All asset investment, and trades, through online exchanges like Excoincial aim to establish a way for users to pay less and win more profits. Proof of Liquidity mechanism is a concept created to achieve this through deeper liquidation of assets and ensuring that capital is effectively used and gained from with minimal losses.
This is why Excoincial is big on its promise to
provide a means of holding liquidity assets on different Blockchain addresses
to ensure that traders, investors, and stakeholders can be confident on
investing, entering and closing trades without fear of liquidity crisis.
In this post, we will talk about the Advantages, and
disadvantages of proof of liquidity to centralized exchanges like Excoincial
and also why POL is important in a centralized exchange like Excoincial.
.
ADVANTAGES OF PROOF OF LIQUIDITY
The core advantage of Proof of Liquidity for
centralized exchanges (CEX) has to do with its ability to serve as a bridge
between two market makers who provide liquidity.
Centralized exchanges like traditional financial
institutes do provide crypto liquidity through stored in house assets and
simply rely on intermediary market makers.
Factors like cross exchange market making is made
possible and equally implemented when a bigger exchange operates as a sole
market maker in providing liquidity services to lesser exchanges that cannot
provide enough in house assets for their trades.
These larger exchanges accept all buy and sell others
from the markets they service to help facilitate hassle free trades. This
connects buyers and sellers and lets them trade on a mutually convenient
transaction price. The larger exchanges who act as their own market maker in
turn make revenue from what they charge from the spreads of the trade.
DISADVANTAGES OF PROOF OF LIQUIDITY
Since liquidity generally refers to how seamless
assets can be traded, its disadvantage occurs where the supply drops due to
circumstances that cause assets to freeze up, and in turn cause the demand for
liquidity to increase. This imbalance in exchange is called the liquidity
crisis and it has been proven very dangerous and able to cause bankruptcy.
If a crypto market platform does not have enough in
house assets it will be hard to satisfy liquidity demands and cause the market
to plummet.
WHY POL IS IMPORTANT IN A CENTRALIZED EXCHANGE LIKE
EXCOINCIAL
Excoincial is a centralized exchange where users can
buy or sell and convert assets inside Excoincial or across bridges to other
exchanges. Liquidity gives Excoincial exchange users the ability to smoothly
convert a unit of an asset to another asset that is marketable. E.g
cryptocurrencies and tokens like AFCASH.
Excoincial is able to market stability when there are
high liquidity levels and low price changes.
Here are some key benefits Excoincial gets from High
liquidity:
Accurate pricing and charting formation
Easy to enter and exit buy and sell orders because of
high numbers of market players
Enjoy better prices for everyone in a thriving market
Unlimited orders can be easily handled with no
glitches because of the higher number of participants in the market.
CONCLUSION
A centralized exchange like Excoincial thrives with
the presence of high liquidity levels because it satisfies market demands and
keeps our revenue pumping and the trades of users profitable to them also. It’s
an all round win factor for Excoincial, our investors, stakeholders, and
traders in the Excoincial ecosystem. Our duty is to make sure we have enough in
house assets as we mainly rely on ourselves as market makers.
Our users are expected to make the best of the high levels of liquidity we pull into the exchange and trust us to avoid all forms of liquidity crisis that may threaten revenues and profits in future. Our investors and stakeholders also can be rest assured that their capital will reach its maximum efficiency and attract better ROI for them too.
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