Market Maker Incentivization Worker Proposal ($300)

[cryptillionaire]

https://bitsharestalk.org/index.php/topic,22798.msg295848.html#msg295848

[bitsharesbrazil]

Paying a negative fee immediately from the buyer who pays a positive fee is nothing more than shifting the price.  It is a meaningless change.

Taker pays the fee to both maker and the network. It's more than shifting price because it encourages makers thus improving the liquidity.

Sometimes it helps me to imagine an extreme case to get a better feel for what is happening on the smaller scales.  So what follows is my own thought experiment.

Lets try the experiment with a 20% taker fee just to be outrageous.  Lets have the maker fee be -20%.    Under such a market, those who demand liquidity take a 20% loss and those who provide it get a 20% gain. The trader would view such a market similar to a market with a 20% spread. They would be hesitant to buy such an asset because they know they will take an instant 36% loss if they are the taker on both sides. (.8 in and .8 out).  This means that someone looking to get in-or-out of such a market with the least loss would have to be a maker for one of the two trades in which case they take a 4% loss (.8*1.2=.96).  Those who are willing to "wait" on both sides of the trade can profit by 44% (1.2*1.2).   Hence the negative maker fee encourages users to wait (which is the opposite of liquidity).  You create "lines" on both side of the order book of people who want to exit their position. I suspect you would see very narrow spreads with steep walls.  This market would have the appearance of good liquidity, but the underlying reality is that 'day traders' view it as a market with a 20% spread.

So in this extreme case the takers (aka traders) end up paying for their liquidity TODAY the same way they would pay for their liquidity without the 20/-20 maker/taker rule: via a large spread.  Market makers end up making the same profits they would if they had a 20% spread between their buy and sell walls. The only thing the negative maker fee is doing under this model is enforcing a minimal spread that makers can provide, in other words price-fixing the market maker fee.    Instead of market makers competing to reduce spread, they are competing to be the first in line of a "virtual" 0 spread.   Because no value is moving through time all this price fixing is doing is creating shortages (of takers) and gas lines (those waiting to exit on both sides of the book). 

So it is clear that if we set the maker/taker fees to be greater than the natural spreads that things break down.  Our real goal is to reduce spreads, not enforce a minimum spread with steep cliffs of liquidity on either side of that minimum spread.

So this means that we want to maximize maker rewards without increasing the cost to the taker.  So lets look at another extreme market:

1. Suppose that takers paid a 0.1% fee
2. Suppose that makers earned 20% bonus from someone else (ie: the network).

In this market there would be huge walls of liquidity as people compete to get a 44% return every time they turn over.  This 44% return completely eliminates almost all market volatility risk.  Traders/takers see an effective spread of just 0.1% which means they feel very comfortable buying the asset because they know they can turn around and sell it instantly with only a 0.2% loss.  Assuming there was no limit on the 20% bonus, then people would start trading against themselves.   Obviously you would have to mitigate this self trading by making the reward based upon how long the order was on the books before getting filled.  This is the situation we really want to create.

So the question becomes how do you compensate makers today without making todays traders (takers) pay for it.  My proposal has tomorrows takers pay today's makers by paying for market making today, but not tomorrow.

The proposal here says you give them 0.1% today + a cut of the net present value of all future fees.

The cost of providing liquidity on early on is much more expensive than the cost of providing the same liquidity in a mature market.
Under this model you gain more liquidity from makers early on (when it costs the most) without actually decreasing liquidity available in the future (when it costs less).  If you set the decay curve properly you can end up with "constant liquidity" equal to the average liquidity over the entire life of the market.  Over a long enough time horizon this means that you should get almost as much liquidity in year 1 as you do in year 30 if market makers believe in the future of a given market.u

So when people suggest "simple" rules they are not really getting the result they want.

now I understand why bytemaster was feedup n told a f######### you all.....people can not understand things that will.shift our game for for a couple. a few bucks......even tbis way bytemaster could have part of his job funded n with some expectations.for.the future if it grows.....

Hope bytemaster can rebuy all bts pretty n make a retun aka jobs

[bytemaster]

Is this just for UIAs or smartcoins also?

Any asset has the potential to enable this feature.

[theredpill]

I hate to repeat myself but I think this is important, this FBA only appeals to BTS people, those who believe that this exchange gonna succeed and collect a lot of fees (few people that probably already invested their money on us), those who don't do not gonna put their real money to provide liquidity on exchange to this FBA.

That make sense?

[morpheus]

Is this just for UIAs or smartcoins also?

[monsterer]

If we assume that the asset issuer only allocates 50% of trading fees to the incentive program then, the MAKER asset would receive 10% of all trading fees.

Where can I vote for the far superior, dilution less alternative proposed by @Chronos?

[bytemaster]

If we assume that the asset issuer only allocates 50% of trading fees to the incentive program then, the MAKER asset would receive 10% of all trading fees.

[Samupaha]

How much of the MSHARES revenue the MAKER owners are getting? I'm I just too blind to see it or isn't it decided yet?

From this thread:

CNX only gets 20% of what is paid to Market Makers.

From worker proposal:

I have updated the example to state that MAKER owners would receive 10% rather than saying that Cryptonomex will receive 10% of all future market fees.

...but I don't see it in the example.

[abit]

bump

[clayop]

How this feature is related to the percentage fee on order creation(adjusted market fee)?
And what happens if the order creation fee becomes very low with adjusted market fee?

