Augur and the difficulties of an “Appcoin”

The launch of Augur’s crypto currency did not have a good start on the digital market.

The prediction market based on Ethereum gained a good foothold last week. Its Reputation Token (REP) was quickly listed on well-known markets such as Poloniex, Bittrex and Kraken. However, the market value of this token fell quickly after the launch.

Looking to the future

Since then, some market observers have expressed concerns as to whether the Blockchain token has long-term survival potential and what the survival potential of “Appcoins” looks like in general.

The token actually serves as an incentive for users of the forecasting market to provide the Augur platform with reliable reports on real-world events. Last year, Augur raised around $5.3 million in sales of its REP token. The platform launched its beta in March, but only last week when it was free to trade.

This release is an interesting test of the Appcoin model. Tokens are distributed through the blockchain to drive acceptance and provide a means to support the project. While supporters see this model as a new way to generate financial support for start-ups and gain momentum, critics see Appcoins more as a “homeopathic” remedy with a new name.

How traders see this is currently unclear, but Augur already offers some data

The price of a REP token rose sharply after launch, but fell 52% after an opening of $13 on 4 October to $6 on 6 October. REP is currently listed on coinmarketcap for around $5.6.

Besides this sharp drop, Petar Zivkovski of the Whaleclub expressed his concerns about it having benefited most those who struck here early.

He explained CoinDesk:

“[REP] has rewarded accumulators, its founding team, the early buyers more than it would now be possible for anyone who buys tokens.”

First Movements
The digital currency quickly took its place in the top ten crypto currencies in terms of market capital. According to coinmarketcap it is still the eighth largest currency.

Although the token currently measures a market capitalization of $62 million, this is another descent from the all-time high of $119.7 million on October 5.

Most of the trading of this currency took place on Poloniex. Zivkovski emphasized that the first REP/BTC volume that went through this exchange was mainly a selling volume. According to his assumption, the first phase was a trade of “early accumulators… Please have tried to liquidate their REP [bitcoin]”.

But Arthur Hayes of BitMEX argued that the decline since the release was overall but all success. The price now remains above the price paid by early supporters last fall.

“I wouldn’t say this has set us back,” he said CoinDesk. “Dry is still traded well above the ICO as”.

What happens with the REP token from now on depends mainly on two factors: Acceptance and verification by the regulatory authorities.

Some argue that Augur may be driving through heavy regulatory waters and thus experience a similar fate to Intrade. The forecast market was closed in spring 2013 under pressure from the US government.

“Any successful forecasting market is likely to attract unwelcome and potentially fatal regulatory oversight, mainly related to sports betting,” Eliosoff said.

But even if the platform manages to survive through these regulatory risks through its decentralized management, he sees difficulties in keeping users for a long time. Augur decided to overtake Ether – the crypto currency of the Ethereum network. All this, together with the launch of his own Appcoins, could lead to long-term difficulties.

“For me this is exactly the description of this situation”, he explained CoinDesk.

At least one analyst of the market found an alternative perspective to the market launch. He suggested that the REP eyes will not be the last ethereum-based Appcoin.

“REP draws the first major Ethereum Subtoken attention from various stock exchanges to itself quotes, stressed Olaf Carlson-Wee, and is the digital asset hedge fund Polychain Capital. Added:

“He won’t be the last.”