by Haohan Xu, CEO and Founder, Apifiny
The Web has evolved from an “Information Superhighway” (Web 1.0) to the “Social Web” (Web 2.0) and now to a new era, the “Internet of Value” (Web 3.0), where more efficient ways to transfer value are being powered in large part by blockchain technologies.
However, like all emerging technology eras and markets, this new era also has some major growing pains that we’re solving head-on at Apifiny. We’re guided in this effort by our company mission: to provide a unified, global digital asset trading network for institutions — The Global Crypto Marketplace.
Let’s first recap the current problems that we’re solving because, together with our partners, we cannot evolve an entire industry without a keen understanding of its biggest problems.
Current Problems of Centralized and Decentralized Digital Asset Trading
The central limit order book (CLOB) model used by centralized exchanges (CEXs) enables fast trading execution and predictable fees. Traders have peace of mind that their unique identifiers are private and their counterparties have passed KYC compliance protocols.
However, today’s CEXs also suffer from poor, unpredictable liquidity during extreme market conditions. Since the majority of the liquidity on a typical centralized exchange is provided by very few market makers who have to sacrifice uptime to manage their risks during extreme market conditions, liquidity will become scarce and the market will become volatile.
In addition, incentives for traders and liquidity providers (LPs) are misaligned. Traders are paying high fees on taker orders to consume liquidity while liquidity providers are getting paid small rebates on maker orders to provide liquidity. Liquidity providers are getting paid anywhere from 0 – 3 basis points while liquidity consumers are paying 0 – 50 basis points. The massive 50 basis point difference is entirely consumed by the centralized exchange. And most centralized traders are not even getting the best asset prices because they’re trading in relatively small, disconnected markets.
Decentralized exchanges like Uniswap use automated market making (AMM) to better align the incentives of traders and liquidity providers while also providing more reliable, predictable liquidity.
But today’s DEXs also suffer from slow trade execution, large slippage, poor scalability, lack of privacy, high gas fees, and very poor compliance procedures (e.g., KYC/AML).
What if traders could have the very best of centralized and decentralized trading in a more powerful, global platform for institutions? That’s exactly what we’ve been building, Apifiny HEX, a new class of hybrid digital asset exchange. It’s designed to create the global crypto trading market that institutions need. (In addition, Apifiny gives institutions the flexibility to trade directly on over 25 centralized exchanges from the same interface or via one set of APIs).
Key Benefits of Apifiny HEX
Unlike other markets, Apifiny HEX aligns the incentives of traders and liquidity providers (LPs) using automated market making (AMM). Our trading platform uses a CLOB model with the ability to host a liquidity pool. For traders, one unified order book captures deep and predictable CEX and AMM liquidity at the same time. Apifiny HEX also ensures traders and liquidity providers’ identities are kept strictly private.
Benefits for HEX traders, market makers, and investors include:
- Zero Taker and Zero Gas Fees. Get zero taker fees and orders filled instantly. Pricing is “what you see is what you get.” Users also get zero gas fees.
- Superior Global Price Discovery. Traders can find the best asset prices aggregated from leading connected exchanges combined with tightly integrated AMM. Apifiny combines centralized and AMM orders into one unified, global order book on a single interface. One world. One market. One book.
- Deep, Predictable Liquidity. Traders access deep, predictable liquidity across all market conditions. Apifiny HEX is the only global trading platform where traders can place orders in a single, global order book that includes liquidity from over 20 centralized exchanges and from AMM protocols.
- Institutional-grade Security & Compliance. Apifiny is a regulated trading venue, so traders can rest assured that their counterparties have all completed KYC onboarding with institutional-grade security.
- Democratized Market Making. Anyone will be able to become a market maker and provide liquidity using automated market making (AMM) with no gas fees.
The Road Ahead
We are convinced that CEXs and DEXs are intermediate steps in the evolution of digital asset trading. The future of crypto liquidity is distributed but connected. The future of digital asset trading is in creating a true global marketplace via a hybrid exchange trading platform like Apifiny HEX.
Our vision is to create one global trading market of digital assets for a new era, the Internet of Value.
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