Why not make it so you can shift forms, however it would require to fight under the City State banner you picked.

Open World PvP worked well in Star Wars Galaxies, yes I know it is an old old MMO that only is kept going by the fanbase to these days with private servers and the likes.

But one thing the game got right, was PvP.

You could set yourself in 3 forms.

1. On Leave Not flagged for anything
2. Combatant - None PvP but able to attack NPC's
3. SF Special Forces - PvP

Flagging self was done by a command, but likewise a button can be used for it... if you are Full PvP form... it would take you 5 or 10 minutes to go on leave again, I would say 10 minutes being vulnerable to attacks would be best option... also when you are flagging yourself for it your character would blink or something for a minute, that way the opponent will be able to notice if am possibly going to be jumped and either to prepare or to get away.

PvP should be the reward in it self as it is and actually in an MMORPG it is the Ultimate form of RP.

And maybe to have players be able to set down bases that is bought for seals or something, that can be taken down when and in the period they get vulnerable.

There is a catch to it all though, when you switch to PvP mode, you can't engage in PvE, as your hotbars will switch out to the ones we use in PvP.