Joey outlined the new fee structure in an answer yesterday, saying that the fees will adjust automatically so that the REP market cap is 5x outstanding interest on the Augur platform. Can you explain a bit about how this will be achieved in practice? In particular, what external data feeds will need to be used to get an idea of REP market cap? How often will fees change under this system? Is it possible that fees on a market change during the time that market is open?
The data feed for REP price will come from an automatically created Augur market. This market will be a normal market and go through the normal resolution process (leveraging the reporting system and security model to ensure accuracy of the data feed). Once the REP price is known, we can easily calculate the REP market cap by multiplying by the total supply of REP (11,000,000 at the moment).
The contracts will track the open interest of all markets passively as people interact with the system so that we always have the open interest numbers available to us. Once the open interest and REP market caps are known we then know whether the REP market cap is too high or two low. We then calculate the new fee with the formula
current_reporting_fee * (augur_open_interest * 5 / rep_market_cap).
The tentative plan is to update this value on the order of once a month. If we update too frequently, the market will not have time to adjust to the new fee schedule and the REP fee will spike or tank. If we update too infrequently, then we are at risk of the security model becoming invalid due to a sudden growth in Augur that isn't yet accounted for by the fee system.