I had this idea when thinking about how to improve liquidity and make the DEX easier to use. If we want to make exchanges seamless we have to either have really long confirmation times (to get limit orders) or use the current "auto-frontrunning" order to force people to place their orders carefully.
Long confirmation times isn't feasible for obvious reasons, and the problem with the second solution is that it can be really annoying if liquidity is low. So I was thinking instead of trying to fix frontrunning we could instead incentivize liquidity.
What if yield was only paid to successfully matched bitasset orders?
So if you want to earn yield, you have to put it as an order on the exchange, and you will only get the yield if someone buys into your order. (If you cancel your order, you get nothing). This way you can also get yield for bitasset bids (so you can earn bitUSD yield on your BTS if you have an old bitUSD/BTS bid that is successfully matched). This would first of all make the order books much bigger. It would also make them "older". Most investors/traders would always have their money sitting around as orders, just in case they get hit and they can earn some yield.
But I think this could also work to eliminate the need for price feeds, because it would create so much inertia in the market that once a critical mass of orders have been reached on a given bitasset market, the peg will be forced to hold.
Imagine if there was a high volume USD gateway on the blockchain. Most inexperienced traders who have bought into bitUSD and want to try to earn some yield will put all their bitUSD as asks on the bitUSD/IOU market at slightly above the peg. People holding IOUUSD will put them all as bids at slightly below the peg. Over time we'd see the emergence of gargantuan buy and sell walls. The older these walls are, the more yield they will have accumulated, BUT this yield will only be paid out if they are actually matched. This means you can generally count on walls as being real, and with enough bitasset volume you can begin to fully trust the market peg even if it isn't backed by price feeds, because of the massive inertia from the old walls.
To give an example with numbers: Someone bids 99 IOUUSD for 100 bitUSD (1bitUSD=0.99USD). After one month, another person sells 1000bitUSD into this buywall. The market maker now ALSO gets 100 bitUSD*1 month worth of yield. If a bitasset seller got their order matched, then they would get the IOU or BTS they bought, AND get the yield on the bitasset they sold as a bonus. Because people will be reluctant to give up their yield, they will rarely cancel orders and will try to set them "right" the first time. With bitassets this will include always setting the price near the peg if they see other orders near the peg too, and everyone are highly incentivized to always market make because that's how you earn yield, meaning the peg will reinforce itself.
For simplicity I said that all bitasset yield should go to market makers. The yield calculation would have to based on average bitasset volume instead of market cap. If this is unfair to those who just want to hold their bitassets and don't want to deal with market making, there could still be a normal yield to them as well, as long as there is an extra incentive to be a market maker.
In the end I think ordinary bitasset holders will prefer having high liquidity rather than yield. Investors who buy bitassets to invest/speculate are also willing to market make. Ordinary people who hold bitassets to spend are most concerned with being able to get in and out of the bitasset as quickly and easily as possible, so they will much prefer the extra market making. So I don't think there would be anything wrong with simply giving all yield to market makers.