The purpose of Illiquid Market — why is peer to peer token trading important?
We’re thrilled to announce that illiquid.market is in public Beta and is available for anyone to use. We’ve created a range of explainers covering topics from how to use the platform, to the security guarantees that underpin the marketplace.
While those are important topics, we want to take a moment to cover some of the wider strategic thinking that guided the development of Illiquid.
Why should Illiquid exist? What does it do that other solutions like Uniswap can’t? Who is this for?
Consider the current state of the market, the collapse of CeFi Lending platforms like Celsius has underpinned the importance of maintaining custody of your coins whenever possible.
When we consider the trading of vested tokens, much of this trading still takes place off-chain (we’re working on changing that). One of the largest OTC desks was run by Three Arrows Capital, who are currently in the midst of collapse. The provenance and ownership of their various vested positions is now completely up in the air — leading to several 3AC backed projects dumping in price amid the uncertainty.
When we look at DEXs — Uniswap is great, but it’s becoming increasingly apparent that there are situations where it does not work well for everyday users…
Because of how the Ethereum Virtual Machine works, MEV, sandwich attacks and front running have become increasingly common, to the point where on many low cap coins, it’s basically impossible to buy or sell on an AMM (Uniswap, Pancakeswap, 1inch etc.) without a bot moving the price 2–10% right before your trade executes.
Even if everything else goes well, the design of AMM curves mean that even moderate sized trades on low cap coins result in slippage (price movement) of 2–10%.
Lastly, sometimes AMMs just plain don’t work — you’ll pay $80 USD+ for a transaction and it’ll fail inexplicably. This is especially frustrating for small traders that are looking to build a “moonbag” position in a low cap gem with limited funds.
The solution to these AMM woes? Direct peer to peer block trades. Illiquid.
Folks will still use AMM DEXs for high caps where liquidity is thick, but as we ride out crypto winter, many projects will see their pools dry up. That’s where Illiquid comes in.
Consider also cases where tokens have no on-chain liquidity. Wrapped/Liquid Vesting Tokens, DEX LP Tokens, fungible GameFi assets, tokens with CEX-only liquidity and even “Rug Pulled”/dead coins will all benefit from being tradable OTC.
Illiquid is by no means the first time peer to peer swaps have been attempted on chain before. In the 2017/2018 cycle, projects like Airswap, Wyvern and 0x raised huge sums and attempted to crack this problem, before being overshadowed by Bancor and Uniswap’s AMM model.
We’ve taken inspiration from these earlier attempts, borrowing heavily from Airswap’s OTC UI, but adding critically important components like multi-chain support, and a publicly browsable database of orders.
While the market conditions are quiet at time of writing, we’re excited to offer something that will prove unique and valuable to the wider market long term.
We hope to see Illiquid make it cheaper to trade low cap coins, allow a seamless way for folks to trade Liquid Vesting Tokens, and open up trading opportunities on assets that were previously considered Illiquid.
Unvest allows anyone to wrap, vest and distribute tokens using Liquid Vesting. Illiquid is an immutable, secure and decentralized protocol built by the team at Unvest. Join us on Telegram for the latest announcements and updates.
