June 6, 2022 vladimir

Will Decentralized market making take over the traditional centralized market makers?

Market makers stay behind the success of some of the most successful unicorns and almost all cryptocurrency related projects.

Market makers’ main focus is to maintain liquidity, depth, and spread among markets in order to provide buyers and sellers with the greatest possible opportunity to trade a specific financial product or an asset.

Now, let’s have a closer look at how market makers work and how they make profit:

Let’s use the example of a new project called Mango Finance. Mango Finance just finished their ICO(Initial Coin Offering) and their token is now tradable on the DEX (Decentralized Exchange) Pancakeswap.

In order to create healthy volume and a price action, Mango Finance hired a market maker firm. The market maker creates volume and the firm also sells Mango Finance tokens in order to generate a healthy income for itself. However, Mango Finance pays this market maker over $6,000 per month and pays 3% of all tokens sold, which is a hefty price. Furthermore, Mango Finance is totally dependent on the availability of this market maker. Mango Finance also wants to use this market maker to sell the tokens of their private investors. For this the market 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 can see from the example above, automated market makers have been a great help to crypto startups, but their services may end up being quite costly. This is why firms have been looking for market making alternatives and Avatea aims to assist unicorns and startups with exactly just that.

Mango Finance now turns to the Avatea protocol. Choosing a decentralized market making bot. By connecting to the platform different market making algorithms become available which can be activated by staking their native token and a paired token such as BUSD or BNB. Mango Finance is now able to manage their market making activities completely by themselves, choosing and changing the desired volume, price action, and buy/sell orders whenever they want 24/7.

Mango Finance now pays a minimal fee to the protocol, this fee is used to buy back the native Avatea token.

You can learn more about the Avatea protocol and how it works here.

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