Opinion: Liquidity mining is a natural choice for market competition
Some people think that liquidity mining is meaningless,
Some people think that market making is meaningless,
Some people think that Dex is meaningless,
Some people even think that defi is meaningless...
Some people say that the Defi bubble is about to burst.
In fact, it's good that the bubble bursts.
Because, only when the bubble bursts, some people can see the value under the bubble.
The meaning of market making
The meaning of market making
Today is the time, I believe that few people will question the significance of market making. In order to maintain the integrity of the logic of the article, let me briefly talk about the meaning of market making.
The significance of Dex is that transactions are on the chain, and user assets have higher security.
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The significance of market-making mining
Some netizens said: market making is meaningful, but market making and mining are meaningless.
The little bee has been thinking about this question for a long time. Market making is very meaningful, but liquidity mining continues to release coins, and the value of the coins is deteriorating. It seems that liquidity mining is meaningless.
excitation
excitation
Market-making mining gives market makers some mining currency rewards, which is compensation for market makers facing double risks. The double risks of market making: one is the risk of giving up liquidity and putting coins in the fund pool, and the other is the risk of impermanent losses caused by currency price fluctuations.
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Differentiation
Differentiation is the necessity of liquidity mining.
Differences of traditional trading platforms
Remember the once-hot transaction mining? The transaction mining initiated by Fcoin, the little bee actually thinks it is very good, but the transaction mining has gradually disappeared in the currency market. Even if it still exists, transaction mining is no longer our focus.
Example:
Example:
A senior exchange A with strong strength, multiple currencies, relatively good reputation, large trading volume, and good trading depth.
Another small exchange B is newly established, the founding team does not know who it is, there are few currencies, and the transaction depth is small.
Which one do you choose?
Another example:
There are two big exchanges, An and K, you are optimistic about a coin and have a heavy position, but there is no such coin in An, and there is this coin in K, which exchange do you use?
The answer is self-evident.
There are strong differences between Weitong trading platforms. Different scales, different strengths, different currencies, and different experiences. Therefore, even if Fcoin launched transaction mining, it was only popular for a short time, and soon retreated behind other big-name exchanges.
Instead, let's compare the current Swap exchanges. Swap on different public chains is also comparable to a certain extent. After all, the currency types are different, and the transaction fees and transaction experience are also different.
However, it is difficult to compare Swap on the same public chain.
Differences of swap exchanges
Sushi and uniswap almost have relative currencies and transaction calculation models.
The trading pairs of Defibox and Defis on EOS also have a large overlap. Some people say that the income of Defis is slightly higher, but no matter how high it is, it is limited. After all, the source of market-making income is transaction fees. And the transaction fee rate is 0.3%, there is no difference. Part of the transaction fee will be reserved for the operator of the swap. After all, the operator also has operating costs, and the team members also have to eat. Therefore, there is no obvious difference in market-making returns.
Among the swap exchanges on the same public chain, only mining has become a relatively obvious difference. Different Swap market makers can dig out different mining coins. Mining coins not only have different names, but also their prices may have different performances.
This is why, as soon as Sushi launched market-making mining, it quickly seized most of Uniswap's funds. Because there are no other differences, except mining coins.
Therefore, uniswap had to also issue a mining coin UNI.
Although various mining coins continue to be mined, the market expects a long-term decline. But different mining coins still have different market expectations. This is why uni is almost the latest mining coin to go online, but still has the best market performance.
On the contrary, sushi should be a swap mining coin that was launched very early, but the price table has been declining all the way. Not only because of the possible joint attack of the three major institutes, but also because the market's expectations for sushi are not high. After all, sushi just issued a coin, and the algorithm model, transaction realization and ecological development of swap are the credit of uniswap. Therefore, even if the three major firms do not crack down on sushi, sooner or later it will go all the way down. There may have been a joint attack by the three major institutes, but this only advanced the fate of sushi.
Comparison of transaction mining and market-making mining
Little Bee compared the previous transaction mining model with the market-making mining model.
First, the transaction mining of the traditional trading platform is not on the chain, and there is room for black-box operations in opacity, while the market-making mining of the swap exchange is carried out on the chain, which is completely transparent.
Second, the objects of incentives are different. This is critical. Transaction mining motivates traders, while market-making mining motivates market makers. The market maker is essentially the counterparty of the trader in the swap exchange, and is the currency exchanged by the unconditional trader. You must know that traders are active, they initiate transactions due to currency price fluctuations, but market makers on the swap trading platform, after throwing funds into the pool, passively accept orders, and they cannot choose the price of the order, Quantity, time, etc. Therefore, it is more rational to motivate market makers than to motivate traders.
Third, the impact of incentive behavior is different, which is also critical. Transaction mining encourages traders to repeat transactions, which is meaningless. However, market-making mining encourages market makers to invest more funds into the pool, which is beneficial to the trading pair market and allows traders to face less price slippage.
Fourth, motivate results. The result of transaction mining is to increase the transaction volume of the exchange, but this transaction volume contains the moisture of swiping orders, which is not the real transaction volume, and the trading platform may not be able to obtain the mining coins because it wants to send the mine coins to the traders. Lots of benefits. However, market-making mining increases the size of the capital pool, which is greatly beneficial to the trading pair. As mentioned earlier, it reduces price slippage.