[Akado]

I think it's worth remembering this passage from the OP proposal:

It is our belief that the cost of implementing a feature must be less than the present value of a feature. It is the belief of Cryptonomex that this particular feature is worth much more than the cost to implement it and therefore Cryptonomex will be implementing it speculatively in exchange for a cut of all MSHARES for all assets that use this feature to improve their liquidity.

The OP is very complicated, so cryptonomix gets rewarded for implementing it by taking a cut of the MSHARES. Fair enough, but is this clouding their ability to judge the counter proposal objectively?

BMs opinion will eventually get some people to vote it, but this could be solved by simply doing two worker proposals, the one who gets voted in first or has more % of approval is done,

[monsterer]

I think it's worth remembering this passage from the OP proposal:

It is our belief that the cost of implementing a feature must be less than the present value of a feature. It is the belief of Cryptonomex that this particular feature is worth much more than the cost to implement it and therefore Cryptonomex will be implementing it speculatively in exchange for a cut of all MSHARES for all assets that use this feature to improve their liquidity.

The OP is very complicated, so cryptonomix gets rewarded for implementing it by taking a cut of the MSHARES. Fair enough, but is this clouding their ability to judge the counter proposal objectively?

[Empirical1.2]

What about going with option 1 for a set period of time, and if it doesn't work (as you think it won't), then go with your OP?

Yeah, I'm not a big trader & I'm heavily in favour of anything that could add liquidity, I'm also excited that BM is really focusing on directing himself to this end but the historically reckless manner in which BTS consistently throws itself into long term obligations that have thus far proved unsuccessful is cause for concern.

Throwing away the fastest growing crypto-currency in the world on the back of this thinking for one...

Suppose we had Bitcoin level inflation (10% per year)... and we put that toward the referral system...  at today's valuation that would buy 30,000 users per year... at the valuation it would quickly grow to $600,000,000 it could buy 300,000 users per year....

Yes... this would be game changing... yes... inflation in this case would yield a net gain for shareholders.

Having said that, provided we weren't committed to implementing this solution on critical BitAssets like BitUSD and BitGold and could trial it on a less critical or privatized BitAsset or UIA first to guage its efficacy then I would be in favour of it.

[monsterer]

What about going with option 1 for a set period of time, and if it doesn't work (as you think it won't), then go with your OP?

[fav]

alright, can we start to get things done now? there's too much talk and little action, I'd like to see a worker soon.

remember: done is better than perfect

[bytemaster]

There have been several opinions expressed that I would like to address:

Opinion 1. If we don't increase the taker fee, then we won't shift the market and we can still incentivise market making by reducing the maker fee up the opposite of the taker fee.

If I offered everyone on this forum $0.01 to visit me in my office every day you could claim that I am incentivising an increase in visitors.  If my goal is to get 1000 visitors per day will such an incentive program make any meaningful difference?   Of course not, the cost of traveling to see me is greater than $0.01.  On the other hand, if I was handing out Cryptonomex stock to everyone who came to see me then I will probably get a lot of people buying airplane tickets to come visit me.   There is a non-linear curve on the incentive scale.  Below a certain point it makes almost no difference, above a certain point there would be a mob outside my office. 

If we are going to implement something it has to be "big enough" to have a meaningful impact on liquidity, not just theoretically incentivise it.   To have a meaningful impact it has to significantly offset the volatility risk faced by liquidity providers.  In other words, the reward should be equal to the average volatility during the average period a market maker takes to turn over their inventory.   This volatility risk is what we must overcome.  Throwing a few pennies at market makers and saying, "hey take a big risk and we will increase your revenue by 0.2%" and they will say, thanks but no thanks.   



Opinion 2.  We should simply encourage liquidity by diluting BTS

99% of assets on BitShares are user issued assets.    Companies like Open Ledger want to incentivise liquidity in their UIA and will need tools to do so.  Surely we wouldn't want to dilute BTS to provide liquidity in every UIA?  If we are going to code a solution to improve things for some BTS assets, we should do so for all UIA assets. 

As you can see in this thread, diluting BTS is not an option because it has no market feedback via price indicators.

So rather than viewing this as a tool for BTS, view this as a tool for businesses built on BitShares.  These are the businesses that need to self-fund their own liquidity from their own future profits. 

[tbone]

Hence the negative maker fee encourages users to wait (which is the opposite of liquidity).

There are two factors at work here, liquidity, which is the depth of the orderbook and traded volume, which is makers and takers coming together. Having an orderbook 100M USD deep with no trades would still have huge liquidity.

I fear this is argument is another straw man: If you keep the overall trading fee the same as it is now but divert a fraction of it to the makers, how can you possibly change the taker's behaviour?

So let's not leave the taker fee as is.  Let's lower it.  Or let's at least have a very competitive %-based fee.  As long as we're not raising the taker fee in order to pay the maker, we can incentivize makers without discouraging takers.  Let's get this going already, shall we?

[Akado]

financing stealth, instead of core features is taking value from BTS, just by the mere fact of prioritizing non-essential features over essential and much needed one.

I agree with this. I mean, it's awesome to have someone willing to pay for stealth, it is, I'm not refusing it but there's probably other more important features that should be added first.

I will wait a few months after Stealth is implemented to see if I was right or not. Hope it brings the volume people think it will..

[monsterer]

Hence the negative maker fee encourages users to wait (which is the opposite of liquidity).

There are two factors at work here, liquidity, which is the depth of the orderbook and traded volume, which is makers and takers coming together. Having an orderbook 100M USD deep with no trades would still have huge liquidity.

I fear this is argument is another straw man: If you keep the overall trading fee the same as it is now but divert a fraction of it to the makers, how can you possibly change the taker's behaviour?

