I was confused before, let me clarify: We should use the technology being introduced in this thread, even if we don't use channels or smart contracts at all.
SVD is too slow when the matrix is big. If x is the size of the matrix, it takes something like O(x^2) cycles to compute the SVD. If we used this new technology we only need to use O(2*log(x)) cycles, a massive improvement.
3. Moving the oracle resolution off chain is a bad idea, something akin to individuals who only pay taxes if they needed to call the police for help last year -- the result would be an underfunded police department, rampant theft, and everyone smart would move away (or avoid accumulating capital)...it would be impossible to ever raise tax money, in any way, and the town would have collapsed into violence and/or be avoided by everyone.
Your argument against off-chain resolution reminds me of the argument against torrents:
No one will pay musicians if music is free, so we wont get new music any more.
But torrents didn't kill music. The music industry adapted to making money in different ways.
It doesn't matter what is best for musicians or music. Customers prefer to pay less. The cheapest technology wins.
When channel state changes, it usually has to go through one or more hubs. The hub collects trading fees.
The hub wants there to be lots of traders so he can collect lots of trading fees. There will only be lots of traders if there is a reliable oracle.
The hub will spend money regularly for the oracle to settle questions that are being gambled on, even though the results wont get put onto a blockchain. He publishes settlements from the oracle to prove that the oracle works as it should.
Once there are multiple hubs, they will probably share an oracle for some bets.
To fund settlement for an oracle that is shared between hubs, they could use a truthcoin dominant assurance contract.
Since they provide no other benefits, ...[generalized smart contracts] will almost certainly not exist.
What about the ability to update the SVD, or the market maker, or the order book, or the match maker?
What if we want to change from continuous trading to batch trading?
There is no way we will get this all right the first time. Smart contracts let us update later.