Subsidizing Market Liquidity

[abit]

Nasdaq is incentivizing the display of orders for (a) 500 shares at the best bid and 500 shares at the best offer, 30% of the time, and (b) 2500 shares at no wider than 2% of the best bid and 2500 shares at no wider than 2% of the best offer, 90% of the time.  I don't think we need to specify a minimum number of shares or what % of the time they need to satisfy the above conditions, but perhaps we could simply make the reward proportional to the length of time MMs have orders on the books, the size of the orders, and the distance from the price feed.  And maybe we should require that orders be on the book for a minimum period of time, as some have already suggested. 

1.Min percent of the time, 2.having the best bid (or ask) 3.For reasonable amount of shares[ probably as % of average volume in our case]. 4. With max spread [or distance from the feed for our case]

Is a very good rule imho.
Points 1 and 2 are very key elements here. It eliminates my the main issue with volume only based distribution of reward. The aim is good prices most of the time not just 10-15 min a day.

@abit and BM - how computationally doable is the above rule for a blockchain?  Keep in mind that ".Min percent of the time" may (and usually will) include  multiple orders and their sum must > Min.

I think the reward program doesn't have to be built INTO the system. Since all trading data is on the chain, any asset issuer is able to analysis the data, then make their own decisions on HOW to reward market makers on her markets. Off-chain data analysis is usually better than on-chain analysis, more flexible, easier to adjust, more cheating resistant, more people are able to help, will never affect the stability of the network. Apply a worker, distribute the funds according to pre-defined rules (better if special scripts are made already), all these can be done by the committee.

[Erlich Bachman]

subsidizing is our version of mining.

Absolutely
Bitcoin has POW
Peercoin has POS
NEM has POI
hundreds more

and BitShares has

Proof of Liquidity

POL

Where liquidity providers mine BitShares

I finally see the genius now,

Congratulations on inventing this new paradigm!

[tonyk]

Nasdaq is incentivizing the display of orders for (a) 500 shares at the best bid and 500 shares at the best offer, 30% of the time, and (b) 2500 shares at no wider than 2% of the best bid and 2500 shares at no wider than 2% of the best offer, 90% of the time.  I don't think we need to specify a minimum number of shares or what % of the time they need to satisfy the above conditions, but perhaps we could simply make the reward proportional to the length of time MMs have orders on the books, the size of the orders, and the distance from the price feed.  And maybe we should require that orders be on the book for a minimum period of time, as some have already suggested. 

1.Min percent of the time, 2.having the best bid (or ask) 3.For reasonable amount of shares[ probably as % of average volume in our case]. 4. With max spread [or distance from the feed for our case]

Is a very good rule imho.
Points 1 and 2 are very key elements here. It eliminates my the main issue with volume only based distribution of reward. The aim is good prices most of the time not just 10-15 min a day.

@abit and BM - how computationally doable is the above rule for a blockchain?  Keep in mind that ".Min percent of the time" may (and usually will) include  multiple orders and their sum must > Min.

[tbone]

I wonder why only matched orders would be rewarded? Are we going to encourage self trading? The orders who placed there for a long time but not yet have chance to be filled didn't provide liquidity?

Some good ideas in this thread. Mimicking NASDAQ is a great idea for a first cut solution, might as well leverage what seems to work for a dominant exchange.

I would say we couldn't go wrong by mimicking NASDAQ's market quality program. If Nasdaq has deemed it "un-gameable", then who are we armchair experts to argue? Props to @tbone for bringing that to our attention.

yeah i think that's the best logical starting point, leverage their work, but we can always improve over time as we learn.

It seemed pretty good I liked that it rewarded orders very close to the peg based on amount of time they've been active. (I don't think we want to reward orders too far away from the peg to actually be useful/attract new users.)

Atm we have very few DEX users, so the only problem I see with the current liquidity proposals is that we could be overpaying for liquidity in very thinly traded hours when there isn't a lot of demand.

We could structure the program with rewards that are diminished during off-peak hours such that MMs would still want to keep the orders on the book, but we wouldn't pay as much for the less meaningful liquidity. 

[Pheonike]

You dont have to worry about dshares taken away developers. BitShares does a good job of that by itself by not wanting to pay them and/or voting them out on some political reasons instead of performance.

[tbone]

I wonder why only matched orders would be rewarded? Are we going to encourage self trading? The orders who placed there for a long time but not yet have chance to be filled didn't provide liquidity?

Some good ideas in this thread. Mimicking NASDAQ is a great idea for a first cut solution, might as well leverage what seems to work for a dominant exchange.

I would say we couldn't go wrong by mimicking NASDAQ's market quality program. If Nasdaq has deemed it "un-gameable", then who are we armchair experts to argue? Props to @tbone for bringing that to our attention.

