Market Creators
Anyone can be a market creator. This is a necessity for Augur to be censorship resistant, but that also means that not all markets are going to be high quality. There are many factors that go into creating a “good” market, and it can be a bit tricky. The number one problem people have when trying to create valid markets is poor wording. You may have a clear intention in your mind about the question you want to ask, but some of that intention can be lost when writing it down, or there may be some other factors or interpretations you hadn’t considered. Great care is needed. See the examples page for markets that have been worded well in the past. In addition, a check sheet has been written that you can go through before you submit your own market.
A market should ask an objective question about a future event that is publicly verifiable in some way. Common topics include the outcome of sports games, political events, financial trading, derivatives, insurance, bug bounties, the weather, and more. Augur cannot answer subjective questions based on opinion.
As a market creator you have the opportunity to earn money by setting a market creator fee on the market. This fee is a %, typically in the range of 0-5%. This percentage is the amount you get whenever SHARES in your market are redeemed for ETH, before or after the market has resolved. You can also do “market making” where you provide liquidity (i.e. orders) in the order book for both sides of an outcome, earning profit on the spread. This attracts more trading in your market, providing you more opportunities to capture a cut with your market creator fee.
Creating a market does cost a respectable amount of Gas on Ethereum, typically on the order of a few US dollars depending on Gas prices at the time. There are also a few different bonds you have to provide up front which are returned to you if you create a valid market and report on it quickly and correctly at the market’s end time.
Market Parameters
If you think you have an idea for a market and want to create one, there are a few parameters you must be aware of that are required to create a market on Augur.
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Market Question - The question that you want the world to predict, and it is also the title of the market. It should be about something in the future since traders won’t bother with events that have already happened. Put a good amount of thought into this, since Augur has limitations and can’t answer everything. You should be picking a question where you are certain (beyond a reasonable doubt) that the answer will be publicly verifiable by the market end time (also called market expiration). The question can’t be subjective or ambiguous, there needs to be one final truth that Augur reporters can agree on when the time comes. You don’t need to put every little detail into the title, as there is more room for lots of text in the “Additional Details” section of the market. The title can short and catchy to attract attention, but it also can’t conflict with what the rest of your market parameters are. Market questions typically have some sort of time requirement, like “Will X happen by Y date?” - Be careful with date/time formatting and put in a timezone since Augur is a global platform, otherwise UTC time will generally be assumed. Putting the timezone in the additional details section is also acceptable.
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Category/Tags - Used by the Augur UI to help sort your market and make it more findable by other users.
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Market Type - Augur currently supports three different kinds of markets which determine the potential answers to your Market Question: Yes/No - The simplest option, and the best to start with if you are new. The only answers to your market question are “Yes” and “No” (or Invalid, but that is not a tradeable outcome in version 1 of the Augur smart contracts). Selecting this option means you need to phrase your Market Question such that the answer is yes or no. Presently, the Augur UI only shows the order book for the “Yes” option, which helps consolidate liquidity and keeps things simpler in the UI which is another benefit to beginners. Multiple Choice / Categorical - You get to pick from 2 to 8 possible answers, and there will be a separate order book for each. If you create this type of market, be careful to consider full coverage of all the different possibilities the answer to your market question could end up being. A simple trick is to include one of your options as “Other”. Numerical Range / Scalar - These are more complex and will not be covered by this guide in detail. Avoid these until you are much more comfortable with Augur and have used it extensively. You will be provided with a few extra parameters: A min and max value (the bounds of the range), a denomination (dollars, degrees Celsius, etc.), and the precision.
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Additional Details - A large text field for you to put in as much detailed information about the market as you would like. Use this field to provide all of the pertinent and meticulous specifics about what you are asking about. Sometimes getting across all the details can be very difficult, so you can also use this to clarify the intent of the question just to guard against edge case interpretations that you hadn’t considered at the time you wrote the market question. You could also use this field to provide additional resolution source details or how to find the answer to the question.