[tbone]

So just leave the taker fee as-is, and instead have the network discount the maker fee.

Unfortunately, I don't think this can work, because the network can't detect self-trades to collect the network bonus. If completing a trade creates free BTS, everybody in town will be gaming the system.

Actually, you're incorrect on 2 levels.  First, without doing anything special, you can absolutely pay the maker any amount UP TO the amount the taker pays.  In that case there would be no point in self-trading.  But beyond that, BM has already determined that self-trading can be prevented.

[Chronos]

So just leave the taker fee as-is, and instead have the network discount the maker fee.

Unfortunately, I don't think this can work, because the network can't detect self-trades to collect the network bonus. If completing a trade creates free BTS, everybody in town will be gaming the system.

[tbone]

Fascinating. Bytemaster is right. Negative maker fees really do just shift the price, technically speaking. The psychological effect may be to increase liquidity, as makers feel that they are getting a bonus, but it's not mathematically provable as I first thought.

It's only a price shift if you're raising the fee on the taker in order to pay the maker.  So just leave the taker fee as-is, and instead have the network discount the maker fee.  That would positively incentivize liquidity. 

Would it have as much of an impact as we'd like?  If not, we could have the network pay the maker beyond the discount.  Ordinarily this would not work because of self-trading, but BM seems to have very cleverly solved that problem. 

We can also use his maker fee parameter to set how much of the maker fee is discounted or how much the maker gets paid beyond a 100% discount.  We could start small and dial it up (and then later back down) as needed. 

Also, I agree with @theredpill re: having the network pay the maker, at least to start.  It's a lot less complicated and a lot less risky on multiple levels.  A good, happy medium.  Let's do this!

I'm not quite comfortable with the idea of issuing this Maker asset, I rather dilute and issue BTS instead. I understand that dilution is not a popular topic because push the price down and in this way we can bootstrap now ant pay later, but my points are:

1 - Security issued by a security - This just seems strange, BTS is a kind of security, teorecally owes to holders and plan to pay by burning, if BTS network issue another token on a promise to payback with some fees seems to be excluding BTS holders of the "rights" of the fees in the future which could be expensive, and also could be a start of a spiral of debt that we already see in mainstream finance.

2 - Low relative cost - If we find a way to fairly compensate just the best order(s) that stay in the book and get filled, I think as cheap as $100 a day per asset could work, let's say we put gold, silver, cny, usd and eur on; that's $15000 a month. a tiny amount for a $9 million dollar company.

3 - Poor value - With hundreds of valueless tokens floating around, without any base price, immediate liquidity, use, or insurance of future liquidity this token may not have the appealing necessary for the people outside of our community.

I would say let's dilute for 1 month and see how it goes.

Great ideas btw BM as always, a little more patience and we get there.

[sittingduck]

This feature is for issuers first and privatized bitassets

[sittingduck]

Bts holders are not giving up fees due uia issuers

[Tuck Fheman]

So yes, I do expect offers:

- just for this proposal  to be moved in front of stealth proposal.

- me paying for 0-100% of it and receiving 0-20% of all the Maker asset.

I'll take half (25k BTS) for 10%.

[theredpill]

I'm not quite comfortable with the idea of issuing this Maker asset, I rather dilute and issue BTS instead. I understand that dilution is not a popular topic because push the price down and in this way we can bootstrap now ant pay later, but my points are:

1 - Security issued by a security - This just seems strange, BTS is a kind of security, teorecally owes to holders and plan to pay by burning, if BTS network issue another token on a promise to payback with some fees seems to be excluding BTS holders of the "rights" of the fees in the future which could be expensive, and also could be a start of a spiral of debt that we already see in mainstream finance.

2 - Low relative cost - If we find a way to fairly compensate just the best order(s) that stay in the book and get filled, I think as cheap as $100 a day per asset could work, let's say we put gold, silver, cny, usd and eur on; that's $15000 a month. a tiny amount for a $9 million dollar company.

3 - Poor value - With hundreds of valueless tokens floating around, without any base price, immediate liquidity, use, or insurance of future liquidity this token may not have the appealing necessary for the people outside of our community.

I would say let's dilute for 1 month and see how it goes.

Great ideas btw BM as always, a little more patience and we get there.

[tonyk]

And yes I do believe the present value of the stealth is below 45K with 10% annual return...but that is not why you called - It is something for onceupon to decide on, not me.

what you did call me for is that the proposition for BTS holder is with negative returns as well... financing stealth, instead of core features is taking value from BTS, just by the mere fact of prioritizing non-essential features over essential and much needed one. I just chose a random, promising one that has a FBA written all over it...and yes I am ready to fiancé it outright/ split it with CNX and even pay a sum for just placing it in front of the wasteful one.


So yes, I do expect offers:

- just for this proposal  to be moved in front of stealth proposal.

- me paying for 0-100% of it and receiving 0-20% of all the Maker asset.

[tonyk]

And why is this proposal lesser priority than stealth transactions?

Should I pay 45K for this to becomes reality?
Ohh wait I already did... but BM and co decided to not cash it and preferred the money I paid to go down 4 times...


OK new offer - how much should I pay to move this in front of the stealth. No direct benefit for me from such rotation, just the price for putting something that makes sense for everyone in front of a feature that makes almost no sense for everyone [sadly enough for the sponsor the most]?

So I just want to let everyone know, Cryptonomex is investing money aside from the Worker Proposals and improving BitShares. But when we put prices on the various Worker Proposals, part of it is to help everyone else prioritize. If there isn’t a price associated with it we don’t have an estimate of the complexity and how it’s going to impact scheduling...

