“Liquidity will unlock the full potential of digital assets”

Liquidity is the missing piece in the digital asset ecosystem! Recently, the term “tokenization” has become the buzz word in the alternative world of technology-savvy finance. This involves the creation of digital assets, which are transferred to a blockchain. The possibilities are inconceivable when everything that represents value receives a digital representation and becomes accessible to all people. In other words, we are facing the democratization of the financial system. 

However, there exists one crucial hurdle which obstructs this future development. The crucial success factor of the digital asset ecosystem is liquidity. Liquidity is the degree of simplicity with which a token can be traded. In a liquid market, the buying or selling of digital assets at low spread is possible at any time, without causing a drastic change in the price. A liquidity provider is a company that quotes both a buy and sell price of a token at all times, making tokens and exchanges liquid, and thereby providing the conditions for a well-functioning market. Individuals wanting to exchange assets at any point in time can rely on a liquidity provider to enable the exchange. By deploying state-of-the-art software and algorithms, liquidity providers quote efficient prices for tokens at exchanges.

At the moment, we see that most of the tokens are not easily tradable due to the lack of liquidity and the vast potential of decentralized financial systems threatens to wither. The digital asset ecosystem can therefore only succeed if exchanges, token issuers and liquidity providers work together to ensure liquid and orderly markets, thereby enhancing the user experience of market participants. It is already the case that both the quality of exchanges and of individual tokens are assessed in terms of their liquidity. As more investors from the liquid traditional financial markets enter the space, this criterion will become even more important in their assessment.

The future is digital, decentralized, and liquid! Consolidating the knowledge of blockchain pioneers, experienced finance professionals, quantitative researchers and developers, in a regulated and compliant framework, liquidity providers are helping shape that future.

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