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bonkers about creating an expert Mars is
really about me Buffalo's Network
founder creator of the clovers network
also done it before curiously with
Paragon black and notice the author of
mt 1603 of the refundable token s nifty
which was a hackathon project that
inspired an estimated of teas and of
course founder of Lawrence the majestic
creation market Williams
today I'll be talking about market
makers from earning and going over
mitigation techniques and match-funding
hurts
there's your three different versions
and curious if people have opinions
about which
links and then we can
so bikers are automated marketing
measures you might be familiar to these
concepts in the
context prediction markets a mechanism
invented by Robert Hanssen that's used
for basically gambling on prevents Bank
or which uses a technique ratio or and
or the slope formula version of
bioterrorist kind of created by Simon
Taylor media but all these parking
makers provides the query which is a
very important concept and any sort of
token base or asset based system
whenever you have some asset you're
trying to sell or buy there's not a lot
of other people out there trying to
fight or sell it you're gonna have a lot
of problems agreeing on price and so
there's many situations in which you
have the clarity there's just not a lot
of buyers a lot seminarian each topic or
something like that and so you have
designated parties who are willing to
buy or sell at something redefine
formula or agreement or system and those
are market makers in a prediction market
you have
situation because the tokens that you're
dealing with are attached to outcome
events this is the sort of gambling on
future events and often these are very
liquid markets that there's not a lot of
participants so there's not a lot of
token circulation so if say the
prediction market is about the future
headquarters of Amazon and I think it's
in New York you think it's in Chicago I
think it could be in Chicago but your
lecture then so we don't really
necessarily agree on what I should sell
much in public tokens team Ford so it
might be nice to have something that
market maker who's willing to buy this
back the logarithmic spiral is the
market maker use and prediction markets
usually and it's really nice because
it's calculator weights so that at the
end of all of these sort of events the
tokens that did not occur the prediction
that did not occur marking zero and
there's just enough money inside the
contract to pay out all people about the
Kobe incentive to exist micro economies
in general which could take place in
absolute Civic tokens like token curated
registries or my private quarters
network in which there's just you know a
very niche clientele for this token but
you don't want them to be sort limited
by the aspect probably won't have access
to exchanges this is not love people
buying and selling and so there's very
large spread and we're - there's no
agreement about the current prices this
is actually looking into this topic
again with making my project lovers
network it's a game and I didn't want my
users to kind of be stuck with the
point and not being written it but
there's no
some exchange was going to list me so I
wanted to be able to offer them the
ability to offload the coin for ether
and so I was able to employ my own body
curve in the contract so users are
constantly buying sell at a price that's
changing but the general concepts for
finding curves which have indefinite
token supplies are that the tokens
themselves come from the contract which
is the market maker itself as well so
you could send some collateral to get
adopted either into this contract and it
will mend some new tokens for you the
price that it means it is designated
from a predefined formula or an
adjustable formula the situation it
would be basically total supply squared
C the total supplies on the x-axis is
this sort of defect that is how many
tokens are currently in existence and
that determines the price which is on
the y-axis I really you can imagine when
the when the total supplies that are
getting in is almost zero the price is
very low as you purchase the price gets
moved up so let's say the first ten that
you buy will be less expensive than the
next ten after that and the next thing
after that if you want to get rid of
those tokens you can come back send them
the contract they will burn them which
will decrease the total supply pushing
the price back down and a really
convenient aspect of this visualization
is that the area under the curve is
actually the amount of collateral that's
needed to populate that contract in
order to generate those tokens that
collateral is always staying in that
contract which means that when you come
back and try and cash out that money's
there waiting for you it's a bit like an
IC except for the company
have the money flex locked up and it's
there for by vechs mercy of our Lord
so that's right so the top right there's
some kind of math and this is the two
ways that are often used for thinking
about these and calculating these which
is the price formula it's kind of basic
slope formula this is really useful for
visualizing and designing is several
mechanisms but what actually comes to
implementing I kind of prefer the way
Bank or Sonic which uses a concept of
