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RE: How to Improve the Internal Market - Steem/SBD - With Better/Fairer Liquidity Rewards and Implied Prices...
Great article with lots of insight into how trading markets work. This was my thoughts on how to fix the Liquidity Reward on Steemit, eliminate the reward on Wash Trading, ie. if you execute a wash trade your liquidity score is set to zero. This would greatly reduce the gaming and still encourage a tight margin.
Reduce the Liquidity Reward from 1200 an hour to around 200 an hour. This was approximately the original target reward ($250) before the large price run-up. I do like your idea about rewarding more than just the top liquidity provider. Maybe the top 5 split the reward based on volumn.
I think your proposals make sense @gregory-f The great thing, is, there are a number of ways to approach this, and almost all of them will result in the internal market becoming useable once more
I think also that reducing the liquidity reward is the way to go. Probably something like $10 per hour would be sufficient. It's not too much, but something that a (good) bot could easily earn.
I think you need to reward the risk the liquidity providers are taking by working orders on the market, they don't necessarily want filled.
I personally don't think $10 per hour would come close to cutting it. I also think we need multiple users to fight for the rewards and this will result in the spread closing, and the market become more liquid..
Easiest way is to try it. Let's start with a small sum and raise it slowly until liquidity is on a good level.