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Truth Markets



Last Updated: 9/14/2009

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Signup Date: 3/19/2006

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Monday, October 09, 2006 
4:53 PM 
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Monday, August 07, 2006 

Category: News and Politics
7:45 PM 
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Wednesday, May 24, 2006 

Category: News and Politics

Ironic and apropos at the same time, this Truth Markets account received the following private message, referring to one of its "Friends":

Did you know that ______ is a deadbeat dad that owes over $5000 in back child support?

You should get better friends.

This is the raison d'etre for Truth Markets.  Wouldn't you like to know whether this was true or not?  And wouldn't you like to see somebody's reputation punished, whether it be the dad for being a deadbeat or the Claimant for slander?



4:01 PM 
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Monday, May 01, 2006 

Category: Goals, Plans, Hopes
If you already understand the concept and objections raised over the original Truth Markets proposal, you might want to skip down to the Proposed Solution section below.

The Trouble with Truth Markets

The strongest argument against the viability of truth markets as I have proposed them is the argument that says there is nothing to tie claim prices to truth value.  The counter-argument is by analogy to the stock market: stock prices do reflect actual value despite the tenuous-at-best relationship between price and investor returns (usually described as some combination future earnings, dividends, potential company sale value, etc).  The annuity swap was an attempt to create underlying "truth value" in a Truth Claims Market (TCM).  The thought was that by making it financially expensive to hold -- in both senses of the word -- a false belief, and conversely by making it profitable to have money currently invested in a truth, that the market would be efficient and the equilibrium price would correspond quite well to the general consensus of truth.

The problem with the stock market analogy is that currents markets -- stocks and truth claims alike -- have a self reflective aspect that acts to peel away the price from the value for brief, and sometimes extended periods of time.  Not only are you trading on what you believe the current underlying value is but also what you believe the market price will be when you are ready to get out.  The greater fool, market bubbles, Keynsian beauty contests, are familiar terms to describe the phenomenon.

Even those who believe (as I do) that for most truth claims of interest there would be a strong tie, we have to admit that there is something unsatisfying and unsettling about the likelihood of prolonged "truth bubbles" and the converse problem, low liquidity.  The issue as I see it is that the nature of informational feedback loops in currents markets is volatility-inducing rather than stabilizing.

Back to the Futures 

So why not use futures contracts for the TCM instead of currents?  As futures near expiration, the self-reflective component diminishes rapidly; the specter of judgment looms large and the possibility of finding the greater fool approaches zero.  Also, futures can always proxy for current truth claims by couching it as "Will it be discovered before [expiration date] that TC was TRUE at [current time]?"  The problems with using pure futures for the TCM mission are both ideological and practical.

On the ideology side, human judges are corruptible, full of personal agendas and cognitive biases.  Even panels of judges working independently are susceptible with enough at stake.  Moreover, though it is technically true that futures contracts can be crafted to speak of the present, it requires setting an arbitrary judgment date.  Once the judges and the judgment date are known, its hard to believe that the process could remain impartial and free from influence given enough money at stake on the outcome of a judgment.   

Practically speaking, the coordination and scalability problems are real, not only for judging claims, but also for claims approval and judge qualification.  Plus, to simulate a true currents contract (e.g. "the government is doing a good job") using futures requires an indefinite series of listings ala option chains.  Ideally, judging would happen as frequently as possible, but the more frequent the judging, the more cumbersome the overhead and complexity.

The Baby Crying in the Bath Water

I still contend that the emergent information from the Claimant Bond Market (CBM) is really the most important aspect of the Truth Markets concept.  It is clear that good decision making depends not only on truth, but also on relevance.  We need trusted filters (human or otherwise) or we would be paralyzed by the ever-increasing deluge of information.  Now that the informational haystack is large, tools to bail the obvious hay are just as important as a good set of eyes to spot the needle.  If a reliable claims market is like prescription eyewear, the CBM is a metal detector that keeps you from having to sift through every piece of straw.

But CBMs themselves require an unbiased method of determining who the truthiest, least biased people are.   Markets are not the only mechanisms available for this, they just happen to be very good at eliminating most forms of human bias, both conscious and unconscious, by punishing bias holders where it hurts the most: their wallets.

