>Are there obvious pitfalls in scaling something like this that I should be thinking about?

Moral implications. Seems similar to the "prop firm" futures trading landscape.

In my opinion, it's blindingly obvious that this sort of thing should be regulated. Ultimately, what you have is a cloaked casino, where the entrants have things like "trailing drawdowns" that are mathematically brutal to face, and nothing is properly disclosed.

>degens love leaderboards, PnL screenshots, and proving they’re smarter than the next trader.

Speaking as a trader, this isn't trading, it's gambling (and it doesn't take a trader to call it out as such).

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But you're in the crypto sphere, so welcome to the wild west.

The "game" itself likely devolves into a sort of simple Kelly Criterion push/fold poker scenario. At least that's what I've seen with these sorts of games.

Realistic trading competitions would be hitting a benchmark with the highest sortino ratio and risk adjusted returns. Sortinos and sharpes are totally gamable as well, by injecting fragility in the left tail (see regular financial meltdowns), so even that is a bit of a farce for "best trader". Gifting the prize to the highest terminal number just means the well optimized hyper-fragile strategy takes the win. Essentially, the player who bought the most efficient YOLO call option. Which is a skill, to be fair. There's also an embedded straight up psychological gambling element here with how far each player is pushing it. Again, this is not trading, it's gambling.

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I think a "true" trading competition would be awful entertainment. Actually, trading comps that take into account long term returns and risk management would be really cool, but that's actually a lot of effort to do and wouldn't make much money.

>Top traders win, others get bragging rights (or shame).

Social aspect matters. It can be as simple as a badge system, but you probably do want some sense of community. Maybe a clan/tribe system so degen human tribalism takes hold.

>What mechanics would keep players coming back daily instead of trying once?

Make it as addictive as possible. Pull straight from the mobile gaming world. Maybe don't go quite as far as energy meters, but "dailies" and such definitely fits. This is a well figured out blueprint. Pull directly.

Remember when Robinhood had confetti for each new option purchase? Gamification is key. As is whale fracking and extracting huge sums of money from the top 1% of spenders. Maybe even get some inspiration from Star Citizen and the best whale frackers in any industry you can find.

>Would you prefer winner-take-all prize pools, or payouts split across top 3?

I'm sure there are studies that show how you should optimally dopamine hack. You have to pull hard from fantasy sports.

>degens love leaderboards

Leaderboard is 100% important. Maybe even encourage degeneracy occasionally. "biggest yolo of the week" or something, or biggest "bad beat" so losers don't feel alone and still keep their sense of community.

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If I were you, I'd design the game with a set of rules that combines together to have some mathematical "quirks", and I'd be coding a bot in parallel that does optimal kelly betting but has well refined paths that takes into account the odd rules (it could be anything from "temporary boosts/powerups" to trailing drawdowns), and I'd be seeding every competition with fake participants (but not every competition, just occasionally). No cheating required, they would just be brutally efficient players that won and lost like any other player, but have perfect play. (this is the current landscape of online poker, fyi, interesting saga here when it comes to the bot wars).

But I would not be including the other partners in such an endeavor. It's the crypto wild west, after all, and it's all in the game. (Speaking as an ex-Eve-Online player turned trader who was honed in that virtual world 20 years ago - an Ayn Rand sci-fi dystopia that had literal Casino Wars funded from profits from things like this... it's oddly similar today)