitable ambiguity of the spoken word.
Both in the case of Augur and Veil, human interpretation errors are leading to invalid outcomes and resulting in people who have bet on the right outcomes losing money.
For example, a few months ago, one of the markets that garnered a fair bit of attention was “who would control the House after the midterm elections?” and the wagerers had a binary choice between the Democrats and the Republicans. Crucially, the event resolution was set to one day after the day of the election. When the results were out, Democrats gained 40 seats and were the dominant party in the House. So, ideally you’d expect bettors who predicted Democrats to control the House to win. However, if you were to ignore the spirit behind the market created and go solely by the words in the market’s description on their face value, Republicans would be the right answer because the newly elected House representatives would only be officially elected into the House a few weeks after the midterm elections date. So, for the period between the election date and the date when newly elected members were sworn in, technically Republicans were the dominant party in the House. That sounds awfully absurd, but is a natural outcome of people trying to game the system and undermine the spirit behind the betting market contract.
These ambiguous markets always end up with people betting on the losing side coming out on top because once the market is deemed invalid, the total money at stake is equally distributed among all the participants. Augur plans to address this issue of invalid markets in its upcoming summer upgrade. This is also a reminder that there is a lot of work yet to be done for DApps to fully displace centralized applications. It also points to the fiendishly difficult task of designing DApps - it is a proper mix of a range of skills from economics to law to finance to technology.
You can deep dive more into this subject on this thread on twitter by @richardchen39.