Cryptocurrency projects nowadays adopt market makers (MM) deals over incentivizing on-chain pools with their tokens because such deals reduce costs for all parties involved, and price discovery is more efficient on centralized exchanges. MM deals involve the project giving the MM a one-year loan of tokens with zero-cost calls attached, guaranteeing a market of a specified size within an agreed spread for the duration. Most projects, being rich in tokens rather than in cash, pay the MMs with tokens and often provide call options to keep the tokens from early dumping. The options provided by the projects have an expiry that coincides with the loan period and a strike price of 50 to 100 percent premium over the index price that is unknown at the time of the deal. Such arrangements help successfully incentivize MMs and provide liquidity for the crypto market.



Other News from Today