First of all our plans are directly tied to what people are willing to pay for, prioritization wise.

One of the major things that was discussed this week was a new way to raise money to build features. I think that it’s worthwhile to discuss that in this Mumble session. There’s a lot of debate about what we should prioritize and how it should be funded and how much we should pay for things.

First offer:
50,000 BTS to be put this first on the to do list [no obligations other than that]

and / or

potentially  [depending on what is the price tag to code this thing] and I get 20% of all Maker fees, instead on CNX?

[Tuck Fheman]

And why is this proposal lesser priority than stealth transactions?

Should I pay 45K for this to becomes reality?
Ohh wait I already did... but BM and co decided to not cash it and preferred the money I paid to go down 4 times...


OK new offer - how much should I pay to move this in front of the stealth. No direct benefit for me from such rotation, just the price for putting something that makes sense for everyone in front of a feature that makes almost no sense for everyone [sadly enough for the sponsor the most]?

So I just want to let everyone know, Cryptonomex is investing money aside from the Worker Proposals and improving BitShares. But when we put prices on the various Worker Proposals, part of it is to help everyone else prioritize. If there isn’t a price associated with it we don’t have an estimate of the complexity and how it’s going to impact scheduling...

First of all our plans are directly tied to what people are willing to pay for, prioritization wise.

One of the major things that was discussed this week was a new way to raise money to build features. I think that it’s worthwhile to discuss that in this Mumble session. There’s a lot of debate about what we should prioritize and how it should be funded and how much we should pay for things.

I believe Stan said it best here on the forum, but I haven't found it yet. If it was Stan and not Dan, I think the comment was basically the higher priced features come first. I may be wrong, but I'm trying to find it.

Found it

bytemaster: Well how everything works in life, we do things for profit. We prioritize mostly based on profitability. The highest most profitable actions get our highest priority.

[tonyk]

And why is this proposal lesser priority than stealth transactions?

Should I pay 45K for this to becomes reality?
Ohh wait I already did... but BM and co decided to not cash it and preferred the money I paid to go down 4 times...


OK new offer - how much should I pay to move this in front of the stealth. No direct benefit for me from such rotation, just the price for putting something that makes sense for everyone in front of a feature that makes almost no sense for everyone [sadly enough for the sponsor the most]?

[bytemaster]

Fascinating. Bytemaster is right.

  

[Chronos]

Fascinating. Bytemaster is right. Negative maker fees really do just shift the price, technically speaking. The psychological effect may be to increase liquidity, as makers feel that they are getting a bonus, but it's not mathematically provable as I first thought.

[bytemaster]

Paying a negative fee immediately from the buyer who pays a positive fee is nothing more than shifting the price.  It is a meaningless change.

Taker pays the fee to both maker and the network. It's more than shifting price because it encourages makers thus improving the liquidity.

Sometimes it helps me to imagine an extreme case to get a better feel for what is happening on the smaller scales.  So what follows is my own thought experiment.

Lets try the experiment with a 20% taker fee just to be outrageous.  Lets have the maker fee be -20%.    Under such a market, those who demand liquidity take a 20% loss and those who provide it get a 20% gain. The trader would view such a market similar to a market with a 20% spread. They would be hesitant to buy such an asset because they know they will take an instant 36% loss if they are the taker on both sides. (.8 in and .8 out).  This means that someone looking to get in-or-out of such a market with the least loss would have to be a maker for one of the two trades in which case they take a 4% loss (.8*1.2=.96).  Those who are willing to "wait" on both sides of the trade can profit by 44% (1.2*1.2).   Hence the negative maker fee encourages users to wait (which is the opposite of liquidity).  You create "lines" on both side of the order book of people who want to exit their position. I suspect you would see very narrow spreads with steep walls.  This market would have the appearance of good liquidity, but the underlying reality is that 'day traders' view it as a market with a 20% spread.

So in this extreme case the takers (aka traders) end up paying for their liquidity TODAY the same way they would pay for their liquidity without the 20/-20 maker/taker rule: via a large spread.  Market makers end up making the same profits they would if they had a 20% spread between their buy and sell walls. The only thing the negative maker fee is doing under this model is enforcing a minimal spread that makers can provide, in other words price-fixing the market maker fee.    Instead of market makers competing to reduce spread, they are competing to be the first in line of a "virtual" 0 spread.   Because no value is moving through time all this price fixing is doing is creating shortages (of takers) and gas lines (those waiting to exit on both sides of the book). 

So it is clear that if we set the maker/taker fees to be greater than the natural spreads that things break down.  Our real goal is to reduce spreads, not enforce a minimum spread with steep cliffs of liquidity on either side of that minimum spread.

So this means that we want to maximize maker rewards without increasing the cost to the taker.  So lets look at another extreme market:

1. Suppose that takers paid a 0.1% fee
2. Suppose that makers earned 20% bonus from someone else (ie: the network).

In this market there would be huge walls of liquidity as people compete to get a 44% return every time they turn over.  This 44% return completely eliminates almost all market volatility risk.  Traders/takers see an effective spread of just 0.1% which means they feel very comfortable buying the asset because they know they can turn around and sell it instantly with only a 0.2% loss.  Assuming there was no limit on the 20% bonus, then people would start trading against themselves.   Obviously you would have to mitigate this self trading by making the reward based upon how long the order was on the books before getting filled.  This is the situation we really want to create.