Fifth, the mining currency of the traditional trading platform is flat currency, and there will be more application scenarios. Such as paying transaction fees, participating in various financial management on the trading platform, IEO and other activities. However, there are almost no application scenarios for mining coins in swap exchanges.
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The destiny of market making and mining
There is an important difference between swap trading and traditional trading platforms, that is - low threshold. On the backend of the swap program, the threshold for developing a smart contract for swap transactions is very low; There is no difference.
It is precisely because of the low threshold that it is easy to develop and use swap exchanges. Therefore, market-making mining has become an important differentiating factor for swap exchanges to attract market-making funds.
Therefore, market-making mining is a natural choice for market competition and a model that competitors have to use to compete for the market. If there is no sushi, there will definitely be five or six or seven or eight.
Especially when the swap exchange and market making just appeared, there was no stable market, and market making and mining were the inevitable choice of the swap exchange, which was the fate that the swap exchange could not escape.
How will market-making mining go in the future? Little Bee thinks that market-making mining should exist for a long time. reason:
First, in order to attract more market-making funds, mining is still necessary. Yes, as time goes by, swap exchanges will continue to innovate and improve user experience. However, what is the user experience in front of the bonus? A new swap exchange and new mining currency, we know that the new currency has a relatively higher price due to its small quantity, so it is easy to rob existing swap users and funds.
Second, the swap exchange also needs a platform currency to reflect the market's expectations for the swap exchange, doesn't it? Just like the platform currency of traditional trading platforms.
However, not all swap exchanges will exist for a long time. After all, some mining coins may return to zero after digging.
What kind of mining coins and swap exchanges will exist for a long time? In the future, there will be at least one swap exchange on each public chain, which is required for a complete ecology. After all, the issuance and listing of coins and transactions on swap are decentralized.
In addition to comprehensive capabilities such as financial resources, team development capabilities, and operational capabilities, Little Bee believes that innovation is very important.
Creativity. Such as uniswap and bancor, which are innovators of swap exchanges and market making. The ability to innovate is very strong, and uniswap not only has a trading platform and trading calculation model, but also has many development tools. In fact, programmers can use api to call uniswap transactions, and by writing certain algorithms, they can increase profits and reduce impermanent losses.
There is a high probability that such a swap exchange will be evergreen.
innovation
innovation
When it comes to innovation, Little Bee is a little speechless.
Are some teams misunderstood innovation?
The first batch of mining coins is the catering industry, sushi, pickles, pickles, carrots...
The second batch of mine coins are jewelry, pearls, emeralds...
The third batch of mining coins has turned into aquatic animal husbandry again, fishing, raising pigs, raising dogs, raising cattle...
After thinking about it carefully, this is traceable. The Ethereum fund game fomo3D in 2018 is actually a different fund pool allocation method, and it is also organized into a snake team, a whale team, etc...
It seems that innovation should not be in the name, making mining or financial management look like a farm. Is this necessary?
Market-making mining should at least work towards these three directions:
First, improve the form of market making and reduce the risk of impermanent losses.
Second, provide more development interfaces and trading tools to improve application experience. For example, market-making retrieval, in defibox, you must be able to directly click 25% 50% of all. In defis, you can only enter manually, which is not very convenient.
Compared with traditional trading platforms, the user experience of swap exchanges still has a long way to go.
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write at the end
a set of comparisons
Little Bee compared traditional trading platforms and swap exchanges from the three perspectives of establishment threshold, user needs and differentiation.
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The Necessity of Market Making and Mining
At the same time, from the above table, it can also be seen that the differences between different traditional trading platforms are relatively large, while the differences between various swap exchanges are relatively small, especially the swap exchanges on the same public chain, there is almost no difference at present.
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It is not recommended to accept mining coins for the time being
Of course, judging from the current situation, mining coins should still not be accepted.
Some people said that they bought sushi after reading the article about the analysis of sushi by Little Bee. Little Bee doesn't know whether he recorded other people's articles as Little Bee, or he interpreted the liquidity mining analyzed by Little Bee as sushi. Little Bee has only analyzed liquidity mining, not sushi.
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Prospects for swap and market-making mining
Liquidity mining is inevitable in the life of swap exchanges, and may even accompany swap exchanges all the time. Even the price of mining coins will continue to fall.
You should know that the coins of most projects in the currency circle are inflationary.
We cannot rule out that swap exchanges will create new application scenarios for mining coins. Little Bee mentioned a suggestion in a previous article, that is, to create a transaction pool in swap, you need to lock up a certain amount of mining coins as the threshold. You must know that most of the coins issued by a project party have pre-mined coins in their hands. Without setting a threshold for listing coins, it is too easy to cut leeks. A team that is serious about the project will not mind locking some coins. Of course, this is an immature suggestion from the little bee.
What Little Bee wants to express is that an innovative swap exchange has long-term vitality. Even if its mining coins are in a downward trend in the long run, there may be a chance of rebounding.
It should be noted that defi, dex, market making, and liquidity mining are meaningful. But some non-innovative imitation disks may really be meaningless.
Some people don't care about originality, they only care about where they can make money. The little bee wants to say that there is a high probability that there will be more opportunities where there is innovation. There is a possibility of running away from the imitation disk that is rubbing hot spots...
