Evancoin and the stake problem
09 October 2017
One of the problems with a bug futures market is: where do you get the initial investment, or "stake", for a developer who plans to take on a high-value task?
In order to buy the FIXED side of a contract and make a profit when it matures, the developer needs to invest some cryptocurrency. In a bug futures market, it takes money to make money.
If I believe that n hours of work from Evan are likely to increase the probability of a Bugmark-traded bug getting fixed, and my expected gain is greater than n * (current price of Evancoin), then I can
buy the FIXED side of the Bugmark contract
redeem n Evancoin for work from Evan on the bug
sell my Bugmark position at a profit, or wait for it to mature.
Evan is not required to accept cryptocurrency exchange rate risk, and does not have to provide the "stake" himself. It's the opposite—he has already sold the Evancoin on an exchange. Of course, he has an incentive to make as much progress on the bug as possible, in order to support the future price of Evancoin.
If Evan is working on the bug I selected, he would also know that he's doing work that is likely to move the price of the Bugmark contract. So he can use some of the proceeds from his Evancoin sale to buy additional FIXED on Bugmark, and take a profit when I do.
Evan's skills tends to improve, and my understanding of which tasks would be a profitable use of Evan's time will tend to increase the more Evancoin I redeem. So the value of Evancoin to me is likely to continue rising. Therefore I am probably going to do best if I accumulate Evancoin in advance of identifying good bugs for Evan to work on.