Stox vs. Gnosis vs. Augur

Third time’s a charm? what is Floyd talking about?

I was left with a sour taste after the Gnosis ICO. The concept of prediction markets on blockchain has a lot of merit, but selling only 4% of the coins? That’s just about the most centralized decentralized project I’ve ever seen.

So who’s going to be the first to build the first actually working prediction market? Gnosis and Augur have been waddling along for several years and actual usage is still far in the horizon. There’s criticism about both projects and now Stox comes along. It seems Stox paid close attention to learn from past mistakes and address some criticized flaws in both Augur and Gnosis.

An actual utilization for the coin?

The ICO hype at it’s finest. If what you’re doing is selling a token, you’re going to need to give it some purpose. What the hell does it do? why would anyone need it? or is it just an excuse to raise money?

Gnosis dropped the ball on this one. The tokens aren’t really related to prediction markets in any meaningful way.. they’re completely generic and could be applied to any fee-based venture. WIZ tokens are just a way to pay fees. And they’re not even the only way, you can pay fees on the platform in ETH. Why would anyone use WIZ then?

And then there’s GNO. What does it do? gives birth to WIZ. It’s pretty much just a mechanism that pays a dividend, the SEC is going to love this one. It will be interesting to see how GNO fairs in US-based exchanges with the new regulations that are coming along.

What about Augur? REP tokens at least have a purpose related to prediction markets. But they’re focused on a problem that nobody really cares about. Allow decentralized oracles to make decentralized reports? Are people going to buy REP in order to report who won in the soccer match?

A well-designed token grows in value if it generates demand. Take a look at ETH, people need ETH to run contracts (and invest in ICO’s running on these contracts) so there’s demand and the value goes up.

What’s the premise of prediction markets? betting on event outcomes. That’s the economy of this concept and that’s what most people are going to use these platforms for. In both Gnosis and Augur, you bet with any of the popular tokens — ETH, BTC or whatever. So the main action is happening with another unrelated token? Are you trying to generate demand for ETH?

Stox play a different game and goes all in on STX. There’s no other token. You want to participate in an event, you buy STX. I can understand the ongoing demand here.

What about actual users? traffic?

People are always complaining that the current blockchain solutions aren’t scalable enough. “Ethereum can only do ~10 transactions/sec”. Well, how many projects today have a working product that actually needs more due to real usage? The ICO’s themselves are probably the only one.

The biggest plague of consumer-oriented blockchain projects is that nobody really knows how to bring traffic. It’s a well known rule in the consumer app space that traffic is usually what kills startups. You can have the best product in the world and the finest technology, but you fail to market, you fail to get traffic in a sustainable way — and your project dies.

What is the greatest risk for a prediction market platform? that nobody is going to use it. Traffic.

This should have been a central part of the discussion in both Augur and Gnosis. Both have teams that are well versed in crypto, but technology doesn’t win the battle here.. what are their plans to get traffic? is there anything more solid than just saying “we’ll allocate money for partnerships”?

Augur and Gnosis have both been in development for years and raised significant funds. How many actual users do these platforms have?

Stox actually has a decent answer here. The team has real experience in bringing traffic to similar projects, relying on experience from invest.com that did demonstrate ability to market in the real world and get actual mainstream investors to use their non-blockchain platforms. If invest.com manages to bring its existing customer base to use Stox after launch, they’ll be in a position to immediately win the real usage battle.

Another improvement is that unlike Augur and Gnosis, the project actually took the time to bake a traffic and growth plan right into the model. Crypto projects all revolve around incentives. They design a token that creates monetary incentives for behaviors they deem important. If traffic is such a key part, it should be reflected in the model. Stox have a provider/operator syndication mechanism that incentivizes companies like invest.com with an active customer base to bring their traffic into the network for a cut of the fees.

What is the elevator pitch?

If you had to sum up each of the projects in one sentence, what would it be? What is the main idea? what is the team trying to achieve?

For Augur, it would probably be something like “theoretically sound model for pure decentralization in prediction markets”. The project is focused more about theory than practice. As long as there are proofs that the theory holds up, it doesn’t matter if it’s even practical. That’s why event resolution of 8 weeks comes up as a serious part of the solution. Who’s going to wait 8 weeks to know if their bet on a soccer match panned out?

For Gnosis, the pitch would be something like “we want to be Google, collect knowledge and be able to make quality predictions”. Which is a nice concept in theory, but it doesn’t generate a lot of value in the short run. I don’t know if prediction markets is the way to build the Google of the blockchain. It sounds nice in theory that people will buy insurance by creating prediction events about their own misfortune, but it doesn’t sound down to earth.

Stox’s pitch would be “we want to create a business around prediction markets where everybody could make profit”. I think a heavy business focus is healthy. Prediction markets can be turned into a business. Operators will profit from acting as market makers, users will profit from making knowledgeable bets.

We’re all here eventually to make money. A pitch that incorporates a business plan is definitely a step in the right direction.

Execution?

Another pitfall of too many crypto projects lately is faulty execution. Too many projects are being built by teams that lack the experience to manage the amount of money flowing in.

Just a few recent announcements about Augur show some trouble in this regard. REP and solidity migration, founders leaving and so forth. How can you guard against these sort of things? Maybe it’s the time to set a higher standard and expect more solid teams with experience of running a big business / manage millions of dollars.

Greed?

Last but not least.. like we said before, there’s a lot of money flowing in the crypto space at the moment. It’s easy to lose a sense of what’s fair and what’s appropriate. Decentralized platforms like Gnosis cannot sell 4% of the tokens without explaining what’s the rest is for.

Considering that Augur is at $202M market cap and Gnosis at $225M market cap, Stox show up with a very down to earth approach. Cap is at $30M. Selling 50% of the tokens. These are numbers I find easier to swallow.

Maybe Floyd knows what he’s talking about after all.. :)

Some background materials

• Gnosis website and white paper
• Augur website and original white paper
• Stox website and white paper