Except that analysis only holds when you assume participants are honest, or there are no derivatives. What stops me from making a massively stupid bet, and then rigging the market to diverge from reality?
The same thing that prevents dishonest bitcoin miners from rigging the blockchain to say that coin X went from A->M instead of A->B.
As long as there are more nodes who would not benefit from this particular rigging as there are nodes who would, everyone can act in their own self-interest and the outcome would be correct.
> The same thing that prevents dishonest bitcoin miners from rigging the blockchain to say that coin X went from A->M instead of A->B.
Oh, so it has a built-in mining subsidy that miners are rewarded with? Because without that bitcoin suffers from an even worse version of the exact same problem and is not incentive compatible.
> As long as there are more nodes who would not benefit from this particular rigging as there are nodes who would, everyone can act in their own self-interest and the outcome would be correct.
What counts as a node? Can I spin up a million or a billion nodes on AWS and influence the vote that way?
proof of stake seems to be hardly an answer to the problem. And maaku seems to be pointing out that proof-of-work WITH SUBSIDY so far has worked, but without subsidy the dynamics are quite different.
The Truthcoin_1.1.pdf available goes over it a bit. I had the same question and had to hunt around a bit to find it.
It's a weighted vote, with loss of coin penalties for not voting or for voting against the majority and coin rewards for voting on low vote "decisions" and for voting for the outcome that ends up being the majority.
The defence here is the assumption that the usefulness of the market long term will motivate people to vote "fairly". I think that's incredibly naive but it might still work. There are strong incentives to vote for who you think the eventual winning side will be and the assumption that that will likely be the truth (for well designed questions) isn't crazy.
There are a lot of obvious ways to attack this type of system but I don't have the expertise to know how viable they are.
Sounds a lot like a "synthetic asset" which is constructed from derivatives rather than the other way around. Actually I think that is what it is, but I'll have to read the PDF to be sure.
Synthetic assets are very much vulnerable to manipulation by whales. Ultimately you are just providing some incentive structure to keep the small players honest, and hoping that the small-bit players add up to significant security in aggregate, more than any possible combination of colluding players.
Generally speaking that's not a very safe assumption to make, particularly when the underlying settlement medium is irrevocable.
