This article was first published on Kyber Network - Medium
In previous blog posts, we gave an overview of Kyber’s different reserve types, including how the Kyber Automated Price Reserve (APR) is useful for token teams and individuals, and how the Bridge Reserve pulls liquidity from other on-chain sources like Uniswap, Oasis, DutchX, and Bancor.
Today, we want to share about Fed Price Reserves (FPRs), which is uniquely designed to allow professional market makers (MMs) or advanced developers to effectively market-make and generate profits on-chain. Market makers running FPRs provide liquidity for about 70% — 80% of all trades happening on Kyber.
FPRs provide a strong set of advantages that make market making for a wide range of tokens profitable and feasible. These advantages include high capital/gas efficiency, immediate exposure to the widest set of takers in DeFi, exact control over pricing strategies and risk exposure, and a range of safety mechanisms.
An example of how Kyber FPRs allow for a much higher capital efficiency compared to other on-chain systems: reserve operators can use the same quote currency inventory to market-make for up to 14 tokens. In contrast, for AMMs and orderbook systems, a separate quote currency inventory will need to be set aside for every different token or order.
We believe bringing professional market makers on-chain will greatly improve the liquidity in DeFi for the space, and drive innovation forward. Kyber FPR is our technical platform for professional market makers, and we are fully committed to helping them get started.
Opportunities In Market Making On-Chain
Market making on-chain is different from operating on centralized exchanges or in hybrid platforms, with a different set of opportunities and trade-offs. Namely, many DeFi apps and use cases can only take liquidity from fully on-chain protocols.
Since smart contracts only talk to smart contracts, decentralized dapps can only use on-chain liquidity to perform innovative ...
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Kyber Network - Medium