> The size of the bounty isn't defined by the price of the contract, but the total upside available in the order book.
But one person doesn't get the whole thing. ALL the people holding that side of the contract split the payout, in proportion to the size of their holdings in that side of the market.
I think if I use hypothetical numbers, it will help me explain how I think it works, and maybe this will help someone figure out where my error is.
Let's imagine the market is about whether I will die by the end of the day. So far, there are $500,000 in total bets in the market, and there are 5,000 shares in this market. Let's say it's currently sitting at only 10% odds that I'm going to die. I think that means 4,500 shares, or $450,000, is on the "No" side and 500 shares, or $50,000 is on the "Yes" side. Do I have that right so far?
If nothing changes about the market and I'm still alive at the end of the day, everyone who holds a "No" share splits the $500,000 pot, correct? There are 4,500 of them, so they each get $111.11 per share.
But suppose someone has a solid plan to kill me by the end of the day. They decide they want to dump $50,000 in on the "Yes" side. That's not going to buy them 500 shares, because they would need someone willing to sell 500 shares at the current price. They'll actually get well under 500 shares, and probably not even half that many, and they'll still be splitting the pot among the other people who already have the 500 shares on the "Yes" side. So they're still at not even half the "Yes" side of the market. They can probably double or triple their money, but we're talking about making another $50-100k on top of getting their own $50k back. It's not like they get the whole $500k.
That's what I mean when I say it's "not a bounty." A "bounty" makes it sound like, "If you're the one who kills smeej, you get $500k," but that's not what's happening here.
Lots of people might be willing to try to kill me for $500k. A heck of a lot fewer are going to be willing to try to kill me for 2-3x whatever capital they can come up with right before the hit.
Am I at least understanding this part of it correctly, how the payouts actually work? If I'm not, that would go a long way toward helping me figure out what I'm missing.