Cool, I'll take a look at your prediction market idea! I feel like this is the era for prediction markets, so any fun ways we can utilize Bitcoin, Lightning, and nostr to be the bedrock of that technology will be resources well spent!

With regards to the negative ROI, the market currently does not have enough liquidity to support miner hedging at scale. Once we're confident that everything's working smoothly, we're planning to increase the initial subsidy thus enabling more speculators to profitably bet, and enabling miners to hedge their hashrate.

An alternative to our current strategy that can enable positive ROI on each outcome is fixed odds betting. However, we don't want to provide fixed odds betting because it's easily financially attacked and also is suceptable to the same variance problems. The approach we take is we want to decentralize the liquidity in the markets, rather than us being the centralized bookmaker. Then anyone who is comfortable with the risk can place bets, and as long as they have a large enough bankroll, they can strategically bet over time to balance any miner hedging bets. That means we need more speculators betting more frequently to enable miners to hedge.

On your objection to betting markets decentralizing hashrate, I recently spoke with the founders of Demand Pool at btc prague and they were interested in offering hedging services through Bitcoin Prediction Market to their miners. Demand pool is creating a StratumV2 pool that is PPLNS (I believe, I definitely know it is not FPPS). The big problem with mining pool payout schemes is they don't enable smaller pools to grow. Miners don't like variance, and they don't want to deal with it. By betting on Bitcoin Prediction Market, a miner that mines for AntPool (because they get safe FPPS payouts) can switch to Demand Pool and safely deal with variance by betting against Demand pool (betting no). As long as the market has sufficent liquidity, they can profitably hedge their hashrate by betting No on Demand Pool. (Of course, sufficent liquidity implies that we need more speculators betting every block.)

If we want StratumV2 to get adopted, we need miners directing their hashrate to smaller pools. That means they need to feel comfortable doing so. That means they need to deal with variance in a way that is not FPPS (because FPPS is a broken centralizing mechanism). Bitcoin Prediction Market provides them with that path, and that means it can facilitate hashrate decentralization.

I think you might have misinterpreted the quoted section. It means if the market odds do not match the hashrate distribution, then any bet that incrementially moves the odds indicator closer to the actual hashrate distribution has positive expected value. It's just a theorem to show that speculators can indeed generate sustainable yields over time with Bitcoin Prediction Market (that we're not trying to scam you). We wanted to mathematically prove that it's possible to make positive expected value bets so long as the odds don't match the probabilities.

Thank you for your in depth comments! If you have any more I'll be around to answer anything else! 🙏🙏🙏