So the question becomes how do you compensate makers today without making todays traders (takers) pay for it.  My proposal has tomorrows takers pay today's makers by paying for market making today, but not tomorrow.

The proposal here says you give them 0.1% today + a cut of the net present value of all future fees.

The cost of providing liquidity on early on is much more expensive than the cost of providing the same liquidity in a mature market.
Under this model you gain more liquidity from makers early on (when it costs the most) without actually decreasing liquidity available in the future (when it costs less).  If you set the decay curve properly you can end up with "constant liquidity" equal to the average liquidity over the entire life of the market.  Over a long enough time horizon this means that you should get almost as much liquidity in year 1 as you do in year 30 if market makers believe in the future of a given market.

So when people suggest "simple" rules they are not really getting the result they want. 

[monsterer]

@bytemaster I think you should reconsider @Chronos suggestion - it is much more elegant than the OP.

[Chronos]

Paying a negative fee immediately from the buyer who pays a positive fee is nothing more than shifting the price.  It is a meaningless change.

I disagree that it is meaningless. It rewards makers, which rewards providing liquidity (by definition). Liquidity is orders on the books. The 0.2% taker fee penalizes order taking, which also helps liquidity (by definition, taking orders will reduce liquidity).

Consider this thought experiment: what if the maker fee were negative 25%? People would bring the spread to nearly nothing, in an attempt to earn this huge bonus. That would make for much deeper liquidity, but few traders would fill orders because of the taker fee. So, the sweet spot is somewhere less than 25% rebate. 

Another thought experiment: what if maker fee were positive 25%, to be paid to the taker? The spread would become enormous, as traders tried to avoid getting filled.

Conclusion: you can influence the spread, and total liquidity, by adjusting this parameter.

The corresponding taker fee could be offset by somewhat reducing the order placement fee, if desired.

[botfund]

Paying a negative fee immediately from the buyer who pays a positive fee is nothing more than shifting the price.  It is a meaningless change.

Taker pays the fee to both maker and the network. It's more than shifting price because it encourages makers thus improving the liquidity.

Also, the present value of future fees is much greater than the value of current fees.  We therefore transfer value from the future into the present.  Future liquidity incentive requirements are less than initial requirements. 

Maker% and taker% can be set as parameters. This can be addressed by tuning the parameters as time goes and can even be set both to positive values when we don't need to encourage makers.

Those that have proposed simply paying interest to the first order on the book start to get the idea. The question is, where does the interest come from, who funds it?  If you want to do more than simply shift the price, then you will need to bring in outside funding.  I am bringing in the outside funding from future fees in the same market.  You all are suggesting bringing in that funding by diluting current BTS holders.   Furthermore, that solution does little to help out UIA issuers which want to improve their own liquidity and raise money to do so.  My monetizing future fees it helps UIA issuers to fund their liquidity without actually issuing a security.

If the taker is the buyer of BTS on BTS/USD, he pays the fee using BTS by getting less received BTS.
If the taker is the seller of BTS on BTS/USD, he pays the fee using USD by getting less received USD. The maker and the network will get USD and the network can use the USD as a fee pool to fund possible interest as BTS1 or to the first order on the book. This can also be used to further encourage makers in a time sensitive way like you proposed.

[bytemaster]

This is a simpler way to do the same thing.

• NEGATIVE_MAKER_FEE = cash in the pocket of makers
• MAKER_SHARES = more complexity and rules to accomplish the same result

I also think that liquidity would be helped by allowing orders to be placed relative to the price feed.

EDIT: Just to be clear, I'm saying that MAKER_SHARES aren't needed because a negative maker fee solves the same problem much more simply.

How is this proposal better than a negative 0.2% maker fee, which would also reward makers according to the volume they generate, and be much, much less complex?

Nobody has commented on Chorons's idea to achieve the same goal but in a simpler way.
Is there any flaw in his reasoning?

I didn't comment on it because I addressed it directly multiple times.  First in the early discussions, then on mumble, and lastly in the ticket linked from the OP. 

Paying a negative fee immediately from the buyer who pays a positive fee is nothing more than shifting the price.  It is a meaningless change.

Also, the present value of future fees is much greater than the value of current fees.  We therefore transfer value from the future into the present.  Future liquidity incentive requirements are less than initial requirements. 

Those that have proposed simply paying interest to the first order on the book start to get the idea. The question is, where does the interest come from, who funds it?  If you want to do more than simply shift the price, then you will need to bring in outside funding.  I am bringing in the outside funding from future fees in the same market.  You all are suggesting bringing in that funding by diluting current BTS holders.   Furthermore, that solution does little to help out UIA issuers which want to improve their own liquidity and raise money to do so.  My monetizing future fees it helps UIA issuers to fund their liquidity without actually issuing a security.

[clayop]

And also make fees 0 to every maker and get the borrow cost to 0 too.

Would be interesting to see the fight for the first row of the book.

Cheers! lol

@clayop about the borrow fee, can I make something?

zero fee may encourage spam attacks. So based on ElMato's calculation, 1 BTS fee is reasonable.

[theredpill]

What would be the recomended minimal anti-spam fee for the borrow case? We should do this now, this do not depend of any development. Just get voted. I been seeing other plataforms caming out with lots of money to buy liquidity

[theredpill]

And also make fees 0 to every maker and get the borrow cost to 0 too.

Would be interesting to see the fight for the first row of the book.

Cheers! lol

@clayop about the borrow fee, can I make something?