the reserve ratio that's with our
artists so they think about the price as
the reserve to the month level divided
by the supply times some reserve ratio
is going to be some number under one its
what percentage of that supply is
actually backed by collateral which you
can rearrange and see that the reserve
ratio is actually the reserve divided by
the market cap so that's kind of like
how much is actually backed and market
cap of courses and price times the
supply so those are the two sort of ways
that I thought that you can actually
program it in the original format or
there's nice properties of the reserve
ratio that lets you do some sort of
adjustments while it's moving
I had supplies and then at the end we
can go over put a time bite Club part of
the tongue example use case that this
new batch body care techniques being
used it is in a continuous organization
and this is an idea where you would
basically have a Dao has body pair of
attach to it and when that money goes
into the contract it actually can be
used by the dial for operational cost or
something like so the shares are the
tokens their thoughts on this body curve
and walked collateral and some portion
might be used
working capital and the token holders
might receive something like shareholder
rights or receive dividends as being a
participant inside of this sort of more
like a traditional company it's been
implemented with Paragon black called
the fundraising app which should be
coming out soon there's also some other
organizations working around it seorak
from team of Barbara it's really new
things working to get these types of
organizations classified as Rexy in
America so that participate them without
a service fee work is also building
similar mechanisms using the Dow stack
framework for gnosis is DX stuff and
give us in the common stack is working
something similar so there's continuous
organization instead of going through
and hanging out dividends I mentioned
this might be sort of a feature that you
would want and now because it's done
like this there's a really convenient
workaround instead of sending out a
bunch of transactions for all the
several state quarters to give them
dividends you can actually just put
money back into the collateral pool and
this is sort of will increase the value
all the tokens that already exist so if
you're a stakeholder and having these
tokens by injecting collaterals back
into this contract the value per token
will increase for everybody sort of like
paying everybody dividends with just one
transactions that
each person because if the level
increases of the token supply stays the
same you can imagine that the price will
get boosted up in that previous round
similarly when you remove collateral
this is a way to basically increase the
value of the tokens because you've gotta
spend money to make money but these are
kind of the two actions that you'd
expect in a continuous organization
using a bonding curve like this so
front-running as most people know
aetherium and the left public block
chains are kind of slow and they're
their process of transactions and blocks
and for a moment there's this bin full
of non process transactions and so in
that moment you kind of have full sight
of all the other activities that people
are taking place on the blockchain and
if you can see that some of these
transactions are buys or sells and when
it's bonding occurs you'll know that
there's going to be a price movement and
whatever there's a guarantee price limit
running as possible and the active front
running mentioned in a buy orders coming
in you as the front runners would be
able to make another buy order and lose
the gas price which might make the
at first depending on the how that might
works or you might be a miner yourself
you would make a buy order in front of
them with a new guest they would make
one after you and then you make a cell
one so when you make your by the prices
pushed up they think there by the prices
push you further up you make yourself
and your back down here so this is kind
of bad because there's no risk and that
that buyer interacting this market and
so they're basically just scraping off
some of your money and the buyers do you
like going into a store buying the
outfit got somebody else turning around
and selling to them a markup when they
could just buy from the store similarly
in a sell order if you see yourself
coming in you can make a sell in front
of them push the price down we make you
make a cell which the price further down
and then you can buy that so this is a
way to increase your current position
with no risk sort of scraping off their
money and using it for yourself in those
two dividend and working capital
situations you can similarly front-run
so the transaction that might inject
collateral under the pool this is
similar to a buy because you know
there's going to be a guarantee price
move it up so you might decide to buy
right before that rejection happens in
the cell right afterwards or if the
working capital is about two or four
nodes you wouldn't want to have a
situation that you can just sell the
code that's right before they withdrawal
that capital and then buy back
afterwards in the same transaction so
front-running in the wild is rather
rampant these are some statistics from
last year's talk I feel dying about it
so they were doing most of the work on
