If there is a liquidity provider that does not charge any fees, there is only one possibility that it has sufficiently strong trading profitability.
Original title: “How does zero-fee WOOTRADE lead the transformation of cryptocurrency liquidity? 》
Written by: neal
The recent hot Uniswap, Balancer, and Curve have brought the concept of a “market maker” that provides market liquidity into the public’s vision. Market makers generally make profits in the market through their own trading capabilities. When the profits cannot cover the cost, the market makers will charge the exchange separately, and the exchange will then charge a fee to retail investors. The logic of Uniswap is similar, except that there is no centralized platform that charges fees, but directly rewards the liquidity providers with the fees in the trading pool.
Imagine that if there is a liquidity provider that does not charge any fees, there is only one possibility that it has sufficiently strong trading profitability. And WOOTRADE is just such a liquidity providing platform. Taking BTC as an example, WOOTRADE can maintain the spread at 10 US dollars at a depth of 100 BTC, without charging customers any handling fees or service fees. This is due to the incubation team behind it and the main provider of liquidity on WOOTRADE: Kronos Research, a quantitative investment research institution. It is understood that Kronos is good at a variety of trading strategies, with a daily trading volume of more than 1 billion U.S. dollars, and has the ability to guarantee considerable returns in different market environments.
Although WOOTRADE implements zero-fee trading, it does not form a competitive relationship with exchanges operating retail accounts, because its users are mainly exchanges/DEX, wallets, brokers, and trading institutions. Since the launch of WOOTRADE 1.0, more than 10 exchanges and institutional clients have been connected, and a total of more than 65,000 end users have used its trading depth through exchanges that cooperate with WOOTRADE. There have also been situations where new exchanges queued up for access due to market demand exceeding the team’s expectations. Looking at the existing liquidity solutions in the market, WOOTRADE’s advantages are:
- Compared with hiring an external market-making team, the exchange saves service fees on WOOTRADE and reduces market-making risks, and the depth obtained is much better than that provided by a single market-making team;
- Compared with the liquidity aggregation platform, WOOTRADE with Kronos market-making support not only has better depth and faster transaction speed, but also provides zero-fee transactions.
Comparison of the BTC transaction spread between WOOTRADE and Coinbase
Better depth than mainstream exchanges is the basis for WOOTRADE to acquire customers, and the unique zero-fee model is the most attractive place for customers. After the exchange uses WOOTRADE, it not only solves the liquidity problem of mainstream currencies, but the original hedging cost can also be used for other businesses, such as new purchases, trading activities, etc., to gain more new users and trading volume. The WOOTRADE team revealed that after their customers were connected, the transaction volume increased by 3.5 times, and the retention rate of major traders also increased significantly.
The annual handling fees that users with different trading volumes can save on WOOTRADE
WOOTRADE improves its own profits by helping customers save costs: because it has improved the depth of the exchange and saved hedging costs; the exchange’s users grow and send more orders; so the market-making strategy on WOOTRADE has the opportunity to get more Income. Such business logic is called “payment for order flow” and it already exists in traditional financial markets. It is well known that Robinhood, which is valued at $11.2 billion, is well known, but few people know that Robinhood’s success is inseparable from the world’s top quantitative funds behind it: Citadel, Two Sigma, Virtu, etc. Robinhood connects market makers like Citadel to obtain liquidity and rebates, not only exempting retail investors from handling fees, but also providing retail investors with the best transaction prices in the market. The market makers represented by Citadel have obtained a large number of real trading orders and gained more income by virtue of their trading capabilities, and rebates to Robinhood.
It is worth mentioning that Mark Pimentel, the co-founder of WOOTRADE, worked for Citadel and Knight Capital. Mark was first in the high-frequency trading group of Citadel and then to the electronic market-making group of Knight Capital, where he was responsible for operating the largest dark pool in the United States at the time. Knight Capital was acquired by Virtu in 2017, and the main part of the acquisition was the electronic market-making department.
Mark, who is well versed in the dark pool business model, has seen a similar pain point between quantitative funds and exchanges after entering the cryptocurrency industry, that is, market liquidity is scattered . He hopes to apply his trading capabilities and dark pool experience to WOOTRADE and inject the unique token economy of the blockchain to make this model more stable, fairer and more efficient.
WOOTRADE has its own native token, which will serve as the carrier of value and rewards generated by the system. The team will use WOOTRADE’s revenue for secondary market buybacks, and will also reward nodes (exchanges, wallets, traders, etc.) that provide high-quality orders.
Known functions of WOOTRADE native token are:
- Trading margin: tokens can be used as margin for trading accounts;
- Reward: As a WOOTRADE node, provide quality orders to get token rewards;
- Pledge: Pledge tokens in a market-making fund or pledge to obtain governance voting points;
- Payment: Holding tokens to obtain investment shares in certain asset management products, and using tokens to pay asset management fees to obtain discounts.
Not only is it a centralized exchange, but WOOTRADE’s partners also have Dex, such as Injective Protocol and MOV. Compared with AMM products, the complete Dex will have more trading functions, such as limit orders, order books, etc. However, due to the popularity of liquid mining, AMM has more users, and some complete Dex products are not interested. For exchanges, users and liquidity are like the question of “chicken eggs or chicken eggs”. Dex’s choice to cooperate with WOOTRADE is equivalent to solving the liquidity problem first, and the user problem will also be solved.
The popularity of AMM also caused traditional exchanges to have shortcomings in the liquidity of DeFi currencies, and even lost users. Therefore, in addition to mainstream currencies, WOOTRADE has successively added more popular DeFi currencies to help centralized exchanges improve their competitiveness on the DeFi track.
WOOTRADE’s goal is to achieve 40% of the liquidity of the cryptocurrency market, which means that there will be a large number of exchange customers and market makers on the platform. There is a huge potential asset management investment market between the investors on the exchange and the market makers operating asset management, but because the trading team cannot be verified and trusted, investors often miss good opportunities. In the future, market makers on WOOTRADE can display the net value changes and trading performance of their accounts through the on-chain oracle, and exchanges can choose asset management products and open them to their investors.
WOOTRADE’s product design shows the combination of traditional finance and decentralized finance. The market effect it produces will quickly cause the transformation of cryptocurrency transactions. Effective token design and the application of blockchain technology will also provide traditional capital Management business brings changes.
Source link: mp.weixin.qq.com