[theredpill]

How about that: each 10 block or so pay some BTS to the first order of the book (proportional of the size of the order) of each asset we want to bootstrap :-)

[theredpill]

This is not the same because the first ones will earn more then the last ones, the more simple equivalent way could be to get a dillution that is deacaing until 0 to pay the maker (then the network get all fees later that will pay this dilution)

[jakub]

This is a simpler way to do the same thing.

• NEGATIVE_MAKER_FEE = cash in the pocket of makers
• MAKER_SHARES = more complexity and rules to accomplish the same result

I also think that liquidity would be helped by allowing orders to be placed relative to the price feed.

EDIT: Just to be clear, I'm saying that MAKER_SHARES aren't needed because a negative maker fee solves the same problem much more simply.

How is this proposal better than a negative 0.2% maker fee, which would also reward makers according to the volume they generate, and be much, much less complex?

Nobody has commented on Chorons's idea to achieve the same goal but in a simpler way.
Is there any flaw in his reasoning?

[vegolino]

For $300, let's just get it done.

Totally agree.

Me too 

[carpet ride]

Very cool feature.

One question though.  What does CNX need to make this a success? 

Let's say a big BTC market maker became interested and wanted to partner with CNX on this feature .. would that add value?  Or maybe I should rephrase .. will this feature incent CNX to actively pursue market makers

[BunkerChainLabs-DataSecurityNode]

Awesome!

Very excited to have more features for BitShares to grow and increase profitability.

This is a great step forward.

[BTSdac]

I  don`t think it is a good idea to make Market Maker as a base feather of block chain  protocol level

The market maker is NOT implemented on the block chain level ..
The proposal proposes a way to PAY market makers for their liquidity!

I notice two point
1. "under this proposal we would introduce a new parameter to assets that allows the issuer to configure different market fees for makers vs takers "
2. hard-fork
 if not block chain level ,why need to hard-fork
I think the block-chain protocol level should simple ,   I disagree  different fee between  makers vs takers

[btstip]

Hey Tuck Fheman, here are the results of your tips...

• funnybear: has been credited 5 PERCENT

Curious about ShareBits? Visit us at http://sharebits.io and start tipping BTS on https://bitsharestalk.org/ today!

Source: https://bitsharestalk.org/index.php/topic,20482.msg264415/topicseen.html#msg264415

Created by hybridd

[mike623317]

For $300, let's just get it done.

Totally agree.

[Empirical1.2]

I like that the decision to apply it can be tried on a market by market basis.

If the market starts out small with $10K / 24hr volume, and then turns into a $30M 24/hr volume then the market fees of 0.2% will yield $30,000 per day, half of which would belong to the individual who provided a meer $10K of liquidity in the first year. Meanwhile those who provide $10K of liquidity once $30M of volume is reached will get a very small number of MSHARES

The percentage of market fees that are directed to repurchase MSHARES is a parameters that is set by the issuer. It may be increased, but never decreased.

Is there a risk that once $30M of volume is reached, the committee may choose to reduce the % of market fees given to the MSHARES programme or halt the programme now that it no longer incentivizes liquidity thus short-changing people who had provided initial liquidity with future expectations of receiving a higher %?

[donkeypong]

For $300, let's just get it done. 

[bytemaster]

just posted some questions on https://github.com/cryptonomex/graphene/issues/475

My main concern is the effect on BTS profitability and referral income. Does it mean that 80% of fees will go to the maker and 20% of fees will go to cryptonomex? Is this only for new UIAs? Will this also be for current committee issued smartcoins?
How will BTS profitability and referral income be affected?

I  don`t think it is a good idea to make Market Maker as a base feather of block chain  protocol level

The market maker is NOT implemented on the block chain level ..
The proposal proposes a way to PAY market makers for their liquidity!

While Market Making is not done at the blockchain level, incentivizing it is. It is a fair question of whether or not this extra feature is something we want.

I attempted to answer your questions posted on the issue.  The mile high summary is that this feature in and of itself takes no profits away from the referral program nor BTS holders. It is only a reallocation of profits previously reserved to the issuer and completely at the discretion of the issuer to adopt or not.  BTS benefits from increased order creation fees and user adoption if the program works. 

Only if the committee managed assets adopt the feature would it impact the funds available to the committee and thus indirectly to the BTS holders. The committee would have to decide whether or not they thought it would be profitable to adopt this program for USD and CNY. 

[Thom]

just posted some questions on https://github.com/cryptonomex/graphene/issues/475

My main concern is the effect on BTS profitability and referral income. Does it mean that 80% of fees will go to the maker and 20% of fees will go to cryptonomex? Is this only for new UIAs? Will this also be for current committee issued smartcoins?
How will BTS profitability and referral income be affected?

I  don`t think it is a good idea to make Market Maker as a base feather of block chain  protocol level

The market maker is NOT implemented on the block chain level ..
The proposal proposes a way to PAY market makers for their liquidity!

While Market Making is not done at the blockchain level, incentivizing it is. It is a fair question of whether or not this extra feature is something we want.

You raise some good questions. Another important issue related to how such features will effect referrals and trading is how will they affect the (currently few) exchanges that trade BTS? If we don't come up with a roadmap and schedule for all these hardforks we'll see exchanges that support BitShares dry up.

I know BM is well aware of the impact that hardforks have on the maintenance overhead seen by exchanges, so this just adds more pressure to hardfork more frequently. We need to publish a policy about hardforks and publish it widely, and gauge the crypto community's response to it and adjust it accordingly.

I don't know how the rate of hardforks will change, but conceivably pressure to release features may stimulate it, plus the need for hardforks to resolve emergency issues that could arise.

