46
General Discussion / Incentivising Liquidity
« on: December 02, 2015, 09:58:46 pm »
I have two basic proposals for incentivising liquidity:
Proposal 1: Maker / Taker
Add an asset flag that allows issuers to only charge fees to the Taker (the new order being placed) and not the Maker (the open order on the books). Currently both sides are charged. The Taker is the one that pays for liquidity.
Proposal 2: Share Market fees with Maker
The default model is to just give the Maker what the Taker paid, but this model does not generate any leverage. At most it gives the Maker an incentive proportional to the market fee. We would like to amplify the incentive for Market Makers early on when the risk is the highest by reallocating future revenue to current Makers. Under this model, there would be huge incentive to be a Maker on day 1 and no incentive to be a maker on day 1000 (other than not paying the market fee).
In effect, the long-term success of a market depends upon it getting bootstrapped and we should give the "makers" a share of the long-term success proportional to their contribution to liquidity.
Every time a Maker's open order is matched, they receive MAKER_SHARES equal to SIZE_OF_ORDER * RATE where RATE starts out at 1 and decays to 0 with a half life of 1 year. The supply of MAKER_SHARES will grow proportional to volume until the RATE hits 0 after (4 years).
MAKER_SHARES will only be awarded for orders that sit on the books for at least X minutes (to prevent trading against yourself).
MAKER_SHARES will automatically be purchased back from the market with the market fees earned on the asset. MAKER_SHARES will thus represent a stake in the future success of an individual market and they can only be earned by providing visible liquidity.
To maximize the number of MAKER_SHARES you earn you want to do the following:
1. Place orders that sit on the books for at least X minutes if they get filled instantly (less than X min) we will assume you are trading against yourself to "MINE" "MAKER_SHARES".
2. Buy back and resell as often as possible.
Whoever performs this service ends up "owning" a large share of the BitAsset market and they deserve it. BitShares benefits because it is earning fees from every trade in the system just like it always did.
Failure to pay for liquidity early on is like a company that wants to grow without hiring developers or marketers. We must provide profit motives for the services we want to see.
Proposal 1: Maker / Taker
Add an asset flag that allows issuers to only charge fees to the Taker (the new order being placed) and not the Maker (the open order on the books). Currently both sides are charged. The Taker is the one that pays for liquidity.
Proposal 2: Share Market fees with Maker
The default model is to just give the Maker what the Taker paid, but this model does not generate any leverage. At most it gives the Maker an incentive proportional to the market fee. We would like to amplify the incentive for Market Makers early on when the risk is the highest by reallocating future revenue to current Makers. Under this model, there would be huge incentive to be a Maker on day 1 and no incentive to be a maker on day 1000 (other than not paying the market fee).
In effect, the long-term success of a market depends upon it getting bootstrapped and we should give the "makers" a share of the long-term success proportional to their contribution to liquidity.
Every time a Maker's open order is matched, they receive MAKER_SHARES equal to SIZE_OF_ORDER * RATE where RATE starts out at 1 and decays to 0 with a half life of 1 year. The supply of MAKER_SHARES will grow proportional to volume until the RATE hits 0 after (4 years).
MAKER_SHARES will only be awarded for orders that sit on the books for at least X minutes (to prevent trading against yourself).
MAKER_SHARES will automatically be purchased back from the market with the market fees earned on the asset. MAKER_SHARES will thus represent a stake in the future success of an individual market and they can only be earned by providing visible liquidity.
To maximize the number of MAKER_SHARES you earn you want to do the following:
1. Place orders that sit on the books for at least X minutes if they get filled instantly (less than X min) we will assume you are trading against yourself to "MINE" "MAKER_SHARES".
2. Buy back and resell as often as possible.
Whoever performs this service ends up "owning" a large share of the BitAsset market and they deserve it. BitShares benefits because it is earning fees from every trade in the system just like it always did.
Failure to pay for liquidity early on is like a company that wants to grow without hiring developers or marketers. We must provide profit motives for the services we want to see.