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 keep 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 closer look at how market makers work and how they make profit:
Let’s utilize the example of a brand 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.
To be able to create healthy volume and an amount action, Mango Finance hired a market maker firm. Industry maker creates volume and the firm also sells Mango Finance tokens to be able to generate a wholesome income for itself. However decentralized market making, 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 influenced by the availability of this market maker. Mango Finance also really wants to utilize this market maker to sell the tokens of the private investors. With 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 can see from the aforementioned example, automated market makers have been a great help to crypto startups, but their services may become quite costly. This is the reason firms have been trying to find market making alternatives and Avatea aims to assist 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 for example BUSD or BNB. Mango Finance is now able to handle their market making activities completely on their own, choosing and changing the specified volume, price action, and buy/sell orders when they want 24/7.
Mango Finance now pays a minimal fee to the protocol, this fee is used to purchase back the native Avatea token.
You can find out more about the Avatea protocol and how it works here.