With the advent of better and better technology, we as individuals are enjoying all the conveniences that come along with that. Our day to day lives are rife with small technological solutions that allow the world to run just that much smoother. When it comes to exchanging assets, it’s no different.
Being able to capitalize on liquidity across any asset it’s key to understand why liquidity itself is so important and understand the potential behind it. No matter what the asset, there is a market for it. Being able to take that asset and convert it into cash is of paramount importance and allows the free flow of the marketplace entirely. When the value is tied up in assets that are unable to be liquidated, losses are incurred.
Community Governed Liquidity
To generate liquidity there needs to be a stable and functioning ecosystem in which the trading of assets can take place. This ecosystem needs to function for the provider of the ecosystem as well as the participants within that ecosystem to ensure continued liquidity is provided.
Traditionally, the parameters of such an ecosystem are dictated by the creators of that ecosystem without much, if any, input from the participants within that ecosystem. This model is similar to what we see across the institutionalized financial world where systems in place largely benefit its creators forcing participants to play by their rules. Not only do these systems negate the input of the participants, but also come with their own set of problems such as manipulation, corruption, and hacks.
When ecosystems for liquidity are governed by their participants, the parameters that govern that ecosystem can change through a democratic process and in a perpetual way. By allowing the community to have governance over their own platform, they can participate as a whole to provide the best possible ecosystem for trade.
Liquidity platforms, when built on the most capable foundations, manifest themselves as the most ideal liquidity providers. Since liquidity is a goal of the system itself, the parts that make up that system are created on top of absolute protocols. These protocols, when coupled with community governance and true transparency, provide a framework that can dynamically evolve as better solutions become available. This, in contrast to traditional systems, allow for little improvement, especially concerning the implementation of the newest technological advancements.