Waves are liquid!
The emerging crypto-economy closely resembles the old, traditional economy — in fact, it is a continuation of it, just on a new technical and conceptual level. A major part of this crypto ecosystem is an open market price discovery mechanism, which takes place on both centralised exchanges and on the emerging decentralised crypto exchanges. What we’re potentially going to see in the future is streamlined financial markets, with low entry barriers, less regulation (at least less centralised regulation; regulation will be carried out through crowdintelligence, smart contracts and AI), low transaction fees and liquid orderbooks.
But there’s still a long way to go to get there, from the perspective of both regulation and infrastructure. We are trying to offer new regulatory solutions as well as provide some of the required infrastructure solutions for the ecosystem. Let’s discuss token liquidity here and see what we can do to create open markets where a token issuer can tap into natural liquidity, to ensure the price discovery mechanism is more stable, and token prices less volatile.
Currently, liquidity is quite a big issue for new crypto assets. You don’t have guaranteed trading volumes when your ICO token hits exchanges. Many teams who are focused on their ICO and getting their token listed on exchanges find it quite surprising that they have to do anything else after that. Because of this lack of liquidity, even good projects can have issues with their communities, since this is quite often perceived as a sign of something being wrong with the project itself.
There are different ways to tackle this problem, both traditional and with new, decentralised methods. I should mention a very interesting approach from Bancor, which promises to create a guaranteed liquidity mechanism, based on smart contracts and low-level protocols. This is a disruptive approach changing the whole centuries-old mechanism of open market trading.
Unfortunately, at this stage it’s probably too early to rely solely on a smart contract-driven approach, since there are several technical and conceptual issues to tackle first. However, we can start implementing such a smart contract approach, combining it with more traditional market making — that is, providing liquidity through algorithmic automated trading robots.
I want to announce the first market making fund aimed at providing liquidity for new tokens. The economics behind the fund is quite simple: if you want market-making for your token you need to buy some of the fund’s tokens from the open market and hold the tokens in your account for the whole period of market-making services. Through this the fund’s token acquires value and may become interesting not only as a service token, but also as an investment.
I’ve talked to several market-maker teams who wish to participate in the fund and provide their services to token holders. If you are interested in being one of the market makers please contact me. This is a booming market with potentially hundreds of teams involved.
The fund’s goal is to provide liquidity for the new, emergent market of crypto tokens. All tokens compliant with current regulation should have access to guaranteed liquidity.
The liquidity revolution has begun! Stay tuned for the official announcement.