2 Architecture Proposal

Mechanism #1: Truth Claims Market Basic Concept Create an electronic marketplace for truth claims of all sorts where prices range from $0 (false) to $100 (true). 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 A: “E = MC2” (a textual quote) Claimant A: Albert Einstein Truth Claim B: A press release from the White House on Iraq’s weapons of mass destruction. Claimant B: George W. Bush, plus each member of his Cabinet Truth Claim C: The documentary movie, “Outfoxed” Claimant C: each individual who has Producer or Executive Producer credit on the film. A Truth Claim (TC) is similar to a commodities contract, however the contract is not between a buyer and seller, but between a true-sider and a false-sider. I.e. there is nothing being sold, it’s more like a wager. Both sides post their wager via the market at the time they enter the contract, and the wager is settled at an event called a Judgment. The winner gets paid $100 per contract while the loser gets nothing. TC contracts are entered into at the current market price, with the true-sider posting an amount equal to the price and the false-sider posting the difference between the price and $100. For example, suppose that you believe that the press release from Claim B above is probably false but the current market price for it is $60, indicating that 60% of the market thinks otherwise. You decided to “false-side” ten contracts of Truth Claim B, requiring that you post $400 now. You will either get back $1000 if the Claim is judged FALSE (netting you a $600 profit), or you will lose the $400 you posted. NOTE: More on the mechanics can be found in the FAQ sections and Important Details section below. If you are new to “alternative markets” you may wish to skip to the Claimant Bond Market description below to understand some motivations. Important Details The following details were constructed after much debate and critique of the original proposal. These new details are important to make the market commercially viable and not just a project which is “nice in theory but doesn’t work in practice.” It is the goal of this site to assure that a practical TCM be created and available to the public.TCs come in two flavors: Futures and Currents. Future Truth Claims (aka Futures) are a variant of ideas futures in that they are predictions about the future state of the world. Current Truth Claims (aka Currents) are about the current state of the world.The Judgment Process Having a judgment process of some sort was deemed necessary to anchor claim prices to underlying truth value. In order to maintain objectivity and protect the market from forces of influence and corruption, it was deemed practicable to create a “wisdom of crowds” style judgment process where individuals collectively judge without being able to communicate about their votes and without any one person or group being able to exert control during judgment. To that end, we introduce the notion of a Judgment Time Window during which judges are randomly chosen by the system to determine definitely the truth value of a given Claim. For Futures, the Judgment Time Window (JTW) is an explicit part of the Claim, like settlement date on a commodity future contract, e.g. Future Truth Claim: WMDs will be discovered in Iraq before the JTW for this Claim. Judgment Time Window: 15:30GMT – 15:40GMT on December 14, 2004 For Currents, the JTW is automatically determined as follows: each day a portion of the total outstanding Currents are selected randomly by the market 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. It’s a giant pop quiz. When a Judgment Time Window opens for a Claim (be it a 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 don’t 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 two derivative markets below are adjusted. Settled Currents are immediately made available for future Judgments. For more details and possibilities see the FAQs below. To understand the rationale behind this model, read the blog entries here, beginning with the original proposal which took a different approach.

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, corporation or politician makes a new claim, we want to know how credible this Claimant is. Claimant Bonds 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 Net Asset Value (NAV). The NAV of each Claimant Bond is based on the current price of all Truth Claims that the Claimant is an author on.

Mechanism #3: Authorship Derivative Claim Market Those in the public eye, who we depend on for news and knowledge, have a tendency to deny making claims when there is no penalty for doing so. This is disconcertingly the case with some people 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. Any time a new TC 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.

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