Like I have said earlier, fragmentation is giving volatility its much-needed strength to ensure that cryptocurrencies have a hard time in the market this year. In October 2017, many coins have already started to experience a sudden rise in value which lasted and only get higher throughout the year. We cannot say the same for this year and the coming winter does not look like it got some hidden cards to aid the rise in the value of cryptocurrencies.
This fragmentation has resulted in a lack of liquidity in crypto markets. You cannot point to any top exchange that is dominating in at least one crypto pairs. For instance, BTC/ETH. Not even the top exchanges. This is because the liquidity and prices of crypto pairs are not pegged to a particular spot. Instead, they shift from one region to another. As you are reading this, USA might be the place with the highest liquidity and good prices of BTC/USA (i.e, BTC could be sold in a more profitable way in the USA at the moment), in the next 30 minutes, the best region may be in Europe.
Let us get this right. We are not saying that liquidity is not present in the top exchanges out there. But these exchanges only offer liquid to their clients alone. That means you cannot get liquid on cryptocurrencies if you are not their client. This form of liquidity is known as “Liquid Silos”. In fact, they may offer liquid for top fiat currencies such as USD and Euro but they do not have the resources to offer such for minor cryptocurrencies. That is where Quoine Liquid comes in.
How Liquid makes liquidity accessible to crypto traders in general
Liquid has a kind of network that brings all top crypto exchanges together and makes them accessible to everyone. This means you do not need to be a client of a particular exchange to trade with their client in as much as you are on Liquid. These exchanges are already in a network accessible to everyone and you can choose to trade with whichever one pleases you. In case you do not understand how and why this is very important for liquidity, remember we mentioned that liquidity does shift from one region to another. If for instance, the best place to trade LTC right now is an exchange situated in Europe and you are a client of another exchange in Asia, on the Liquid platform, you can do a peaceful and successful trade right from your Asia exchange. That is one powerful and indeed, a revolutionary inception – Liquid by Quoine.
World Book - the masterpiece connecting exchanges on Liquid network
Liquid is able to influence liquidity in the crypto markets through a system called World Book. World Book is a system that offers a multi-market order book. This means it has the ability to aggregate orders and prices on the world’s various liquidity sources into a single highly liquid tradable order book, allowing crypto traders to place orders in the currency of their choice. With this, where the best liquidity for a particular currency is residing at the moment of trade does not matter, and a trader can just trade with a trading pair of his choice.
World Book is able to influence liquidity in the crypto world because it solves two major problems that are limiting liquidity. These two problems are Liquidity Silos and Underserved Markets.
Liquidity Silos
Let us say a trader (trader 1) in Italy wants to trade BTC/Euro (the former; “BTC” is called Base Currency while the latter is known as Quote Currency), and we have another trader (trader 2) who wants to trade BTC/USD in the USA. From what we have discussed above, liquidity for a particular currency might be great at one exchange in Asia right now and the liquidity for another currency is only good at an exchange in the USA at the time. Since top exchanges only provide liquid for their clients (which is what we call Liquid Silos); that means trader 1 might not be able to get liquid from an exchange where trader 2 wants to trade from (which is having good liquidity at the moment) since he is not their client. But now that Liquid platform has these exchanges in its network, it paves the way for traders to trade with anyone they want to. Hence, a trader on exchange A which is situated in the USA can decide to trade with a trader from exchange B which is situated in another continent entirely. This gives room for traders to get maximum liquid by trading with a pair that is currently in a position to access that. Hence, you tend to make profits trading in this way.
Underserved Markets
Underserved markets are the markets that are not strong enough to provide liquid for their own protocol tokens. These are considered to be weak and do not have the strength to aid their tokens. However, Liquid platform is able to solve these two problems by connecting all top exchanges and some minor ones (regardless of their strength) together to a single liquidity in a network. Each of these exchange benefits from this network one way or the other. And like I have said earlier when one is in crisis and needs financial assistance, it can borrow from any of the other exchanges in the network. Isn’t this outstanding!?
We can also take a look at this point. The Liquid platform gives traders the ability to trade for whichever Quote Currency they want, thanks to their World Book. Previously, traders would need to settle; either pay the price (of losing some amount) when the liquid is not provided to them from the other exchange where their trading pair is or undergo some FX trading (converting currencies from one form to another). Since exchanges practice Silos Liquidity, traders cannot be given access to their liquid unless they are a client of that exchange. That means you will need to be a client of all major exchanges if you are to get access to liquidity when it shifts to the crypto pair that they offer. Thanks to Quoine’s Liquid platform, this is no longer the case.
The three super technologies behind Liquid’s World Book exceptional operations
For every enterprise or better still, a system that performs so well, there are always some hidden cards underpinning them behind the scenes. This is the same as Liquid’s World Book. There are three technologies that empower the World book for it to be able to give Liquid the results needed. These are Matching Engine (ME), Cross Currency Conversion Engine (CCCE) and Smart Order Routing (SOR).
Matching Engine
World Book’s Matching Engine (ME) was built with combined decades of experience in financial technology. This technology allows the World Book to be able to process millions of transactions in a matter of seconds. It is architected to be so powerful that it can match millions of transactions in seconds, making it the best in the cryptocurrency and Blockchain technology industry.
Cross Currency Conversion Engine (CCCE)
In a situation where the two trading pairs do not share the same Quote Currency, there is a need for conversion. This Cross Currency Conversion Engine activates near-instant automated currency conversions. So regardless of the quote currency being traded by each of the pairs, World Book has its way of getting the transactions done quickly and efficiently and the system in action for this is Cross Currency Conversion Engine technology.
Smart Order Routing (SOR)
Since several exchanges are connected to the World Book network on Liquid, transactions between clients of different exchanges may need some extra time to get done with. However, there is a technology that handles that, and also ensures that things are done without frictions or delay. The Smart Order Routing boosters the real-time connection with the exchanges in the network.
The world of cryptocurrencies can be so complicated at times. And for the problems that are limiting the potential of cryptocoins to be eradicated, there is a need for continued advancement – and one is what Quoine is doing now with their Liquid platform.
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