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Resolution Source - This can either be “General knowledge”, or “Outcome will be detailed on a public website”, in which you then provide the public website address. You should probably default to using general knowledge for most questions, unless it is likely that multiple answers will be possible and you want to use a specific web site as the singular answer. This is common for cryptocurrency financial markets, where different exchanges have slightly different answers for what the price of a cryptocurrency is at a specific time. Note that the answer to the market question needs to be able to be historically referenced by reporters, potentially months after the market end time (due to the dispute and forking process). Some resolution sources might give you the answer to your question, but only for a short time period. This can present issues for reporters looking up the market answer later on, and can result in the market resolving as invalid. Sometimes an archive tool like The Internet Archive can be used to find the historical answer, but it is not 100% reliable. It is possible that an archiving tool specifically for Augur may be created in the future to improve the reliability of using specific web sites as resolution sources. But for now, try to stick to general knowledge markets if you are new to Augur.
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Designated Reporter - The Ethereum address that is allowed to do the initial report for the market to determine its initial tentative outcome. Note that this address cannot unilaterally decide what the answer to the market is, as any REP holder can dispute the answer. The designated reporter can be the same address used to create the market, and it most commonly is. There is a “no-show” bond that must be put up by the market creator which is lost if the designated reporter doesn’t show up on time (within 3 days of the market end time) to put forth the initial tentative outcome.
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Market End Time - Also known as “Market Expiration” or “Reporting Start Time”. This is the time where the market enters the reporting phase to determine what the correct answer is. The answer to the market must be known before the market end time. If the answer to the market is not known by this time, the market will be invalid. It is recommended to set the market end time well after the event is expected to occur, to give plenty of wiggle room for unexpected delays. Potential delays can vary dramatically between domains: sports games usually resolve within a day but political election results can be delayed for weeks. Note that timezones also matter. If a timezone was not specified in the market question/additional details, UTC will generally be used. The Augur UI will convert timestamp fields to your local time for display, but are actually stored in UTC on the blockchain. If you don’t want to think too hard about this, just set the market end time at least one day after the answer to your market question should be known.
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Market Creator Fee - This is where you get to potentially make some money. This fee is your compensation for asking an interesting question on Augur that people want to trade on, and incentivises you to advertise your market. This parameter is a percentage cut that you will receive from traders settling their market shares for ETH with the market itself, which can happen during regular trading (if both traders in the trade have shares they want to cash in for ETH) of a non-finalized market and also when a market is finalized and the winners want their winnings. Note that market creator fees that are 5% or greater will be filtered out by default in the Augur UI, since it is unlikely to be a useful market for traders to trade on. Typical fees are usually set somewhere around 1%.
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Initial Liquidity - This can be done during the market creation process or afterward. If this is your first market you may want to skip this step during market creation just to keep things simpler for yourself. A market with liquidity (i.e. open orders) is much more attractive to traders and can help you get your market some attention. This is a complex topic, so if you want to learn more you should look up “market making”. The basics are that you want to estimate the probability that the event will occur and place orders above and below that estimated probability. If you get lots of trades on one side, you adjust your orders to compensate. This requires vigilance over the state of your market, and is aided greatly by programmed bots/tools. Note that your open orders stay in the order book, even if the market is in reporting or finalized. They should probably be cancelled before that time, otherwise it may be “free money” for someone else.
Required Bonds
Creating a market in Augur requires some capital to be locked up, which is used to incentivise desired behaviors in the platform. Assuming you play by the rules and do what you are supposed to do, these bonds will be returned to you.
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Validity Bond - Payable in ETH. You can get this back once your market resolves to anything other than invalid. This help prevent market creators from creating poorly defined markets.
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No Show Bond - Payable in REP. You can get this back once your designated reporter (likely the same address as the market creator) shows up in time to give the initial report of the answer for the market. There is a time limit to do this, which is currently set to 3 days after the market end time.
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Designated Reporter Stake - Payable in REP. When the designated reporter does the initial report, this bond is put up to incentivise other reporters to make sure the answer is correct. If reporters think the initial report is incorrect, they can dispute the answer to earn the designated reporter bond as a reward. If the initial report was found to be the correct answer (disputed or not), the bond can be returned to the designated reporter.