Right now if you want to use augur you have a few fees:

Fees to get ETH (debit on coinbase of 4%, ach is 1.5%)

Volatility issues associated with ether itself (daily volatility of ~5%) which won’t be fixed until something like dai is supported

Reporter fees (very low atm, like 0.01%, likely closer to 1% in the long run)

Market creator fees (~1–2%) which I think will trend towards 0 over time

Ethereum gas fees (~3% on a $100 order) which’ll be solved as the Ethereum network scales

The absolute cheapest you can get is hedging out the volatility (say around 1.5% cost of capital + fees to do so), buy with ACH on GDAX (0 fees that few people know about), use a market with a fee of 1%, and do a large order (say $500) so the gas fee is more like 1%.

That’s about 3.5% in fees [fees aren’t charged on every trade though, but rather open interest, but we’ll get to a metric we can use to compare fees to the regular world quite easily in a moment]. Maybe add 2% for spreads because given all the above and the speed of Ethereum and you’re at 5.5% best case scenario.

Worst case scenario [or sometimes even average case scenario, because the average user won’t know all the tricks above] is you’re coming in through debit on Coinbase (4%), not hedging out ETH volatility (say that’s a 3% cost for a day, since it can go either way), not being careful about picking a cheap market (2% fee), and doing a smaller order size (3%). That puts you at 12%, add in 2% for spreads and you’re at 14%.

Ok so to compare this to the outside world, in the UK between markets like Betfair and bookies the payout ratio is about 92–93%. That roughly means for every dollar matched that’s how much a user expects to get back on average. Since fees are charged on open interest in Augur, we can almost directly compare those fees above to external world payout ratios. So, best case scenario on Augur your payout ratio is around 94.5%, average/worst case scenario your payout ratio is more like 86–88%. Which perfectly explains why it doesn’t make a ton of sense to use Augur for much today.

There are two additional avenues to explore here. One is, how do those fees drop so that it does make sense to use Augur and it’s the #1 venue for almost anything? And two, is there anything where it makes sense to use Augur today?