BTC Liquidity Benefits on the Stakenet DEX
All markets, centralized or decentralized, function using liquidity to service orders. A key function of the success of any market is the depth of its liquidity, which helps to provide market participants with low-slippage order fulfillment.
The Stakenet team has developed several solutions to drive liquidity depth and provide market maker benefits to support liquidity on the Stakenet DEX, which you can read more about below.
The Stakenet DEX functions on traditional orderbook liquidity. The DEX itself interfaces with the back-end matching engine to support order submission and acceptance for market makers/market takers.
The Lightning Network and Connext state channel solutions route funds according to the matching engine. Finality generally occurs within seconds, and funds are immediately accessible for trading and/or other uses.
A robust market relies on its liquidity, which is largely driven by market makers. The Stakenet team would like the function of a market maker to be democratized, and as a result, is developing the tools to allow individual users to provide liquidity on the platform.
What this means for you, is that you will have the opportunities to submit orders to an automated order-flow system, and effectively earn trading fees through the taker-pays-maker function, in addition to other passive income strategies using the Automated Market Maker liquidity tools built into the DEX.
This feature has been discussed before but is worth a quick re-visit as it is key to understanding the motivation for user liquidity provisions on the DEX.
Within any trade, there is a market maker and market taker; in the DEX, the market maker is the user who submits an out-of-money limit order, where the market taker is the user who submits a market order and/or limit order that is in-the-money when submitted. At launch, market makers on the dex will receive 90% of the trading fees earned on each trade. This incentive structure is known as “Taker-pays-Maker”, and is intended to help drive early liquidity on the DEX.
As a side note, the other 10% of the trading fee on each trade will go toward market purchases of XSN, which then might be owned into “Protocol owned liquidity” or a price floor fund (read more here about in one of the next articles). Please also note that this isn't final yet and will be decided by the Masternodes holders.
To further incentivize market makers, the DEX will come with a feature to allow users to submit balanced liquidity across a spread of the order book; this will enable users to passively earn income on trades, by offering multiple orders spread across the order book. This feature will shortly be added after the DEX release.
Simply designate the coin pair you’d like to submit liquidity to, move the slider to match your risk tolerance, and the DEX takes care of the rest, submitting trades on your behalf to help you earn passive income by taking advantage of market volume and volatility.
See the below diagram for more details on how to submit liquidity to the market maker BOT, and begin earning passive income via trading fees and market movements:
In conclusion, the Stakenet DEX is a feature-packed product designed to enable self-custody users to take command of their funds by enabling built-in features to make trades and passive income, all while supporting the DEX platform and contributing to the decentralized trading revolution.
Please also note: Like our partner, Connext Network, has been demonstrating this year the Stakenet DEX will be released with one hub. Adding more hubs, more liquidity, and more decentralization will be the key points of the next stage we are entering, PROMETHEUS.
Stay tuned for further updates on developments for Stakenet users and DEX market participants, as well as our fast-evolving plans for the future of the protocol!