Abstract: Responding to requests, the following text answers the three questions proposed by Alan Schramm in relation to MAM - Death Betting Markets. Without defense or moral judgment, only possible technical solutions to the three issues raised are discussed: the escrow, the identifier and the oracle.
1. Introduction
After the collapse of FTX, it can no longer be denied that the world's major power groups have their devices and representatives in the Bitcoin ecosystem, sometimes collaborating and sometimes conflicting - as was evident in the battle of the “war of wars”1
The literature review on the subject can already be found in the previous article in the same substack2 addressing the legality of life insurance made on the deaths of politicians; the exact analogy of death gamble motivations with insurance; plausibility of legal use of the system, since death can be natural, it would not necessarily be a market for assassins; and, the history of publications on capture/kill markets.
MAM awakens growing public interest and the main issues of this market were well described by Alan in this episode of intankaveis3: "decentralized identifier, decentralized oracle and escrow".
2. Model
All corruption stems from the separation of control and ownership. With modern governments this issue has reached its apex, with elected politicians and even unelected bureaucrats causing harm to millions or billions of people with absolutely impunity.
The death betting market would be a way to realign power and responsibility. By allowing victims to invest small amounts betting on the death of their tormentors, it would solve Olson's “collective action problem” - which explains why criminals tend to administratively capture governments (centralized benefits and diffused losses). MAM also makes crimes, abject non-criminal behavior and even mere corruption by administrative capture unfeasible/expensive, increasing the risk of becoming the target of significant stakes.
In other words, dictators and criminals in public office inflict losses on millions of people - or billions - but not large enough for one of them to retaliate. With MAM, the collective organization will be independent of negotiation or other communication beyond the platform or smart contract - and even other people who are not the victims will be interested in investing in the bets - such as: a) hitmen, in order to win the bet; b) player, as an alternative to state lotteries (usually fraudulent and with tax costs, in many cases, of more than 50% of the prize); and, up to c) the target itself, in search of a safe conduct.
Would a million people bet, on average, $1000 on the day that a dictator will die?
If the answer is yes, then $1 billion could be pseudo-anonymously raised for anyone who bets on the day of death correctly. For an amount of this magnitude, probably even relatives and closest employees would be willing to guarantee death on a certain day - especially if the destination and ownership of the payment were not public.
In the previous article, gamification mechanisms were discussed to make this happen more efficiently: exclusive bets per day (avoiding the risk of splitting the prize), bets and payments through pseudo-anonymous means; and, increasing betting costs (perfect discrimination), as explained in the excerpt:
“To give you an idea of the values that could occur, if each exclusive one-day bet costs 1 US$ more than the previous one and the first one costs 1 US$, considering only a 50-year window (18,262 days) - which ignores the participants ideological players with no intention of receiving anything and thus being able to bet more than 50 years in the future - then the prizes could exceed 166.7 million US$. This is not counting if bets and balances are in bitcoins, undergoing passive appreciation. If only 10,000 days were wagered, it would be (10,001/2)*10,000=50M. If only 5000 days were wagered, this scheme would give (5001/2)*5000=12.5M.” The first term represents approximation to the average bet per day from 1 to 5000 (5001/2) and the second the number of days bet.”
In short, there would be a platform - whether centralized in a sovereign entity with a reputation and aligned interests or a sidechain/federation running a smart contract - that would allow victims to indicate their tormentors and bet on their heads, through a pseudo-anonymous mechanism, there could even be several markets of bets for each tormentor, expanding perfect discrimination, starting bets on the first day with 1US$ (or any other unit) and increasing bets on subsequent days - although the proportional gain is increasing with higher bets:
Ten people in arithmetic progression of 1US$ more per day bet, starting with 1, the 11# hitting would win 5x what they bet; the 31# , would win 15x what you bet; the 1001# would take 500x; 10,000 betting, the 10,001# would magnify 5000x the investment; 100,000 people betting, 100,001# would win 50,000x the stake; with 501,000 bets, the prize would be 250,000x the next daily bet; and so on.
