PIP: move from market creation/stake & play concept to "liquidity providers"

Preamble
Move from market creation rewards/stake & play concept to “liquidity providers”

Simple Summary
This proposal describes how to implement auto market making for prediction markets

Abstract
Motivation
There was a ton of “staking” shitcoins, which real value came to zero. The real utility of staking was to lock the holder’s liquidity during the pump&dump cycle. In that case, staking by itself has no meaningful purpose.
Also, the PlotX prediction markets suffer from low liquidity while holders’ tokens used unproductively.

Specification (optional)
To solve this problem team should implement a “liquidity providing” option for holders. In that case holders liquidity will be split into all 3 options on the chosen market and the chance to win will depend on the algorithm, which tweaks price gaps. The holder can lose one market but it’s the PlotX team responsibility to tweak market conditions that holders profit was proportional to his provided liquidity in time and intensity at which the market was played during this time.
Possible bonuses for liquidity providers:

  • save on gas costs due to auto market re-creation with their liquidity.
  • the ability to use provided liquidity at any time to bet on one or two option instead of all three
  • the ability to set “bullish” or “bearish” preset. in that case, liquidity will be used to bet on the top two or on the bottom two options accordingly.

I’m not sure that this idea would actually be feasible in reality and it’s potentially overly complicated to implement and manage and comes with a high risk to liquidity providers.

Staking PLOT is a lot different from staking a coin that has no function. Generally those coins come to zero because the staking rewards are provided from newly minted coins, so you have inflation. Staking PLOT does not inflat the supply and it comes with legitimate benefits to the stakers. It also provides incentive for people to hold onto their PLOT when they’re not making predictions and gives them a vested interest in the success of the PlotX platform and encourages them to promote prediction markets

It’s important to incentivize participation, promotion and long-term holding in order to encourage long term growth of the project.

1 Like

I like the attempt at trying to drive an incentivization model connected to PLOT holders for providing active liquidity. While I also think it is a a complicated value proposition, this does create the spark to think along these lines. Much appreciated.

2 Likes

I think it’s not overcomplicated, it’s about more flexible risk&reward distribution. Actually, someone who makes bet on a market right before expiring has a lower risk than the market creator.
And for e.g. I’m bullish on bitcoin, or I expecting a flat in near future, it’s great if I can support market creation and get rewards if I was right. It’s all about the math behind all this.

But why not just participate in the market? What you’re pretty much suggesting is automated market participation, right? Not so much “liquidity providing” because the liquidity is gone at the end of each market cycle. I do like the idea of automated market participation that you could set parameters for but I’m not sure that it makes sense to replace staking with that.

It’s no just “automatic market participation”, it’ automatic market participation with lowered risk and lowered premium for the risk, but in long term it should be rewarded more than staking due to value it’s created for project. That’s the goal