Market Maker Incentivization Worker Proposal ($300)

[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]?