So why not just vote on who our truth filters will be?  Or better yet let everyone choose their own?  Essentially that's the world we live in today.  The problem is that even if we were able to objectively determine for ourselves (or agree upon) who is truthiest among us, the very nature of bestowing such power corrupts those bestowed upon.  The competitive marketplace of the CBM continually outs the truth-tellers from their biased and corrupted counterparts, even when those counterparts are future versions of themselves.  Best of all, the individuals selected by the CBM as being high T.Q. need not be actively or even knowingly(!) involved in judging claims for the proposed system to work.  In fact, the system may be least prone to bias when claimants are unwitting. 

Proposed Solution

I propose to take the best aspects of ideas futures and truth currents markets to construct the system that best achieves the two goals set out for the Truth Markets concept at the outset.  Its worth noting that if the TCM is robust, then the CBM and ADM should behave as intended.  Or at least move the discussion to the next level.

Let Truth Claims (TCs) be simple contracts that wind up worth exactly $0 (FALSE) or $100 (TRUE) depending on a future Judgment.  TCs come in two flavors: Futures and Currents, the only difference being that Futures have no Author but do have a Judgment Time Window, and currents have no Judgment Time Window but do have an Author.

For Current Truth Claims (CTCs) the Judgment Time Window is determined as follows: each day a portion of the total outstanding CTCs are selected randomly by the system for Judgment.  The Judgment Time Window for each selected claim is randomly chosen to fall sometime that day.  Neither piece of information is known or knowable ahead of time.  Its a giant pop quiz.

When a Judgment Time Window opens for a claim (be it Future or Current) the judges are determined by the system as a randomly chosen subset of all registered market participants.  (Not only is it a pop quiz, you dont know if you are going to take it once it happens).  If you are chosen to judge a claim, you have three choices: TRUE, FALSE or abstain.  And if you are absent during the Judgment Time Window (or your virtual chads are hanging) you will be auto-abstained.  Votes are securely and privately tallied by the system, and the side with greater than 50 percent of the non-abstaining votes is declared the winner.  All contracts on the claim are settled, and prices in the derivative markets are adjusted.  Settled CTCs are immediately made available for future Judgments.

Benefits of the Proposal

By choosing the CTC judgment date randomly, we reduce the corruption potential by making prolonged propaganda campaigns expensive and impractical.

By choosing judges randomly from a subset of total potential stakeholders, we further reduce the profitability of corruption by diluting the efforts of those who would seek more direct means of market manipulation, i.e. you can't bribe 'em if you can't find 'em.  But equally importantly we make the system practical by dramatically reducing individual judgment duty and by making the judgment process as simple as a quick IM chat exchange.

Open Questions

What portion of the total outstanding claims is chosen for Judgment on any given day?

A natural choice would be 1 in 365 so that the mean time to judgment is fixed and tangible.  Varying this rate though may be useful for fine-tuning the system dynamics or keeping individual judging burden within an acceptable range. How long is the Judgment Time Window? Empirical testing required.  My feeling is to keep it as short and unpredictable as possible while still allowing a critical mass of judges to comprehend and consider the claim thoroughly.  The longer the window, the greater the chance of corruption.

What portion of the total registered market participants are chosen to judge a given claim?

Theres no reason it couldnt be 100%, but the higher the percentage, the bigger the individual judging burden becomes.  Assuming a minimum threshold for diversity of opinion, it would be better to keep the number as low as possible, and allow each claim to be more carefully considered.  Also, the higher the percentage, the more likely a tragedy of the commons, wherein individuals compete to the point of dysfunction over the amount of total influence they hold.  In other words, if you know you only have a 10% chance of being chosen, it might not be worth skipping dinner and other healthy activities on the off chance you could be called to duty.

Why not limit the potential judge pool to only those who have a stake in the particular claim?

This increases bias and corruption potential dramatically, even if you dont know who the other stakeholders are.  Its important to have diversity for overall accuracy (see Wisdom of Crowds).  Plus you might run into a case of pathologically low judgment liquidity, say in the instance where there is only one outstanding contract: the one between you and the person who took the other side.

Is voting done purely democratically, or is it weighted somehow, e.g. by each judges NAV on the CBM?

Interesting question.  Could be beneficial for overall truthiness, but also could lead to destabilizing feedback loops.  Empirical testing required.

What happens with the annuity swaps, those were cool?

