How are the fees currently set in Augur for both reporters and market creators? When are they charged? Does the market creator still get half of the fees and the reporters get half of the fees? Are they still charged on trading volume or is it different now?


Augur now has two fees charged to traders

  • Market creator fees
  • Reporting fees

Fees are charged when "open interest" decreases. In Augur markets the number of complete sets issued or shares available of each outcome is open interest. Fees used to be charged on market volume, but these are avoidable using systems like 0x, and aren't actually closely tied to the security model. Open interest, however, is because the open interest in a given market determines how much money is stored in that market at any given time.

So open interest is decreased and fees are charged when a market has closed and someone has won / holds shares with value at the end, or when a complete set is closed out or sold (i.e. closing a short position does this).

With Augur, we want the fees to be as economically efficient as possible, ensure reporters get paid as much as they should, and be non rent-seeking. The old fee structure split fees between reporters and market creators, and let market creators decide the fee, which could result in reporters being paid too much or too little.

Now, market creators choose their own fee which goes solely to them (these will trend quite low over time I imagine).

Then, reporters get paid such that the market cap of rep is >=5x the value of all outstanding money (i.e. outstanding/open interest) in Augur markets. If the market cap of rep is below this, fees increase. If it's above this, fees decrease. You can think of it similar to how companies like Amazon don't pay out anything in the beginning and charge low fees to boost growth, but once they mature more they start actually charging a bit more to make more money. In the beginning rep's value will be primarily driven by speculation so fees will be low. As time goes on people will hold rep (this could be many years off) for reporting and earning fees from doing that more than its pure speculative value (think Coca Cola vs a rapidly growing startup).

As a trader, say your shares were worth $100 at the end and the market creator fee was 0.05% and the reporter fee to maintain the invariant above was 0.1%, you'd get back $99.85 at market resolution.

For more commentary / discussion on this see Reddit Thread on Fees

  • How does the augur system know it's own market cap? By how much per reporting period are fees increased/decreased? – tobi Aug 28 '17 at 12:20
  • It uses reporting to determine its own market cap :). It's just a simple linear algorithm to adjust them exactly at the moment – Joey Krug Aug 31 '17 at 16:48

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