SIP-67: Binary Options bid phases

Simple Summary

The current binary options system doesn't have any support for early bidders, thus it makes sense for everyone to wait untill the last possible moment before casting their bids. This is a proposal on how to achieve a system where bidders would be incentivisized to cast their bids as soon as possible

Abstract

There would be three bidding phases, automatically created on the creation of the market. Earlier phases will have smaller bid and withdrawal fees. Early bidders will have their withdrawal fee locked even when the bid gets to later phases, so they still achieve the "discount".

Motivation

With the current system for Binary Options it makes sense for bidder to wait until the last possbile moment:

1. They will have a clear picture on the final odds
2. They mitigate the withdrawal need and can use their funds in different places until the bid gets to final stages
3. So finally they have no reason to lock their funds early in a bid

For this reason currently only markets with shortterm bid windows make sense. We want to balance this out so that long term bid windows are also attractive for both market creators and bidders.

Specification

Overview

As soon as a binary market is created the bid window is split into 3 phases equal in length:

1. Early Bird: 0.5% fee, 3% withdrawal
2. Standard 1% fee, 5% withdrawal
3. Late Riser 2% fee, 7% withdrawal

Early birds will have 0.5% fee on bids and 3% withdrawal cost till end of the bid phase. Standard bidders will have the current 1% bid fee and 5% withdrawal cost until the end of the bid phase. Late Risers will have 2% bid fee and 7% withdrawal fee.

UI will have to be adapted to support these phases. Markets already created will keep their default configuration.

Rationale

Technical Specification

Test Cases

John Doe create a market with bid deadline in 72h:

1. Early bird phase is until hour 24, with 0.5% bidding fee. Everyone who joined on the bid phase has 3% withdrawal fee until the end of the bid deadline.
2. Standard phase is 1% fee. Everyone who joined in the standard phase has 5% withdrawal fee until the end of the bid deadline.
3. Late Riser phase is from hour 48 till hour 72, with 2% fee and 7% withdrawal fee.

Configurable Values (Via SCCP)

1. All fees are subject to configuration
2. Number of phases is subject to configuration

Copyright

Copyright and related rights waived via CC0.