While they didnt ultimately solve the truth/price grounding issue, they could be useful for canceling out time value premiums.  Time premiums would be inherent in both FTCs and CTCs (essentially CTCs are time integrals of FTCs, much like continuously compounding interest integrates a monthly series of compounding).  And since the point to TCMs is to tie price and truth as closely as possible, theres good reason want them canceled.
5:30 AM 
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Thursday, April 13, 2006 

Category: News and Politics
The most compelling critique of Truth Markets to date goes something like this: since there is no future outcome or judgment tied to claims, there's no tie between claim value and truth value.  The critics rightly point out (I think) that there's no reason in theory that adding the annuity should help this situation.  My argument is not one about theoretical markets though.  We often find that market dynamics go against theoretical predictions until some underlying and confounding truth about human nature or group dynamics gets incorporated into the theory.  And what we know about securities markets in practice is that the formal tie between stock price and company value is tenuous at best, even under the most generous interpretations.  Yet the markets do seem to work surprisingly well, and if you ask the average investor what they are buying when they purchase $1000 worth of AAPL stock, they will almost always say or imply that they are buying a piece of the company or its future value.

I was discussing the question with a friend who is really good about grounding big ideas has this to say:

Kevin Dick wrote:
> I think the first thing you have to decide is whether we're talking a
> difference in degree or kind when comparing truth markets to
> securities markets.  My personal opinion is we're talking a
> difference in degree.  Even with securities, there is no ultimate and
> final arbiter of the "answer", except the market.  Yes, there is some
> reasonably hard information to work with such as inflation, real GDP
> growth, and corporate profits.  But those are subject to
> uncertainties in measurement and trustworthiness.  The market seems
> perfectly capable of dealing with those uncertainties.  Moreover, the
> coupling between these hard factors and the price of any individual
> security seems fairly flexible.  Just look at the variance in P/E
> ratios and variance in ratios of currency values to inflation,
> interest rates, GDP, and purchasing parity.
>
> If you accept that we're talking a difference in degree, then the
> only question is whether there's some critical mass of hard
> information necessary to make a market work.  Mathematically, it
> would be something like an inflection point or attractor.  I'm not
> aware of anyone having demonstrated this one way or the other.  Given
> the value people place on things like fashion, precious metals, and
> fiat money, I find it hard to believe that you can't get away with
> nearly all of a security's value being tied to belief in the future
> state of the market.
>
> If you accept that belief in the future state of the market is what's
> necessary, then we're back to standard market issues like liquidity
> and volatility.  My guess is that assertions that aren't verifiable
> won't be very liquid or will be extremely volatile.  That will be
> what's important, not whether the current price is near 50.  Most
> serious traders will simply stay away from them.  As always, the
> market will tell you whether you have a "good" assertion or not.
> "The official US GDP growth for 2007 as it stands on Dec 31, 2008
> will be greater than 3%" will see a lot more action than "Jesus will
> arise once again".
>
> Of course, you can have private market makers whose sole function is
> to put forth tightly worded verifiable assertions or take the other
> side of such assertions.  If you have those, at worst, you'll have to
> put in some provisions about "de-listing" an assertion if it doesn't
> meet certain volume or price movement requirements over different
> periods of time.
>
> Just my thought.
>
> Kev

12:58 PM 
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Tuesday, April 11, 2006 

Category: Blogging
12:24 PM 
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Tuesday, April 11, 2006 

Category: Goals, Plans, Hopes
Someone asked privately:

Does your theory hold that people who are actually telling the truth be rewarded with riches? If so society has never been based on such an idea in the past and I applaud your development of the prospect that such a thing can happen!

While telling the truth wouldn't make you rich, trading on truth would, provided that there are people who (a) make claims that are not true, and (b) are willing to put their money on the line to back up those claims.  Currently, both conditions seem to hold, but the effect of the market would be to essentially arbitrage away one or both.

12:18 PM 
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Saturday, April 08, 2006 

Category: News and Politics
Someone privately asked the following questions:

In your example of "Bin Laden is alive and free," how do you determine the price of $85? Is it a ratio of those who beleive it's true, and those who beleive it's false? (eg, 17 say true, and 3 say false -- 85% to 15%)

The price is determined by the market, just like with stocks.  Ultimately the market is simply a mechanism that matches two individuals who want to enter into a contract at an agreed-upon price.  In the truth claims market instead of buying or selling an underlying security (such as a stock certificate), you are essentially betting on whether the claim is true or false.  The bet is in the form of a contract at an agreed-upon "price", where the price is used to determine future contingencies, such as how much it costs to get out of the contract.  When we ask "what's the current market price of the Bin Laden claim?" we are really asking what the last contract was done at, or what it closed at the previous trading day.

