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Topic: [2017-08-14] Solving the Liquidity Challenge of Decentralized Exchanges (Read 2542 times)

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They may have underestimated how the active traders, like market makers, day traders, swing traders, speculators give more liquidity in the market. The writer of the article thinks that a big boost in liquidity can be attained by making it more convenient and easier to convert cryptocoins for ordinary users. Ordinary users buy and hold giving only very little liquidity.

If they want a real liquid, high volume exchange they should build it more for the traders with a complete set of trading tools, charting and an automatic trading feature.



Addressing the liquidity challenge

Improving the liquidity in decentralizing trading platforms is one way to help encourage mainstream adoption. Of course, many factors contribute to the liquidity of an asset. But, if the ways in which consumers make monetary transactions using cryptocurrencies could be simplified, then it's not difficult to imagine that the demand for such assets would increase.

There's little doubt that trading cryptocurrencies will continue to take place on different kinds of exchanges for the foreseeable future without a single, more stable asset emerging to keep their value in check. This means that overcoming market fragmentation and liquidity problems will require a unique solution.

One approach to solving the challenges that exist in decentralized exchanges is to reduce the cost of the switch for cryptocurrency traders. If an on-chain platform can tap into multiple reserves, and lower the barriers of switching from one exchange to another by working with various wallet providers, then users can log into their wallets and execute a token conversion without ever leaving their wallets.

This allows receipts to access payments from any token that a decentralized platform supports.

Token-to-token convertibility is not the only approach to solving the liquidity challenge. There are many other unique ideas on how to help users execute cross-network transactions seamlessly and at reasonable rates – and these solutions are opening up entirely new ways for the greater public to participate in the cryptocurrency ecosystem.


Read the full article https://www.coindesk.com/solving-liquidity-challenge-decentralized-exchanges/
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