Would a sicario bet 10,000 in one day to win 50 million? would you bet 1001 to receive 500,000? or both? The object of the bet with a prize of 500,000 on his head, would not bet 1000 a day that he had to expose himself (violent or natural death, as an invasive medical procedure) preventing other people from having gains from his death these days and increasing your legacy?
If the answers to at least one of these questions is “yes”, then MAM is in demand – and it is capable of realigning responsibility and power.
3. Development: answers to Alan's questions
A simple solution to the decentralized identifier is to return the winnings to the address that sent the bet. The transaction, to make it even clearer, could contain an indication of the day in a message to the address that the escrow/smart contract defined as the destination. Bitcoin addresses are pseudo-anonymous and until their control is proven with key signing the attribution of ownership is probabilistic. In this solution, the identifier would be more private when it comes to good practice to transact said amounts to place the bet and receive the prize - if done on-chain.
A more elaborate solution to maintain privacy (of the bettors, but mainly of the winner) would be to run this smart contract on another layer - and alternatives already exist, such as confidential transactions on Liquid4; privacy solutions on the Lightning5 network; e, coinjoin and coinsawps6
As for the question of the decentralized oracle, a solution would be a contestation system in which, at any time, any participant could claim the end of the bet (indicating a certain date of death) and/or indicate their agreement or opposition to the fact having occurred on the indicated date. No one determines the outcome of a bet better than the parties who bet by desiring the outcome.
The payment deadline may be proportional to the difference between bettors who contested and agreed with the fact that it occurred on the indicated date. For example, if the payment deadline is (only in cases where there is more agreement than disagreement in whole percentage points):
Payment deadline = 30days+30days*[100-(accepted%-disagreed%)]
So, if you 100% agree, pay (and close the poll) in 30 days. If 80% agree and 10% object, pay in 930 days (30+30*[30]). If 50% agreed and no one disagreed, it pays in 1530 days (if you do not increase the sign of agreement or disagreement), if 30% agrees and 20% disagrees, it pays in 2730 days. Even with the minimal difference (1%) of agreeing than disagreeing, the system would still pay in 30+30*(99)=3000 days - less than 8.5 years.
This mechanism encourages the winner to prove the fact publicly - while allowing greater collection of evidence for a longer period of time, the lower the degree of convincing the other bettors.
In the previous article on the subject, in which the MAM would be a solution to liberate a country under totalitarian dictatorship with an internationally recognized parallel government in exile, the oracle could be centralized (with entities doing forensic analysis of images, DNA and sentencing in court) and the escrow would be solved: it was enough for the parallel government platform to receive deposits and make payments like any cefi exchange.
If the MAM is instituted without the support of a sovereign entity, then the escrow issue could be resolved through a smart contract that receives payments with date indications, messages from these addresses/dispute issuers/confirmation of closed bets and that makes the payment to the bettor winner. Another solution to the escrow problem is centralized: a reputable platform offering the service on the deep web - as there was Silk Road and Silk Road 2.0.
Conclusions
The issue of anonymity of payment is linked to the anonymity of the form of deposit and receipt - and its solution would be linked to the specific good practices of the medium used. On-chain, anonymity could be guaranteed with the acquisition of values used privately and the payment of prizes at the addresses that placed the winning bets. Furthermore, solutions at other layers already exist.
The oracle question is resolved by a contestation system. The more bettors confirm the date of the fact and the less bettors contest, the shorter the period to keep the poll and pay the winner soon. Most users would be motivated to manifest themselves sincerely, even to continue enjoying the benefits of the system in which they are users - and the majority without any advantage in behaving in a different way (in the case of ideological bettors, who bet desiring the result, even losing).
The escrow issue could be resolved with a sovereign entity starting the system; with someone with a reputation offering services on the deep web - as happened with Silk Road; or, ideally, with smart contract running in second layer.
Several issues were not discussed because they are outside the epistemological framework, such as the platform's remuneration and what to do with the resources when there is confirmation of death on a day that was not wagered.