What is my incentive to bid against the majority position?

Your incentive is the money you can make when the market price goes against the majority because then you can earn the difference, just like you can in a stock market (thought the mechanics are slightly different for how it's done). 

The more interesting question is what incentive do you have for going with the majority?  After all if a claim is at $95, the upside of trading above that is much smaller than the downside.  The answer in the proposed model is the "annuity swap" feature.  Essentially the person on the minority side pays an ongoing premium to the person on the majority side for the life of the contract, with the annuity being greater the closer the price is to the extreme endpoints of $100 or $0.  If the minority side (what the proposal calls the "wrong" side) wants out of the contract, then they are allowed to buy their way out.  One detail that wasn't specified was what happens if the price moves towards the minority side and they still want out.  More thinking on this part needs to happen since it affects incentives.
10:54 PM 
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Friday, April 07, 2006 

Category: News and Politics
A lively discussion has broken out on Paul Phillips' blog.

3:46 PM 
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Monday, March 20, 2006 

Truth Markets

 

Proposed is a system which achieves two goals:

1.Create an unbiased and trusted rating mechanism for claims that purport to be true statements as well as a related rating mechanism for those who make truth claims.

2. Offer incentive for such a system to be created and self-sustaining without undermining the credibility or impartiality of the system itself.

 

Mechanism #1:Truth Claims Market

 

Create an electronic marketplace for truth claims of all sorts where prices range from $0 (false) to $100 (true).  This is NOT a futures market; all truth statements are evaluated according to the current state of the world.  Each Truth Claim has one or more Claimants who are tied to the Truth Claim for as long as it is listed in the TCM. Here are example Truth Claims that could be on the TCM:

 

Truth Claim: "E = MC2" (a textual quote)

   Claimant: Albert Einstein

 

Truth Claim: A press release from the White House on Iraq's weapons of mass destruction.

   Claimant: George W. Bush, plus each member of his Cabinet

 

Truth Claim: The documentary movie, "Outfoxed"

   Claimant: each individual who has Producer or Executive Producer credit on the film.

 

Truth Claims are similar to commodities contracts however with two important distinctions: (1) the contract is not between a buyer and seller, but between a true-sider and a false-sider; that is, there is nothing being sold, it's more like a wager, and (2)  each contract has a built in annuity that gets paid for the length of the contract.  More about both of these nuances in the FAQ below.

 

 

Mechanism #2:Claimant Bond Market

 

It is impractical to have a market for every Truth Claim that we would like to evaluate.  A good proxy for knowing the market's belief in a particular claim is to know the reputation of the individual or group that is making the claim.  In some ways, the Claimant Bond Market (CBM) is more important than the TCM.  When a news reporter or a corporation or a politician makes a new claim, we want to know how credible this Claimant is.

 

Just like other types of bonds, ClaimantBonds have an underlying net asset value (NAV) and a yield in the form of interest on principal. Unlike most bonds, ClaimantBonds don't have a maturity date, but rather they act more like bond funds, where you can buy and sell shares at any time at the current NAV.  The NAV of each ClaimantBond is based on the current price of all TruthClaims that the Claimant is an author on.

 

 

Mechanism #3:Authorship Derivative Claim Market

 

Many Claimants in the world seem to like to deny that they said something, even when there is public record of their claim.  Records are called into question, allegations fly of misquotes and quoting out of context.  Often there is no credible record to refer to.  In light of this, how do we in good conscience allow a Truth Claim to be listed on the TCM?  And what do we do when the putative Claimant objects?

 

The Authorship Derivative Claim Market (ADCM) allows us to trade on the veracity of the meta-claim that the Claimant actually made the alleged Truth Claim.  ADCs are really just a limited form of Truth Claim, and as such can work using the same mechanism as the TCM itself.  Values range from $0 to $100.  Any time a new Truth Claim is created for the TCM, a corresponding Authorship Derivative Claim is made for the ADCM.  They are always correlated one to one.

