How to Use the REP Token on Augur
Augur has recently released the 1.04 version of its App, meaning it is live on the main Ethereum net. In just a few days, almost 200 bets have been placed.
Admittedly, some parts of Augur are confusing. Because you can place bets completely with Ethereum, it may not be immediately clear what the uses of Augur’s REP token are. The following is an explanation of how to obtain and use REP.
REP as a Token
REP is the unique token usable on the Augur betting platform. Its full name is “Reputation,” and that’s the best way to view the token — as your reputation.
For every action you take that uses REP, you are literally staking your reputation on it. For every action in which you gain REP, it is because you added value to platform.
Although using Ethereum is how you buy or sell shares on Augur marketplaces (bets), REP is what keeps the Augur infrastructure growing and running smoothly. It’s the glue that holds everything together.
REP can be used to:
- Create a bet
- Dispute a bet’s outcome
- Purchase participation tokens
And it can be received from:
- Purchasing it on an exchange
- Being right about a dispute
- Reporting on a bet
Let’s look closer at all of this.
Creating a Bet
Once you are logged in to your account, you can create a bet. If you don’t own any Ethereum or REP yet, buy some at an exchange like ethex.market (shameless plug). Right now, you will need around 0.35 REP, or about 10 USD worth, and a variable amount of ETH to create a bet.
You can bet on anything that you want to on Augur. It’s completely decentralized, so there’s no authority which dictates what can/cannot be betted on. But don’t confuse this lack of authority with chaos — Augur is set up to ensure that users are penalized if they create bad or invalid bets.
Once you come up with a question to bet on, you can set the possible outcomes, how it will be reported on (resolved), and its liquidity. If you want a detailed explanation, check out this video I made showing how to create a bet.
There are a few fees to create a bet on Augur, so I’ll explain how each one works.
Validity Bond: This is a bond that is meant to ensure that users do not make bets that will be invalid. If the bet that you create is valid, then the entire bond is returned to you.
A bet is invalid if its outcome does not fit any of the outcomes set for the bet. For example, if your bet was whether the sun over Toronto would be green, blue, or purple on Tuesday, but it was actually yellow, then your bet would be invalid. Bye-bye Ether!
No-Show Bond: This is the only time REP is used in bet creation. The no-show bond is meant to bind the designated reporter to reporting on the outcome of a bet when its reporting date comes up.
If the designated reporter (which could be the bet creator, or someone else) reports on the outcome within 3 days of its expiration date, then the bet creator recoups the bond. If the designated reporter does NOT show up to report on an outcome, that amount of REP is placed on the public market of the bet for anyone to claim by reporting on the outcome.
Ether: This is the amount of liquidity that you add to the market (the bet). At the expiration date of the bet, this is distributed to the winning bettors. Adding liquidity to your market attracts more people to it, but it is a completely optional expense.
Est. Gas: This is the cost of processing the “transaction” of creating the bet. This is not optional and is not recouped.
First Public Reporter
As stated above, if the designated reporter does not report on the outcome of the bet within 3 days of the reporting window, then the no-show bond is put up for grabs for anyone. This is called the Open Reporting Phase, and the first person (first public reporter) to report on the outcome during this time receives the full no-show bond (which is in REP).
If you are vigilant and quick to the draw, this is another way to receive REP, and thus increase your reputation by quickly reporting on open bets.
Disputing an Outcome
For 7 days after a bet expires, it enters a dispute round phase. During this time, if any person doesn’t agree with the tentative outcome (determined by the designated reporter or first public reporter), they can dispute it. To do this though, 2x the amount of REP that was in the no-show bond must be staked. This could be staked by one person or multiple.
Each outcome has a dispute bond. So, if there were 6 outcomes, and the first is tentative (under review), the other 5 each have their own dispute bonds, and their own chance to be the successful outcome.
There is one main incentive in disputing outcomes: if you successfully dispute an outcome you receive 1.5x the REP that you staked. For example, if you staked the entire .6994 REP, and successfully disputed, you would receive around 1.05 REP.
If, while on the dispute tab, you don’t see any bets that you want to dispute, then you can purchase participation tokens.
Participation tokens can be redeemed for ETH as a portion of the reporting fees during a Fee Window. There is one fee window per week (7 days), and at the end of it, reporting fees are awarded to reporters, disputers, and people who hold participation tokens. This can be used as a way to indirectly change REP into ETH through Participation Tokens, because 1 participation token is equal to 1 REP token.
So why should You get REP?
Obviously, REP helps keep Augur running, but what’s in it for you? Other than being able to fully use the Augur app, and changing REP into ETH with participation tokens, REP can be bought and sold on a few exchanges, like Ethex. On an exchange, you can directly change your REP into Bitcoin, Ethereum, and other cryptocurrencies.
Augur is one of the most interesting projects on the Ethereum Blockchain right now, and it’s growing rapidly. If you haven’t already, download the app from the Augur website, and check it out!