The policy should be something like:

Hardforks for the purpose of releasing FBA's will not be done more frequently than N times in a P period. BitShares will incorporate all other hardforks into the periodic hardfork schedule to the extent possible. Hardforks to address emergency issues will not be bound to a schedule but will be performed as necessary, with as much advance notice to all parties as possible.

[bytemaster]

just posted some questions on https://github.com/cryptonomex/graphene/issues/475

My main concern is the effect on BTS profitability and referral income. Does it mean that 80% of fees will go to the maker and 20% of fees will go to cryptonomex? Is this only for new UIAs? Will this also be for current committee issued smartcoins?
How will BTS profitability and referral income be affected?

I  don`t think it is a good idea to make Market Maker as a base feather of block chain  protocol level

The market maker is NOT implemented on the block chain level ..
The proposal proposes a way to PAY market makers for their liquidity!

While Market Making is not done at the blockchain level, incentivizing it is. It is a fair question of whether or not this extra feature is something we want.

Currently BTS is not collecting income from market fees.  This would be an opt-in feature on a per-asset basis.  So the committee would have to decide whether or not paying for market makers improves the overall volume / transaction for BitShares.  CNX only gets 20% of what is paid to Market Makers.  This means the committee could say market makers only get 10% of trading fees, leaving CNX with just 2%.   Bottom line, CNX only gets paid if the feature is used and it doesn't have to be used.

[maqifrnswa]

just posted some questions on https://github.com/cryptonomex/graphene/issues/475

My main concern is the effect on BTS profitability and referral income. Does it mean that 80% of fees will go to the maker and 20% of fees will go to cryptonomex? Is this only for new UIAs? Will this also be for current committee issued smartcoins?
How will BTS profitability and referral income be affected?

I  don`t think it is a good idea to make Market Maker as a base feather of block chain  protocol level

The market maker is NOT implemented on the block chain level ..
The proposal proposes a way to PAY market makers for their liquidity!

While Market Making is not done at the blockchain level, incentivizing it is. It is a fair question of whether or not this extra feature is something we want.

[theredpill]

Is a symbolic contract that allows CNX to be reward with future market fees 20% of all fees if I understand right.

I think we should do it, if CNX is willing to develop for free now to be compensated on fees later, this tell us a LOT in terms of if they have any doubt about succeeding.
Some conditions must be respected IMO:

1 - This cannot affect in any shape or form way the network functions.
2 - We have to find a way to compensate only the bests offers that STAYS on book by X period of time (the trigger is the match of order, but the reward is proportional of the TIME the order stayed)


Thats no doubt in my mind now if this network will be a great success, my shares are not for sell so soon :-)

[gn1]

100k bts is the cost for implementing the feature.

It is NOT the votes needed to be approved.

Okay, got it.

He made it sound like the hard fork plan will go through without stakeholder's voting, so I had to ask.
Thank you.

[Bhuz]

100k bts is the cost for implementing the feature.

It is NOT the votes needed to be approved.

[Tuck Fheman]

In the worker proposal, it says "If the proposal gets funded then it will be assumed that the required hardfork has been approved by stakeholders and development will compense."

What kind of rule is that? 100000BTS can be paid by one person, and a hard fork gets approved just like that by getting funded? That's so centralized.

95% of the people might not be even aware of this thread.

#sharebits "funnybear" 5 PERCENT

I'd give you a FISTBUMP but I think you own more than me at this point. 

[gn1]

In the worker proposal, it says "If the proposal gets funded then it will be assumed that the required hardfork has been approved by stakeholders and development will compense."

What kind of rule is that? 100000BTS can be paid by one person, and a hard fork gets approved just like that by getting funded? That's so centralized.

95% of the people might not be even aware of this thread.

[fav]

$300 is reasonable, let's test it and see where it goes.

[bitcrab]

make sense, although it bring complexity.

[luckybit]

The issue I see with this is that later on in the game, market makers won't be incentivised enough to provide liquidity.  You may think that at this point the asset will have reached "critical mass" and won't need liquidity, but I doubt that will be the case.  Stocks, bonds, and forex all have market makers still and their volume is more than BTS may ever be able to dream about.

I like the idea of incentivising people to bootstrap liquidity for assets at the beginning, but there needs to be a provision for market makers in the future.  I would suggest making vesting a part of the equation.  If someone promises to keep providing liquidity by reinvesting their profits, they should be provided with more maker shares.  Someone promising to provide guaranteed liquidity for 5 years is much more valuable than someone who will provide liquidity for 3 months.  These shares could be cashed out early, but only with a penalty and distributing the penalized maker shares back into the reserve.

Profit reinvestment needs to be a feature. Why isn't it?

[luckybit]

https://github.com/cryptonomex/graphene/issues/475

This is the first of many new proposals that don't cost the BTS stakeholders much of anything to get powerful new features.  In this case all the stakeholders must do is grant permission for a hardfork that implements a new feature.  100% of the new feature is self funded. 

The result is a new investment opportunity for those who want to invest on a per-feature basis in assets that are not a SECURITY because they are not a liability.

Please read the issue for more details.

This looks like a great solution.

[Empirical1.2]

Well the price is good 

My concern is that it ties BTS long term into approach which may not work.

It seems complicated & commits BTS to an approach which might not work for an extended period of time.

I would rather we tried some negative fee approaches, funded by a worker proposal on a single market, possibly experimenting with a few so that we can find out what incentives market makers respond too and what creates a tight peg in the best, most cost effective way rather than going all in on a specific long term approach from the start. 

