Prediction trading based on blockchain is unique concept that could offer the access to very large market. Betting and trading in general are old concepts that were used for long time, but the problem is that since all of the exchanges or betting houses are specifically oriented to one or few assets it does not allow trader/bettor much freedom, however the power of blockchain can completly change that.
Augur basically allows anyone to set their own "asset" and their own terms of payouts or odds for payments from strictly trading or betting when it comes for profits this allows each person to increase their chances of success simply becouse there is not central authority that is giving you odds and assets that are by default created to give edge to house and not the user.
Augur allows anyone to strictly shape the predictive question about topics they know a lot about, or question that they are interested in of how is it likely to shape out in future.

Crowd wisdom

Crowd wisdom is the main core of Augur platform, it basically leans on the process where mass of people that have knowledge about certain subjects are more likely to give objective rational answer on question as oppose to single person answering that question.

Quoted explanation from Wikipedia:

A large group's aggregated answers to questions involving quantity estimation, general world knowledge, and spatial reasoning has generally been found to be as good as, and often better than, the answer given by any of the individuals within the group. An explanation for this phenomenon is that there is idiosyncratic noise associated with each individual judgment, and taking the average over a large number of responses will go some way toward canceling the effect of this noise.[1] This process, while not new to the Information Age, has been pushed into the mainstream spotlight by social information sites such as Wikipedia, Yahoo! Answers, Quora, and other web resources that rely on human opinion.[2]

Potential use cases of Augur

Now the key is to understand how Augur could attract very large sums of capital and participants due to blockchain technology which is offering completly objective results from any question as no irrational being is included in process of delivering the results of question.
For example lets take a question:

Who will win US elections in 2016?

Now lets take two sided use of such question, one is launched by media organization or specific individuals (who may or might not be financed by certain election participant and therefore being not completly objective), and on other hand question that is simply asked on Augur platform (the same question), but since it is handled on blockchain the objective results are far more likely to be accurate due to technology handling the process.
In reality media organizations and reports are often caught being subjective which often gives false results of pre-election polls. Something like that could not happen on Augur platform, which would naturally increase the chance for market participants (eg voters) to preffer seek their pre results from blockchain software rather than putting a trust in media company that launched polls.
With technology one nearly excludes the need of trust into results.

Another example of use would be people who are little educated on certain question they are interested in and want to have other people to give them better accurate prediction on certain event. For example if someone is undereducated on technology and is looking to buy HDD but is not sure if it is better to buy HDD today or in 4 months, then one could shape a question:

Will the price of X HDD drop by 15.8.2017?

This would allow other people who are experianced with technology to answer that question for them relatively accurately, since the crowd would be providing answer it would simply mean that if there is specific person that contributed the "vote" to question and had no experiance on subject, the crowd impact would significantly reduce impact of such one person on whole overall results of question.

Another use of such platform could be perhaps farmer. Generally it can take quite a lot of research to answer very accurately what the weather will be in few weeks in certain area, the humidity, or any other data, which means that farmer might not have time to research that, but someone who is specifically dealing in industry that is actively researching that, this person could then very easily provide answer to that farmer, along with hundreds of other persons who would also contribute on giving answer thus allowing it to be as objective as possible.

So the question might go like this:
Will the humidity and temperature decrease in area X over next 4 weeks for more than 2 fold?

Use example of current beta version

Trading and predictions on whole another level

Such platform lifts the trading into whole new territory because there is almost nothing that can be traded. Its not just few currencies, few stocks and few derivates, allowing to use any question being an traded asset, allows the quantity of traded assets to expand into unthinkable numbers, this allows for people to trully focus on trading only what they really know the best. For example you arent being forced to trade EURUSD becouse that is one of only few instruments that your broker allows, but one can really focus on niche that one is the best at and trade on it. And at the end the point of Augur is not just about trading and making profits, its about distributing the objective knowledge and answers to the people seeking an answer. This means that it no longer is just a zero sum game, where its all about competition, its actually providing knowledge and answers as value, obviously not all answers would be accurate, in fact probably a lot would be wrong, but still its overall that counts.

Predictive market can provide business owners the power of predictive analytics

It is well know fact that using predictive analytics is very helpful because it allows business to adjust its working and production phase ahead and thus adjusting future results on positive side. That is why all major internet companies like Google, Apple, Valve have implemented strong statistical data into platforms to allow business owners to use that data in their advantage.
Predictive market would basically serve in very similar manner than statistics are allowing business owners to see a little bit further ahead with the data they are given to (in terms of questions and answers).

Impact of prediction markets on overall trading

Imagine that 50.000 people on Augur answer the question Will the price of Bitcoin be higher than 4000 in 3 months?
If such question would get a huge % in yes answer (eg 85% yes), then this would show and uncover sentiment of market behind that, showing that at that point of time there are aggressive holders and buyers of BTC that show intent to be there.
This would also further increase the speed that markets are trading at, generally the speed of markets is increasing each year as quantity of information that average trader can access and the speed of trading platforms are increasing, which means that one is able to dig deeper and deeper into lower time frames, into higher liquidity and better price fills. Predictive markets would push this even more, as markets would be rebalancing itself even faster.

Advantage of Augur over other trading platforms

-No central servers. It is completly decentralized which is far superior to any current crypto or fiat exchange. We had many problems in crypto markets where exchanges suddenly stopped working, or people were scammed by owners of exchange or simply the large FX or stock exchanges and brokers that from time to time do go bust creating large loses.
Augur is decentralized which removes such problems giving it significant edge over competition. If one is looking to be investor in Augur that is significant thing to consider.

-low fees. Power of blockchain allows very low fees, again far lower fees than any trading broker out there is willing to give you.

Instant payments and quick deposits. Placing deposit or withdrawal into any exchange either fiat or older crypto exchanges takes a long time, depends with what you pay it could take up to few days, plus there is hassle of going trough regulated system providing the papers when opening account and such. With Augur there is no such hassle and deposits are quick within few minutes, if blockchain is not clogged.

Create your own market. Any question that one creates is considered as trading asset, which gives anyone ability to create any trading asset, this is something that is only a sci-fi with current brokers, and yet Augur provides such feature.

Just combining this few features Augur wipes out competition in current trading and investing space, which gives it huge potential for possible growth as investment.

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Market capitalization and over-under priced aspects

Current capitalization is sitting around 200 million USD, and it should be looked and judged from different points depending on what investor is looking for.

-long term investor (3-5 years):
Long term investor is generally looking for Augur to be functional and operating, leaning on the prediction that there will be millions of people using it within that time frame. This is well within reason since platform is nearly ready to start, as long as team does decent marketing its possible. This means that with current 200 mil USD market cap its pretty much straight buy for long term investor, if one is aiming for few billion USD market cap increase.

Short term investor (1 year):
This is where it gets more complicated becouse current market cap size based on what number of users are currently using platform (mind that its not yet in properly function state) makes the current cap too high. Basically 200 mil is too large cap judging for what amount of users will use it in very near term future. This exposes retrace of price downwards or even possible hard correction more likely over short period of time. In my opinion best would be in such case to wait for decent correction towards 50 mil market cap and buy it there for short term investment, otherwise risk is too large.

Third option, the best one in my opinion is trade it from technical chart patterns and only enter on wedge pattern using very low risk. If pattern works stay in position if it doesnt cut the loss quick and that 1% loss. In worst case youll be stoped out for nothing while the price rallies high, that is the downside of such strategy one has to be willing to take.