Nasdaq is incentivizing the display of orders for (a) 500 shares at the best bid and 500 shares at the best offer, 30% of the time, and (b) 2500 shares at no wider than 2% of the best bid and 2500 shares at no wider than 2% of the best offer, 90% of the time.  I don't think we need to specify a minimum number of shares or what % of the time they need to satisfy the above conditions, but perhaps we could simply make the reward proportional to the length of time MMs have orders on the books, the size of the orders, and the distance from the price feed.  And maybe we should require that orders be on the book for a minimum period of time, as some have already suggested. 

Regardless of the exact algorithm, the interesting thing about making rewards proportional to the amount of time orders are on the books is that the incentives will be dynamic based on the liquidity needs of the market in question.  In other words, in low volume/low liquidity markets, MMs will have greater opportunity to place orders that stay on the book long enough for them to actually earn rewards.  As liquidity and volume grow, the opportunity will automatically diminish as a growing number of their orders get matched more quickly. 

I think this could work very well for us.  I'd be interested to hear what @bytemaster thinks about this, as well as some of the other reasonable, rational contributors here such as @CoinHoarder, @Empirical1.2, @cylonmaker2053, @abit, etc.  I'd also like to hear whether people such as @alt, @bitcrab, and @clayop think incentivizing BitAssets liquidity is not important enough to employ a MM reward program modeled roughly on the Nasdaq's MQP Program.

[Empirical1.2]

Anyone considered Nubits liquidity pools that offer huge buy and sell walls by subsidizing the liquidity pool?

https://nubits.com/current-liquidity-pools

Step 1 Create millions of BitUSD through a POS minting reward for a fairly neutral cost https://bitsharestalk.org/index.php/topic,21547.0.html

Step 2 Create a trustless subsidized liquidity pool that we can voluntarily send our millions of BitUSD to, to earn additional interest and in the process create large BitUSD buy and sell walls around a tight peg. https://nubits.com/current-liquidity-pools We've already seen this process work for NuBits, the question is how much does it cost?

I like that idea because it potentially creates a tighter peg and every BitUSD holder can easily participate, I would be also interested if it could be achieved for a lower cost.

I wonder why only matched orders would be rewarded? Are we going to encourage self trading? The orders who placed there for a long time but not yet have chance to be filled didn't provide liquidity?

Some good ideas in this thread. Mimicking NASDAQ is a great idea for a first cut solution, might as well leverage what seems to work for a dominant exchange.

I would say we couldn't go wrong by mimicking NASDAQ's market quality program. If Nasdaq has deemed it "un-gameable", then who are we armchair experts to argue? Props to @tbone for bringing that to our attention.

yeah i think that's the best logical starting point, leverage their work, but we can always improve over time as we learn.

It seemed pretty good I liked that it rewarded orders very close to the peg based on amount of time they've been active. (I don't think we want to reward orders too far away from the peg to actually be useful/attract new users.)

Atm we have very few DEX users, so the only problem I see with the current liquidity proposals is that we could be overpaying for liquidity in very thinly traded hours when there isn't a lot of demand.

[CoinHoarder]

Was Expanse war on Ethereum with their fork? I can understand the concern but declaring war seems a little dramatic.

First of all, I am of the opinion Expanse is a pump and dump. Look at the lead developer's track record of failed cryptocurrencies with "gimmicky" innovation, dwindling market capitalizations, and over-promising yet under-delivering. First Franko, then Aiden, now Expanse.

Explain how Expanse was/is a positive occurrence for Ethereum?

Yet, you are comparing Apples and Oranges....

The guys behind Expanse are not (and never were) involved in the Ethereum community. See their Ethereum forum profiles and Githubs:
defaced:
https://forum.ethereum.org/profile/defaced
https://github.com/franko-org
CryptoCc:
https://forum.ethereum.org/profile/CryptoCc
can't find anything easily on their 3rd "founder"

My point with showing that information is that the Expanse fork is not a hostile takeover (a la Tonyk's fork) within the Ethereum community. If Expanse formed out of a disagreement within the Ethereum community, and a small but substantial amount of developers/community left expanse to work on the new fork, then yes it would certainly be a bad thing for Ethereum. The public perception alone that the community is splitting into two competing cryptocurrencies is a huge negative force on the market.

Further, you could still argue that since they are "working" on Expanse, that takes away possible developers (and therefore value) from Ethereum in the form of possible smart contracts that never materialize. Furthermore, Expanse community/volume/marketing certainly takes away from the Ethereum community/volume/market cap. Without its existence, these people likely would have participated/invested/traded/developed in Ethereum instead... they did choose an Ethereum fork after all.

