The less information you reveal, the less money you'll make from the market (since you're only trading on part of your private information).
In my example, the private information is the knowledge of the moment of the explosion one second before it happens, coupled with knowledge of a cryptographic secret. It's valuable on the market because you can only get this information if you published the contract and committed the crime yourself: therefore, the contract rewards the person responsible for committing the crime and only that person. The reason people who hate lighthouses will back that contract even if they don't trust the criminal is that they have nothing to lose: they will only "lose" their bet if the criminal destroys the lighthouse, which is what they wanted all along so it's actually a win from their point of view.
But the cryptographic secret is not valuable anywhere else, and the police has no use for it. The only information the police gets from the market is that the lighthouse has rich enemies willing to employ criminal means. Which they probably already knew.
It's quite possible that the participants in a market could develop social norms which prevent this from happening
The market would be even better off if those contracts were banned as soon as they appear. The fact that people can randomly decide whether a contract is valid after you've invested money is a risk for legitimate users (e.g. if you bought insurance against drought, you want to be certain that you'll get paid), and it's not necessary here. To avoid "public bad" contracts, you only need a deletion mechanism.
But for such mechanisms to exist, the possibility of "public bad" contracts must be acknowledged, not dismissed. That's the point I wanted to make.
I think the ability to make these contracts is inevitable, with or without TruthCoin, and it's futile trying to censor them.
You can get these contracts settled by any trusted party, or any combination you choose of trusted parties. There's already someone out there who is offering to escrow money if you want to assassinate a politician. The next logical step is for them to use multi-sig and act as an arbitor, but without the need to hold the funds. It's inevitable that someone will do this, if they're not doing it already.
If anything it would be better to have this activity happening on a public network so that law enforcement can find out who somebody is trying to assassinate etc.
In my example, the private information is the knowledge of the moment of the explosion one second before it happens, coupled with knowledge of a cryptographic secret. It's valuable on the market because you can only get this information if you published the contract and committed the crime yourself: therefore, the contract rewards the person responsible for committing the crime and only that person. The reason people who hate lighthouses will back that contract even if they don't trust the criminal is that they have nothing to lose: they will only "lose" their bet if the criminal destroys the lighthouse, which is what they wanted all along so it's actually a win from their point of view.
But the cryptographic secret is not valuable anywhere else, and the police has no use for it. The only information the police gets from the market is that the lighthouse has rich enemies willing to employ criminal means. Which they probably already knew.
It's quite possible that the participants in a market could develop social norms which prevent this from happening
The market would be even better off if those contracts were banned as soon as they appear. The fact that people can randomly decide whether a contract is valid after you've invested money is a risk for legitimate users (e.g. if you bought insurance against drought, you want to be certain that you'll get paid), and it's not necessary here. To avoid "public bad" contracts, you only need a deletion mechanism.
But for such mechanisms to exist, the possibility of "public bad" contracts must be acknowledged, not dismissed. That's the point I wanted to make.