 

ADCs are an important ingredient in the formula that computes NAVs for the Claimant Bond Market.

Truth Claims Market FAQ

 

 

Q:How is the TCM different from a commodities market?

In a commodities market there is an underlying physical good such as wheat or gold that the contract is based on.  In a simplistic view, you are buying and selling the underlying commodity when you enter into the contract.  With Truth Claims there is no underlying commodity, so there is really no "buyer" or "seller."  Instead there is a person who believes in the truth of the claim and a person who believes in the falsity of the claim (at least with respect to the current price).  The distinction isn't terribly important, however the annuity is because it is the only underlying value in a Truth Claim.  See below.

 

Q: How is this different than IdeoSphere.com (aka Ideas Futures)?

IdeoSphere.com is for claims about the future, not the present.  Also, it is only for "play money".  When people have to bet their own hard-earned cash they are notoriously more accurate in their evaluation of truth, and they ignore whatever biases they may have. Long-term, those who are good "truth pickers" will have more money to invest and thus have more influence on the market.  Those who are deluded or buy into propaganda pay with their wallets and eventually go broke.

 

Q: How is this different than BetFair.com and World Sports Exchange?

The TCM is very much like these so-called "prediction markets".  The main difference is that prediction markets by definition focus on future events whose outcome is incontrovertible.  The TCM is interested in only current truth, and there is a tacit admission that "objective truth" is not relevant.  As long as the market is willing to put its money where its mouth is, we can accept that a cost of $80 for a Truth Claim means it's very likely true, or mostly true.  Conversely, a cost of $1 might indicate that either a mathematical proof has falsified it, or the Claimant has recanted.

 

Q:What's this about an annuity?

There needs to be some sort of underlying value proposition for both sides to want to enter into the contract.  With a normal commodities or stock options contract, there is some underlying security (be it barrels of oil, bushels of wheat, or shares of stock in a company).  Without an underlying security, the possibility for liquidity as the price reaches one of the endpoints ($0 or $100) diminishes.  After all, what's the incentive for someone to be a true-sider on a Truth Claim that is already at $99? 

To solve this problem, we require that both parties pay an annuity to each other, reconciled frequently at a rate that is proportional to the current market price.  At any time, whichever party is on the "wrong" side (i.e. losing on the annuity) can buy out of the contract for the difference between contract price and market price.

For instance, suppose there is a claim that Bin Laden is alive and free, and the current price for it is $85.  Let's say that you take TRUE and I take FALSE (I believe that he's either dead, or the U.S. military will capture him soon).  No money changes hands yet but we've agreed on the contract as of today.  Assume the price closes at $85 (no change).  Assume that the "reconciliation factor" is 1% per day.  Meaning that I pay you 1% of $85, and you pay me 1% of $15 (i.e. $100 - $85).  The net effect is that I end up paying you $0.60.  Tomorrow, a new Bin Laden videotape comes out and the price shoots up, closing at $93.  Now we reconcile and I pay you $0.86.  This goes on for a while and the price stabilizes at $90 for a month, and you've earned $25 on the annuity portion of our contract.  I lose faith that Bin Laden will be caught, and decide I want out of the contract.  I am on the "wrong" side because I am losing money on the annuity.  I decide to exercise my wrong side option to get out of the contract by paying you $5 (i.e. the difference between the current price of $90 and the contract price of $85).  Thus, in a month of being in the contract you've made $30 ($25 from the annuity and $5 in price change).

As we see, the annuity provides underlying value, and a reason for someone to enter into a contract at the extremes when their upside on price change diminishes.  This assures market liquidity at all price points.

 

Q: What about market manipulation?

Who cares?  The only people hurt are those who allow themselves to be misinformed.  The smart investor does research on a stock before buying.  The smart "claim staker" becomes well informed before buying or selling a Truth Claim.  Eventually the market reaches the "true price" as the misinformation gets traded out.

 

Q: Isn't market manipulation illegal, immoral, or at least fattening?!

The argument has been made by some well-respected authorities that insider trading and other forms of market manipulation should not be regulated as they are in current markets.  Proponents of this view say that information that flows within company walls is really no different than the so-called public information.  Insiders buy and sell stock all the time without being accused of insider trading.  Outsiders create sophisticated computer algorithms using an army of math whizzes to glean small nuggets of insight on whether to buy or sell.  The mantra of the markets is that eventually the truth will out in the form stock price.

