And it particular at minute 31m50s (linked above) @sky talks about the “wash trading” problem in just rewarding market’s volume.
I have thought about a (naive) solution. I’d like to discuss it openly here so everybody can participate.
Proposal: what if,
on markets that the Omen squad considers legit (via manual assessment and discussion), DxDAO/Omen participates to the LP in the proportion of, say, 10%.
At the end of the bet, some fees F will have been gained (~10% of all fees generated by the market).
Again, after manual assessment by the Omen swad, this amount F will be donated by the market creator (and/or all other LPs) as LP incentives. If, instead, the Omen squad things something shady happened, we keep F for ourselves.
Rationale: the idea is simple. We get into markets that we consider legit with our own money (Omen squad needs to be careful here) and we prevent wash trading and fake volume by getting a 10% cut on the fees. This makes fake-trading produce a loss. If, at the end, we feel nothing shady happened, we give away the rewards. Otherwise we punish the fake-market participants and keep the fees.
Interesting take on tackling the issue of reward gaming. I’m not sure how scalable that approach would be in a situation when there are millions of dollars flowing through Omen with hundreds of potentially reward-worthy markets. There is also, as you mentioned, a considerable risk taken on by the Omen Squad to manage all this.
I tend to think that the mechanism of rewarding staking of Omen positions is the least gameable way forward. Rewarding early stakers in markets also has the added benefit of pushing a market to being in a more predictive state, rather than being in a reactive state (i.e. only moving well after at the market has swung in a certain direction).
The planned market verification process with OMN should considerably reduce the possibility that invalid markets are created, so I don’t see (2) as a problem moving forward.
Regarding (3) The liquidity reward vote allows the guild to select the best markets to be rewarded, so I’m not sure allowing a veto of a market would be a good thing after it was already approved for OMN rewards by the guild. I’m thinking that this could raise a few eyebrows!
It’s a fun problem to think about, so keep the ideas coming