Will Decentralized market making take over the standard centralized market makers?
Market makers stay behind the success of some of the very successful unicorns and nearly all cryptocurrency related projects. Market makers’ main focus is to steadfastly keep up liquidity, depth, and spread among markets to be able to provide buyers and sellers with the maximum possible possibility to trade a particular financial product or an asset.
Now, let’s have a deeper look at how market makers work and how they make profit:
Let’s utilize the exemplory instance of a new project called Mango Finance. Mango Finance just finished their ICO(Initial Coin Offering) and their token has become tradable on the DEX (Decentralized Exchange) Pancakeswap.
To be able to create healthy volume and a cost action, Mango Finance hired a market maker firm. The marketplace maker creates volume and the firm also sells Mango Finance tokens to be able to generate a healthy income for itself. However, Mango Finance pays this market maker over $6,000 monthly and pays 3% of most tokens sold, which is really a hefty price. Furthermore avatea, Mango Finance is wholly determined by the availability with this market maker. Mango Finance also desires to use this market maker to sell the tokens of these private investors. Because of this industry maker is charging additional monthly fees.
Mango Finance is losing control over its markets, its private sale investors, and is paying hefty monthly fees for it.
As you will see from the above mentioned example, automated market makers have been a great help to crypto startups, but their services may become quite costly. This is why firms have been looking for market making alternatives and Avatea aims to aid unicorns and startups with exactly just that.
Mango Finance now turns to the Avatea protocol. Selecting a decentralized market making bot. By connecting to the platform different market making algorithms become available which is often activated by staking their native token and a combined token such as BUSD or BNB. Mango Finance has become able to handle their market making activities completely by themselves, choosing and changing the specified volume, price action, and buy/sell orders each time they want 24/7.
Mango Finance now pays a small fee to the protocol, this fee is used to buy back the native Avatea token.
You are able to find out more about the Avatea protocol and how it works here.