sort of publishing this in a while and
putting the
17 on HR Delta alone just not very
popular exchange there was four thousand
five hundred dollars a day in August he
and others recently released a paper
called flash boys - she's a reference to
flash boys the high-frequency traders
who would sort of built their online
internet across the new jersey to the
stock exchange in order to prevent order
to prevent mental activity like that and
by their estimates there's thirty
percent of all walks in some manic
programmatic arbitration transactions
which would be included a sort of drama
if you want to see more data on that
you've got a front run dummy there's a
there so this is this is obviously ramp
in the wild and it's only going to get
worse
and so we can do need to address this
because we can't really ask anybody to
use and on chain exchange if we know
that it's not going to be able to
deliver quality service so patch borders
with common clearing crisis is one
proposed solution with three versions
here calling them ordered batches
matching fill and a common clearing
price and again the each other sort of
benefits and drawbacks and I'd be
curious with the general sort of feeling
that's weak
so the first one passionate orders I'm
sorry well they all sort of follow a
similar idea which is that you take some
span of blocks and you collect all the
buys you click all the cells and that
span and in order to make things will be
easy just combine them and one big buy
and one big sell keeping track of course
of all the individuals who actually put
in those in those orders and then you
clear them together with some price and
then you redistribute it to those users
based on that price in the percentage of
decay so the first version of that is
has have a drawback in that one party to
award it over the other although you can
think of it as a feature not a bug you
want to reward one of the parties more
together for instance the buyers so in
order batches it kind of takes most
simplistic approach which is why we just
execute all the buys using the body
curve and then execute all the cells or
the away or do all the cells and then
execute all the pies but this does
reward one or the other so imagine the
execution buys first so let's say we're
starting out in the blue line that's the
current spot price we execute the buys
first the price moves up to the red this
is really good for the sellers because
they want to sell in a high price and so
they've now sort of keeping giving this
Lisa price position of having a high
sell price person moves the price back
down overall if you were to execute the
same orders by first and sell first the
final price would be lower when you do
execute the vice versa
you're next to the cell surge you can
imagine starting to light again it's
going to push it down with a green s
which is great for buyers so they want
to buy at low prices
so now they're sort of the privileged
party in the situation the final price
is going to be higher than average or
higher than the self version which other
two sort of features but if you want to
reward buyers and your system you kind
of think they're putting money into the
system they're they're you know
tributing I want to make sure that
they're rewarded for this capacity you
might say this is a feature and you want
to make sure it happens this way maybe
you have an idea of 40 70 people to the
other one so the second method is called
matching fill and iviva that's it for
Tamar government from gnosis 4l muses
and this idea is that you have the
original spot price the current on and
of course ways the body curve as soon as
you start buying or selling you will
start moving it but in that moment you
have an exact price to theoretical exact
price so why don't you take that one and
match orders as much as possible
you got a speaker device you've got
speaker the cells at that spot price one
half of them is going to get completely
consumed by the other half you're gonna
have some leftover buys there was
actually more buy orders and some liver
cells and their action or sell orders so
whatever's left over and execute was a
normal monitor transaction so you have
this entire side that gets taken care of
just at the spot price disappears the
other side is a combination of that spot
price plus whatever is left over essence
body
the third one is a common clearing price
this is kind of the way you would
imagine mystical this is where you can
find some fair price for the entire
group of buys and sells however it's a
little mystery complicated is comforting
on the EBM and then there have to notice
this member Tom altar for helping you
with this but you can see the formula
for getting this is rather hard to find
it is possible it ends up resulting in
one solution that's zero one imaginary
number solution and then one correct
solution what is convenient is that even
though it's hard to find when they
protect the dummy man it is easy to
verify in the video so if you were to
take that price which was the correct
price in that formula provided with the
transaction execute the borders to be
able to check to dis mess up the slope
at all did this change the market maker
is it it was an incorrect price alert
modified that so it's easy to verify so
there is a solution for that this is
inspired by the notes of diffusion
exchange which has something similar
