2017/01/29 by Iddo Bentov, Bentov, Iddo, Alex Mizrahi +3 · 1 citation
Computer Science · Decision Sciences · Economics, Econometrics and Finance · #Auction Theory and Applications #Blockchain Technology Applications and Security #Cryptography and Security (cs.CR) #FOS: Computer and information sciences #Sports Analytics and Performance
paper · pdf · doi:10.48550/arxiv.1701.08421
openalex publication_date 2017/01/29 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We consider a prediction market in which all aspects are controlled by market forces, in particular the correct outcomes of events are decided by the market itself rather than by trusted arbiters. This kind of a decentralized prediction market can sustain betting on events whose outcome may remain unresolved for a long or even unlimited time period, and can facilitate trades among participants who are spread across diverse geographical locations, may wish to remain anonymous and/or avoid burdensome identification procedures, and are distrustful of each other. We describe how a cryptocurrency such as Bitcoin can be enhanced to accommodate a truly decentralized prediction market, by employing an innovative variant of the Colored Coins concept. We examine the game-theoretic properties of our design, and offer extensions that enable other financial instruments as well as real-time exchange.