UPDATE: While NOT specified either way in the above post, I've since been told that the proposed BEE awards for liquidity providers will not be volume-based, so the wash-trade based attack I outline below would not apply. I have left it in place for transparency.
Don't award Diesel liquidity providers with BEE because it's gameable.
If the rewards are volume-based and feeless then there is a wash trading situation.
Here's how: Create two coins and a pool (1200BEE) make the coins untradeable and issue all the coins to myself. e.g. CANCER<->SHITCOIN. Deposit most of CANCER and SHITCOIN into the pool. Here's the game: trade my CANCER for SHITCOIN and back and forth as fast as the blockchain allows. Now the pool's had a ton of [wash] volume. How then is that pool evaluated against legit pools for BEE rewards.
Better to offer %trade fees settable at pool creation and maybe either a permanent lock or the pool creator has to pay BEE to modify the pool fee schedule (and the change is time locked forward). A scheme to reward liquidity providers with a third token is also a great idea, though the pool creator has to supply those tokens (via inflation or a reserve).
I'm working on an article (any day now) about why zero swap fee pools are a bad idea that results in very low liquidity and high slippage. Zero-gas fees are awesome. Zero swap fees are not.
I'll wait until further details are public before commenting further except to say that I am generally sceptical of decoupling desired behaviours from their rewards.
Great comment and I do agree with you... You have perfectly described the process of milking the system... Like I said in another comment, and you at the end of this one... Let's promote Diesel Pools like ZERP transaction fee pools, but keep swap fees...
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I believe this comment needs some attention.
It also stands that those providing liquidity in something like BTC should get more than those that provide liquidity in SHITCOIN.
You are correct, but such choices should be governed by a transparent algorithm or process. In my example above, CANCER and SHITCOIN are made non-tradeable and issued only to the issuer's account so that no form of external market-discovery can occur. For all anybody knows, one of just ten CANCER coins could represent mineral mining rights in the CANCER constellation and then each coin would be worth gajillions. But, without market-discovery, there's no way an algorithm can know.