Smartcoins are also different to other crypto in that people are concerned about the relative price they are paying. In order to get people to leave their orders on the books we might need to allow people to specify they would like to purchase BitUSD at 1.01 for example. I can't remember seeing whether this would be possible or not and the cost.

[xeroc]

I  don`t think it is a good idea to make Market Maker as a base feather of block chain  protocol level

The market maker is NOT implemented on the block chain level ..
The proposal proposes a way to PAY market makers for their liquidity!

[xeroc]

Is this limited to UIA's only, or can it be applied to MPA's PrivateMPA's and
Core asset BTS?

Current Smartcoins don't ask for a trading fee. But since the committee
controls them, they could a) ask for trading fees b) 'enable' MSHARES and c)
define how much of the fees are used for buybacks. (at least that is my
understanding of the proposal)

It seems like there will be opportunity to abuse this, at least in the
beginning, where few people are competing.  The fee's payed trading with
yourself seem minuscule compared to the possible gain if that Asset ever becomes
popular.  I guess that is a risk though, that it may not be popular. 

I'm trying to envision what this competing will look like.  Everyone trying to
trade with themselves without offering too good of a price and also trying to
avoid filling someone else's order. 

If your own order is the cheapest available.  Other than the fee, is there any
reason NOT to trade with yourself?  If not shouldn't we expect every market to
completely saturate based on the perceived future volume of that market?

I think the conclusion I'm coming to is that these attempted "abuses" are
actually good for everyone.  All participants will be taking their own risks,
and not participating costs you nothing.  Its not a further complication because
not knowing about it doesn't hurt you.   The more competition, the tighter the
spread and greater collected network fees.  Whats to lose? 

Thanks for the analysis!



Plot twist: what will happen if we allowed people to trade MSHARES directly instead of handing them out to makers?
Think of
* BTS for shareholders of the super DAC
* OBITs for shareholders of a partner business
* FEATUREUIA for shareholders of a business unit
* MSHARES for shareholders of a particular market

thinking about it .. MSHARES feel like artistcoins for a market (a pair of TWO assets)

I like it .. very much!

[BTSdac]

I  don`t think it is a good idea to make Market Maker as a base feather of block chain  protocol level

[maqifrnswa]

The issue I see with this is that later on in the game, market makers won't be incentivised enough to provide liquidity.  You may think that at this point the asset will have reached "critical mass" and won't need liquidity, but I doubt that will be the case.  Stocks, bonds, and forex all have market makers still and their volume is more than BTS may ever be able to dream about.
...

I think the idea is that in steady state there will be "normal" market maker rules that are common on other exchanges (makers pay less fees, or takers pay fees to makers).
But there will also be this 'start up' period where there is a bonus, which is not common.

[lil_jay890]

The issue I see with this is that later on in the game, market makers won't be incentivised enough to provide liquidity.  You may think that at this point the asset will have reached "critical mass" and won't need liquidity, but I doubt that will be the case.  Stocks, bonds, and forex all have market makers still and their volume is more than BTS may ever be able to dream about.

I like the idea of incentivising people to bootstrap liquidity for assets at the beginning, but there needs to be a provision for market makers in the future.  I would suggest making vesting a part of the equation.  If someone promises to keep providing liquidity by reinvesting their profits, they should be provided with more maker shares.  Someone promising to provide guaranteed liquidity for 5 years is much more valuable than someone who will provide liquidity for 3 months.  These shares could be cashed out early, but only with a penalty and distributing the penalized maker shares back into the reserve.

[Chronos]

How is this proposal better than a negative 0.2% maker fee, which would also reward makers according to the volume they generate, and be much, much less complex?

[Xeldal]

Is this limited to UIA's only, or can it be applied to MPA's PrivateMPA's and Core asset BTS?

It seems like there will be opportunity to abuse this, at least in the beginning, where few people are competing.  The fee's payed trading with yourself seem minuscule compared to the possible gain if that Asset ever becomes popular.  I guess that is a risk though, that it may not be popular. 

I'm trying to envision what this competing will look like.  Everyone trying to trade with themselves without offering too good of a price and also trying to avoid filling someone else's order. 

If your own order is the cheapest available.  Other than the fee, is there any reason NOT to trade with yourself?  If not shouldn't we expect every market to completely saturate based on the perceived future volume of that market?

I think the conclusion I'm coming to is that these attempted "abuses" are actually good for everyone.  All participants will be taking their own risks, and not participating costs you nothing.  Its not a further complication because not knowing about it doesn't hurt you.   The more competition, the tighter the spread and greater collected network fees.  Whats to lose? 

 

[puppies]

Is this a standard market feature anywhere else?

Any concern about further complicating trading?

Any concern about freezing markets due to incentivising placing orders that won't immediately match? 

[btstip]

Hey ebit, here are the results of your tips...

• bytemaster: has been credited 1 ROSE

Curious about ShareBits? Visit us at http://sharebits.io and start tipping BTS on https://bitsharestalk.org/ today!

Source: https://bitsharestalk.org/index.php/topic,20482.msg264330/topicseen.html#msg264330

Created by hybridd

[ebit]

#sharebits bytemaster 1 ROSE

[bytemaster]

https://github.com/cryptonomex/graphene/issues/475

This is the first of many new proposals that don't cost the BTS stakeholders much of anything to get powerful new features.  In this case all the stakeholders must do is grant permission for a hardfork that implements a new feature.  100% of the new feature is self funded. 

The result is a new investment opportunity for those who want to invest on a per-feature basis in assets that are not a SECURITY because they are not a liability.

Please read the issue for more details.