Information security researchers from academia, industry, and the U.S. intelligence community are collaborating to build a pilot "prediction market" capable of anticipating major information security events before they occur.

A prediction market is similar to a regular stock exchange, except the "stocks" are simple statements that the exchange's members are encouraged to evaluate. Traders will buy and sell "shares" of a stock based on the strength of their confidence about the future outcome—with an overall goal of increasing the value of their portfolios, which will in turn earn them some sort of financial reward. Traders may choose to buy or sell additional shares of a stock, and that buying and selling activity pushes the stock price up or down, just as in a real market.

Some of the stocks being considering cover a few months, such as: "The volume of spam e-mail will increase by 10 percent in the third quarter of 2011." Others will ask participants to gauge the likelihood of far-off events, such as the chance that the U.S. House of Representatives will pass a bill with "cyber" and "security" in its title in the first session of the 112th Congress, or whether broadly used encryption algorithms will be defeated within the next 24 months.

Greg Shannon, chief scientist of the CERT program at Carnegie Mellon's Software Engineering Institute, who is involved with the project, says the purpose is to provide actionable data.

"If you're Verizon, and you're trying to pre-position resources, you might want to have some visibility over the horizon about the projected prevalence of mobile malware," Shannon said. "That's something they'd like to have an informed opinion about by leveraging the wisdom of the security community."

Predictions markets have effectively forecasted all manner of events and trends, from the success of sports teams to the sales of new products. The pilot project will rely on software and services provided by Consensus Point, a Nashville-based company that has helped to build employee-driven prediction markets for several major companies, including General Electric, Best Buy, and Qualcomm. Best Buy's prediction market—called "TagTrade"—is designed to give management an early indicator of which new products or ideas are likely to succeed, and whether specific new stores will open on time.