All cryptocurrency forks are less successful than their counterparts. I can only name one anomaly (Bytecoin-> Monero), and I think that was an extreme case of an unfairly launched Cryptocurrency . Ripple dominating Stellar. Bitcoin dominating all alt coins. Litecoin dominating all of its forks. Ethereum dominating all of its forks. Nxt dominating all of its forks. Peercoin dominating all of its forks. Bitshares dominating Muse. Yet, Tonyk's fork is going to be a great success, provide a liquid smartcoin exchange, and all of us are going to switch over to it.  ::)

Expanse did not sharedrop Ethereum so perhaps it was even worse than this scenario. Then again maybe not, it is hard to compare apples and oranges.

In summary, since it is unlikely the fork will be successful, and it also takes away developers/resources/community/volume/cohesiveness/market confidence/perception of success/etc., a cryptocurrency fork is like declaring war on the cryptocurrency it forked from. It has little chance of success, and is certain to cause negatives that would likely not otherwise occur if the chain wasn't forked.

[TravelsAsia]

All (or most) of the people that disagree with this proposal seem to support Tonyk's fork. I say you implement your idea BM, assuming you have the votes to support it, and let the rest of the community that disagrees with it go off and support Tonyk's fork. Then, the original Bitshares chain can go on to teach them a lesson in the strength of a network effects, and the main Bitshares chain's community would be more on the same wavelength (for other things too such as MAS). ;)

crazy idea

I said "IF tonyk forks Bitshares" ... At that point both chains are in head-to-head competition for the same target market. It is survival of the fittest at that point. By forking Bitshares, targeting the same market, and forking the community/developers/etc.... He is literally declaring war on Bitshares. All is fair in the cryptocurrency wars. This fork would be very different from any previous forks, as MUSE and PLAY are going after different target markets. Tonyk's fork will be competing directly with Bitshares.

Was Expanse war on Ethereum with their fork? I can understand the concern but declaring war seems a little dramatic.

[Pheonike]

This is good because it can finally provide what BitShares has been needing awhile now, Focus. All this dilution arguing has done has slowed downed development. I would rather backed two separate teams each focused on what they feel will work than one team constantly confused and keeps shooting it on feet off.

[CoinHoarder]

All (or most) of the people that disagree with this proposal seem to support Tonyk's fork. I say you implement your idea BM, assuming you have the votes to support it, and let the rest of the community that disagrees with it go off and support Tonyk's fork. Then, the original Bitshares chain can go on to teach them a lesson in the strength of a network effects, and the main Bitshares chain's community would be more on the same wavelength (for other things too such as MAS). ;)

crazy idea

I said "IF tonyk forks Bitshares" ... At that point both chains are in head-to-head competition for the same target market. It is survival of the fittest at that point. By forking Bitshares, targeting the same market, and forking the community/developers/etc.... He is literally declaring war on Bitshares. All is fair in the cryptocurrency wars. This fork would be very different from any previous forks, as MUSE and PLAY are going after different target markets. Tonyk's fork will be competing directly with Bitshares.

[Musewhale]

All (or most) of the people that disagree with this proposal seem to support Tonyk's fork. I say you implement your idea BM, assuming you have the votes to support it, and let the rest of the community that disagrees with it go off and support Tonyk's fork. Then, the original Bitshares chain can go on to teach them a lesson in the strength of a network effects, and the main Bitshares chain's community would be more on the same wavelength (for other things too such as MAS). ;)

crazy idea

[cylonmaker2053]

I wonder why only matched orders would be rewarded? Are we going to encourage self trading? The orders who placed there for a long time but not yet have chance to be filled didn't provide liquidity?

Some good ideas in this thread. Mimicking NASDAQ is a great idea for a first cut solution, might as well leverage what seems to work for a dominant exchange.

I would say we couldn't go wrong by mimicking NASDAQ's market quality program. If Nasdaq has deemed it "un-gameable", then who are we armchair experts to argue? Props to @tbone for bringing that to our attention.

yeah i think that's the best logical starting point, leverage their work, but we can always improve over time as we learn.

[CoinHoarder]

I wonder why only matched orders would be rewarded? Are we going to encourage self trading? The orders who placed there for a long time but not yet have chance to be filled didn't provide liquidity?

Some good ideas in this thread. Mimicking NASDAQ is a great idea for a first cut solution, might as well leverage what seems to work for a dominant exchange.

I would say we couldn't go wrong by mimicking NASDAQ's market quality program. If Nasdaq has deemed it "un-gameable", then who are we armchair experts to argue? Props to @tbone for bringing that to our attention.

[chono]

subsidizing is our version of mining.