The way things work now:

• When users are creating a market, they must choose a quantity of Manifold dollars to put up to initialize their market.
• This amount is a true subsidy, not a bet.
  • The subsidy is used to seed the liquidity pool used by our AMM.
    • If you choose a subsidy of M$ 100, we seed the liquidity pool with 100 YES shares and 100 NO shares for traders to trade against.
    • The greater the subsidy, the more liquidity there is in the pool, the less the price moves when you place a bet.
  • Unlike our earlier DPM system (Dynamic Parimutuel), the subsidy does not correspond to a “bet” made by the market creator at the initial probability.
    • This makes it confusing!
• Liquidity fees from trading are added to the liquidity pool.
• A platform fee is levied on each trade and then burned (to reduce monetary inflation).
• The market creator earns a commission on each trade (which they receive after resolution).
• Once the market is resolved, if there’s anything left in the liquidity pool, it is returned to the market creator.
  • If the probability converges to 0 or 1 before resolution, there won’t be anything left in the liquidity pool.
  • In practice, the probability never completely converges, and there’s usually a small number of shares left in the pool.

Proposed change:

• Instead of users choosing the amount to put up when they create a market, it’s always fixed at M$100.
• This amount is described to the user as a “market creation fee” instead of a subsidy or ante.
• Market creators do not receive the remnants of the liquidity pool after resolution.
  • Anything left in the liquidity pool is burned.
• No platform fee is levied on trades.

Pros:

• Simpler for market creators to model what’s happening with their money when they create a market.
• Every market has a consistent, guaranteed base of liquidity.
• Lower trading fees (no platform fee)