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

[Jhon Dolton]

Market makers stay behind the success of some of the most successful unicorns and virtually all cryptocurrency related projects. Market makers' main focus is to keep up liquidity, depth, and spread among markets in order to provide buyers and sellers with the greatest 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 use the exemplory case of a fresh 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.

To be able to create healthy volume and  a cost action, Mango Finance hired a market maker firm. Industry maker creates volume and the firm also sells Mango Finance tokens in order to generate a healthier income for itself. However, Mango Finance pays this market maker over $6,000 per month and pays 3% of tokens sold crypto market making firm, which is a hefty price. Furthermore, Mango Finance is wholly dependent on the availability of this market maker. Mango Finance also wants to use this market maker to offer the tokens of these private investors. Because of this the marketplace 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 aforementioned example, automated market makers have been a good help to crypto startups, but their services may end up being quite costly. For this reason 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. 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 matched token such as for example BUSD or BNB. Mango Finance is now able to handle their market making activities completely independently, choosing and changing the desired volume, price action, and buy/sell orders every time they want 24/7.

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

You are able to learn more about the Avatea protocol and how it works here.