[Discussion] Delete Augur Turbo no contest outcomes in sports markets

Adding no contest outcome was wrong decision, because it increases risks both for traders and liquidity providers (LPs):

  1. LPs can lose all their liquidity due to huge IL in 49/49/2 pool when no contest price changes from 0.02 to 1, for example when MMA fight is suddenly canceled
  2. LPs can lose up to 5-7% due to IL in markets where real no contest probability is close to 0, for example in NFL markets. Changing initial price from 0.02 to 0.01 or lower can help to decrease IL losses but also proportionally reduces availble liquidity (bad for traders)
  3. Traders who opens positions without buying no contest shares for insurance also can lose all their position. That’s not expected behaviour for most bettors because other prediction markets usually return money in case of tie or no contest

Without no contest outcome in case of tie or event cancellation markets should resolve 50/50 - all shares are redeemed for equal amount of USDC collateral. It drastically decreases risks described above for all market participants.

This is not how sportsbook works. No Contest or Tie is part of the sport final results. It is counterproductive to change it. Split 50/50 is reversing turbo back to old Augur V1. The proper way to handle when NC actually takes place without NC outcome is refunding everyone the initial opening line value when the market is created.
For example,
Now, the initial line value of the spread and over/under is set to 49/49/2. Without NC, it would be just 50/50. So if NC happens, everyone receives 50.
Now, the initial line value of the winner is set to 80/18/2. Without NC, it would be just 81/19. So if NC happens, trader holds A share would receive 81 regardless of how much they pay for it. Trader holds B share would receive 19 regardless.
In both examples, trader paid more than the initial opening line would suffer some small loss if NC happens, but not significant.
This is within the framework of Augur V2. But it needs sometime to implement and deploy. Personally, I think the highest priority for devs right now is porting dispute to turbo and making turbo truly decentralized and censor resistant again. This is by far the most critical point for augur to differentiate itself from other pm and survive. Chainlink oracle is good enough for speed resolution and it is highly unlikely to have lengthy dispute. But without the dispute alternative, augur turbo is just another single point failure pm and a single government inquiry would destroy the whole thing. FF understood it, that’s why they dissolved the organization asap. Within the grand scheme of augur, deleting NC is just a temporary patch comparing to the dispute. Please allocate resource wisely for the great good, not for short term trader’s view.

The Impermanent Loss is potentially unlimited. You would lose all your funds if the NC token dumps to 0.00. Of course dumping it to even 0.0001 would take a lot of liquidity and not be that worthwhile so people aren’t doing it. But to say LPers can lose 5%-7%, potentially understates the issue.

As such, this reform is essential if you want to use an automated market maker.

The only way to not do this and have a chance at LPing being profitable without subsidies and without 100x the volume is to switch to an order book system.

There is 0.05% oi settlement fee that goes to chainlink oracle. Max 7.25% loss was calculted using start price 0.02 and final price 0.0005, because dumping lower leads to losses and isn’t rational

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