I gave a lot of thought about the “Have a cake and eat it too” attack and came to really really sad conclusion:
1. It won’t be a problem to explain to BM why this is actually an attack. (My definition of attack is – flow/ deficiency in the implementation that leaves the system vulnerable and gives a possibility to malicious participants to either benefit (financially) or destroy the market even with no personal gain)
2. The problem is that even if the flow is fixed (the flow in this case is the possibility for an account to be short and long the same bitAsset at the same time), the possibility for someone to be long and short the same asset, (coupled with the limited risk of the short position to 2x max loss) still exists! The malicious player will just need 2 accounts to achieve this same result… and I do not see how this can be prevented => this is deficiency of the model (of the prediction market called BTS X) existing on a blockchain with no access to all assets of the short position holder but just to up to his initial margin.
3. The unfortunate result of 2. is that the “Have a cake and eat it too” is not simply an attack (something fixable) but argument #3 why BTS X will not work. And this is pretty bad news for me, as I will truly benefit much more if the BTS X experiment does work…
…well let’s hope it does against all odds...