The counter argument says that company insiders directly affect the information that is traded on by their actions as employees of the company.  An otherwise bad business deal might look really attractive to a manager if they can trade on information that other people won't have until the damage is done.

The good news about the TCM is that there is no distinction between insider and outsider.  We are all outsiders trying to get better insight.  If you are a better researcher, or you are better at letting your biases and ignorance be tempered by objective evidence, then you should be rewarded in the TCM.  If a corporate or political interest buys or sells large amounts of a Truth Claim so that they may profit on fluctuations, they will be thwarted by market forces.  Yes, there will be those who are caught in the manipulation crossfire and who will lose perhaps worse than the manipulators themselves.  But they knew what they were buying and selling when placed the trade.  They just chose to follow the market rather than research the underlying value of the Truth Claim.

 

Q: Does every Truth Claims have to be entered into the TCM as a written piece of text?

No.  The TCM can easily be built to work on document repositories such as web pages cached by Google, or by unique identifiers (e.g. URLs) that specify where the Truth Claim can be found.  Technology exists for assuring that the Truth Claim document is not altered after trading has begun.

 

Q: Are there market makers for the TCM like in other markets?

No.  Market makers lead to unfair trading practices and statistical arbitrage that runs counter to the mission of the TCM.  The TCM will match buyers and sellers at exact prices using stochastic algorithms that are guaranteed to be fair.

 

Q: Will the TCM take transaction fees in the form of bid/ask spreads?

No.  This would hamper market liquidity and cause irregularities near the extremes of $0 and $100.

 

Q: How do new Truth Claims get onto the market?

In theory, anyone can submit a Truth Claim to the market as an IPO.  Because there are no market makers or transaction fees, all new issues can be set at $50.  Market forces will drive the price to a "fair" point quickly after trading begins.

 

Q: How do Truth Claims get removed from the market?

Truth Claims need never be removed.  Even if a Truth Claim asymptotically approaches certainty at $0 or $100 and volume drops to zero, new information could come out at any time in the future to fire up the volume and move the price off the end.  Also, the annuity assures that there is pressure to move off of the extremes.

Any Truth Claims that are made about a particular time or range of time must include that in the TruthClaim itself, thus obviating the temporal relevance issue.  For instance, you may wish to trade now on a claim about how many genocide victims there were in Rwanda by the end of 1994.  Perhaps more victims will be discovered even today, or information about a cover-up will be released.

 

Q: What happens when a putative Claimant denies making a Truth Claim?

In such cases, the Authorship Derivative Claim (ADC) value for the underlying Truth Claim suffers greatly.  The lower the ADC value, the less of an impact that Truth Claim will have on the NAV of the Claimant Bond of the Claimant.  Thus, if someone lists a Truth Claim and the Claimant denies having made it, then assuming they are telling the truth, there will be little to no impact on their reputation in the Claimant Bond Market.

 

Q: Have you left out any details on how the TCM works?

Yes, there are a few notable ones, but I don't believe they need to be answered upfront:

  1. What's the exact right formula/frequency for reconciliation?  Does there need to be a dampening factor near the extremes, or some other curve to smooth out liquidity incentives?
  1. What is the proper penalty for buying out of the contract?  I arbitrarily chose the difference in contract price and market price, but it could be a multiple or factor thereof, or it could be dependent on the reconciliation factor or the market price.  Is there a need to give the "right" side an out, or can they just choose to hedge their way out in the market itself?
  1. Is the reconciliation factor standardized for the entire market, or is it specified in each contract individually?  If the latter, perhaps the buy-out penalty changes so as to give proper incentive for taking the wrong side near the extremes.  If the reconciliation factor were allowed to vary, then the volume-weighted average would be a market indicator that would give good perspective on volatility.



Claimant Bond Market FAQ

 

 

Q: How is this different than StarMine.com

StarMine.com does objective analysis of market forecasters based on track record over time.  StarMine and the CDM both serve similar purposes, however the CDM is more general and is applicable in cases where the jury is still out on the underlying claims.  Also, StarMine is not a market itself but rather an information source that can be used in a market.

 

Q: What exactly is the formula for NAV?