very complicated executions but it's
easy to verify that they were done
correctly off chain and this my topic
you nice walkers been working with
batching orders
and trades so that's from Dan Robinson
and paid ads I just found out about this
did today they might be talking about it
later today of for twenty and thirty
seven you can see that when you use in
the constant product it actually comes
much easier to make this batch order
calculation in yourself great product
and it's used specifically for token to
already have sort of fixed supplies or
supplies that exist in a while
whereas I think that bond occurs get
much more interesting much more useful
when there's a situation that the token
is actually generated from the same
place as the market maker correct
situations like predictive marketing
curation markets like if you don't have
that requirement that you need swap is a
definitely like relation so there's a
link to the github perfect concept there
it also links to the art on black
implementation it's still your going
final audits and there's also a link to
the particle that has a bit more details
but all these topics if you want to
check that out again later
wait while I see bones by now
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and this is interesting you come and say
hello talk to me me on Twitter email
github yeah that's it we have any
question for some few minutes some of
the three approaches that you described
you have a personal favorite my yeah
so for the most part while working on
this I was really looking forward to
this concert there in crisis is
universal one for everybody but after
sort of finishing it and finding it I
can assign favor in the second one and
because I think that it's sort of the
prices it's more reflective of the way
that mark is actually acting you know
like if there are more buyers and
sellers that buyers should handle the
sort of price movement whereas the
sellers are sort of the minority in that
system a situation so maybe they should
actually just have the spot price which
is comparable but I don't know I mean
the common claim price is also kind of
it feels good and that's what I meant
sort of I think carries about girls
opinions and one of those fields better
course with you
the first one also for the use case up
for where the buyers make sense but I
ask you towards the middle a little bit
the sir that I may be going to show
hence first curve as the like best one
for general use case anybody at second
version got some hands we got
and third version okay we got a couple
as I'd say general consensus a second
kind of makes sense but yeah in that
second version you're talking about for
the best month where there's leftover
heat the buyer's or seller's and
distribute like the prices additionally
between that target group or is it like
a set of buyers to get screwed or set of
sellers get screwed even in between that
attacker good talk
so did you look at heuristics or
optimizations for the price we found the
formula that has all the like necessary
variables that you want to solve for but
I have just using like Wolfram Alpha to
like to solve it I know there's like
some Python libraries that are good for
that sort of symbolic subbing out but
when you actually solve it for the
variable you actually won it becomes
this really nasty nasty formula that I
don't know how to deal with so I'm sure
there are ways something like that map
but at the end of it that's all sort of
caught off chain data so it doesn't
so that you can be optimized with all
the really matters instead it easy to
verify the changes
[Music]
so what was the mention about your last
slide that because new small bright
doesn't have the same constraints that
you were looking at what does there
perhaps morning it's the same kind of
bachelor quarters and they choose the
comparing prices kind of fair version so
I think anything to do it just easier
cloud was exactly protect is the
constant product partners like
and appointments whether it be common
patterns like the size of the orders
that a to be the front-runner orders for
since it's a neutron would like to
detect these small orders went running
large orders or image or performance
like burning in the wild again yeah I'm
not sure about that I wouldn't say a
check from Ron dummy that I kind of data
but I don't know I've talked to some
people and it seems thing it's easy
pickings but there's actually just such
little it would be on chain that there's
not it's maybe not worth putting in the
effort to proper everybody I don't know
so I vote for frontrunner the reality
not have a lot of talks with different
shops by the short version is what you
were saying there's just not enough
money in making two thousand hours a day
all right barely complicated even though
those dollars sounds like a lot people
are talking to say
I mean we do actually give the quiddity
and continues Inc Texas where some
probably a different case well I would
assume that at some point there will be
a product differentiation between the
ducts is where you say you know no to
the front-runner Phil right and so he
would have to just fix the problem with
this it's an entirely fixable problem in
the neck software itself that allows for
the front right there's no well I think
we're at that time you want to talk
later
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