Problems
The market-making landscape is currently marked by complexity and exclusivity, limiting access for many potential participants, especially retail users. High service fees and the lack of a risk-controlled environment, particularly in AMM pools, further exacerbate these barriers. Consequently, there is an urgent need for a solution that democratizes access, mitigates risk, and is cost-effective.
Complexity of Service: The market making process involves intricate algorithms and the integration of several complex systems. This high barrier of entry necessitates a high level of expertise and resources, making liquidity provision a primarily professional service.
Limited Service Providers: The ability to provide market making services is currently limited to a small number of institutions. This scarcity exacerbates the challenge of availability and access to such services.
High Service Fees: The institutions capable of providing market making services usually charge exorbitant fees, which can deter projects, especially startups, from leveraging these services to enhance liquidity for their tokens. This can hamper their market presence and the overall trading environment.
Restricted Access for Retail Users: The opportunity to contribute liquidity to the order book is often not accessible to retail users due to the complexities involved. This limitation restricts participation and democratization of the financial markets.
Insufficient Risk Controls: Automated Market Makers (AMMs) have made liquidity provision more accessible for retail users. However, these users often suffer from impermanent loss due to inadequate risk control and hedging mechanisms. This is a significant risk factor deterring wider participation.
Last updated