This is to be determined.  However, it is clear that it should include the value of all Truth Claims that the Claimant is listed on WEIGHTED by the corresponding ADC values.

Authorship Derivative Claim Market FAQ

 

 

Q: Won't there be market equivalents of slander and character assassination campaigns if the truth of claim authorship is allowed to be called into question?

Very likely.  It may desirable to put mechanisms in place that automatically de-list Truth Claims whose ADC value drops below a threshold.  At the very least, the ADC value will be displayed as a part of the ticker quote for the underlying Truth Claim.  Thus anyone who is researching the value of a Truth Claim will always know how firm the authorship credit is.

 

Q: If the ADC value is low, how does that affect the underlying Truth Claim market price?

It doesn't necessarily.  Truth Claims are about the world, not about who makes them.  However, for the purposes of doing research on a Truth Claim and deciding to make a trade on it, the ADC value could be a relevant piece of information.  A low ADC value could easily dry up the market for the underlying Truth Claim, depending on the nature of the claim.

General FAQ

 

Q: If you don't have bid/ask spread, how does the market itself stay in business and become profitable?

There are several potential revenue streams that make sense:

1) Fixed transaction fees per trade, independent of trade volume

2) Monthly subscription fee for all traders

3) Selling advertising (e.g. pay-per-click web ads)

4) Premium content offerings

 

Q: Nobody is going to invest in "truth".  How is this really going to work? 

Billions are already being invested in electronic marketplaces on information futures for politics, weather, entertainment, current events, etc.  The twist suggested here is to invest in the current truth value of a proposition as opposed to its future truth value.  The annuity provides underlying value to assure that this is not a Ponzi scheme.If you have any doubts about the demand, see the following:

The Economist

http://www.economist.com/printedition/displayStory.cfm?Story_ID=3400241

Wired Magazine

http://www.wired.com/news/politics/0,1283,59818,00.html
"The price of orange juice futures has even been shown to accurately predict the weather"

"Traders on the Hollywood Stock Exchange last year correctly picked 35 of the 40 Oscar nominees in the eight biggest categories, according to The New Yorker magazine."

Trade Exchange Network

http://www.tradesports.com/aav2/TEN/TENhome.html
"The Global Marketplace where Communities of People Invest in their Opinions"
"3 platforms, 1 pool of liquidity, 65,000+ members & 1000's of innovative products to trade"

Prediction Market Summit

http://blog.commerce.net/?p=233
"Mike Knesevitch talked about TEN's (Trade Exchange Network, also TradeSports,  and InTrade) markets. The fact that they trade in real money allows investors  to hedge. Mike said their sports markets are extremely efficient because  there are a number of arbitrageurs who know the statistical relations between  various outcome, and take advantage whenever prices exceed certain bounds.  Since they don't take a position in any of the trades, Mike said they aren't  subject to the 1961 Wire act, which regulates interstate gambling in the US.  It also means they couldn't get a bookie's license in the UK if they wanted  one. TEN has approval from the CFTC to operate as an exempt Board of Trade.  eBOTs can only support trading between certain large firms and qualified  investors. My understanding of what Mike said is that TEN intends to operate  a separate exchange for these large players, allowing them to hedge positions  by trading in prediction markets. One area TEN intends to grow in is weather  contracts. Mike said TEN, as one of their criteria for approving a new claim,  looks for natural trading partners who would take opposite positions. He  pointed out that Ski resorts (whose business falls in a light snow year) have  exposure that is opposite to that of big cold weather cities (whose snow  removal expenses grow in a heavy snow year.)"

 

Founder of Trade Exchange Networks on Google blog

http://www.google-ipo.com/message-board/viewthread.php?tid=263

I've heard of the book, and the 'predicitive power' of money and opinion has long been recognised as being a VERY powerful tool....

We KNEW 100% certain that Arnie would win the California recall, before the announced result....as our contract had virtually closed out at 99 hours before the polls closed.

We also knew something was happening with George Tenet at the CIA 3-days before he resigned....the money moved significantly.

Saddam was captured, but hours before we saw massive volumes trading....

The question will always be about the 'money following money'...but in reality seldom does a market shift unless there is supporting FACT behind the trading.

Its a great theory which in practise we have seen time and time again: "When people state their opinion and back it up with hard cash, its a hard opinion to ignore!"

12:56 AM 
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