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It will unless the outcome you inflate to 80% instead of 50% doesn't hit.
But if you inflate it to 80% by buying shares after market creation, and it doesn't hit, I suspect you'll end up the same?
The difference is option value. If I pay I pay to create the market with reasonable initial odds, I have to wait until the market resolves to get anything back.
If I buy shares to make the odds reasonable, I can sell them before the market resolves.
If you were risk neutral and had unlimited liquidity (which on the margins, with the amounts people are playing with, it seems reasonable), then it should be equivalent. (i.e. instead of selling those shares, you can buy the opposite position)
instead of selling those shares, you can buy the opposite position
Isn't the discounted present value of getting sats back sooner greater than having to wait until resolution?
That's not about risk neutrality. It's about time preference.
You're right. In that case, Predyx should pay you an interest rate for the funds you lock into their system. (It's also a limitation of not being able to take negative positions)
At some point I think this will happen. Creators also share in the fees markets generate but it is not enough to cover the liquidity you have to put up. If you want to break even in a market you created you have to trade it.
I've mentioned that to them. They should (and possibly will).
One of the frictions I'm interested in is this temporal one, where long-term bets are essentially zero-interest loans to the platform. Why would a rational actor do that when there are interest bearing instruments? Getting that resolved would incentivize participation in longer duration/further out predictions.
There's a whole capital management angle that I think Predyx should be pursuing, since they are perpetually in possession of tons of sats. They do operate a routing node but have told me that they really don't do anything to optimize the return.
If they can generate a return on the sats they're holding, some of that can go towards fee reduction and some can go towards paying interest.
Except I can sell those shares for some return as the possibility is looking less likely.
Instead of selling those YES shares you can also buy some NO shares and end up the same. (I think).
Sure in the end it might all work out the same but I would rather post less sats and have more to bet with than post more and hope to get them back at resolution if my probabilities weren't wrong or I don't hedge it properly.
If so, I think we're in agreement now. That's another thing @Undisciplined will appreciate: All this equivalency only works if you assume a risk-neutral individual with unlimited liquidity. If liquidity is an issue, then differences in how much you're fronting vs getting at the back end actually matters.
It's simple maths, simple! ;)
the math is actually hard that's why we're debating this, haha
also, i think @Undisciplined can appreciate, this is why sometimes we have to write down the models, and sit down and do the math... it often isn't that obvious just from talking/thinking
Just kidding, sorry. I know it's difficult to get numbers unless you practically sit on them. Maybe you just need to create one or two markets. Probably create about a match for which you have time of an hour or two to be available and see how it all happens.
You don't even need to pay to create the market. You can go into creator mode, create a fake market and play around with the probabilities and see the difference in liquidity required.
Yes. This is also correct, I didn't think of that.
But yeah I think simple should also know how to cash in on live market opportunities if the liquidity is lower or when he creates a market with even variable probabilities.
That's what I'm saying. I suspect it'll even out either way.