Market Maker Bots are coming to Genius Yield’s DEX. What to expect and how to run your own bot.
Uniqueness of Genius Yield’s Order-book DEX
Genius Yield’s DEX uses an order-book architecture where all the orders are listed in virtual order-book on-chain. Hundreds of trading pairs could have hundreds of open limit orders. Harnessing the power of Cardano’s EUTxO model, many orders could execute concurrently and in parallel without impacting each other. This functionality is impossible on most AMM (Automated Market Maker) DEXs due to the use of liquidity pools where traders all interact with the pool, not other traders, and exposes providers to risks like impermanent loss. Impermanent loss occurs when the value of deposited assets changes compared to their original value upon deposit, potentially leading to a lower return when withdrawn.
Even with an order-book DEX, most traders don’t want to scroll through thousands of orders on an order book. To automate the scanning, matching, and execution of orders, Genius Yield open-sourced Smart Order Routers (SORs), decentralizing the operations of the DEX by allowing anyone to run their own SOR.
Bringing Liquidity to the Genius Yield DEX through Market Maker Bots
While SORs handle the operations of the DEX, any order-book DEX still needs liquidity. Liquidity means that traders can always buy or sell a token at a reasonable market price at any time. On centralized exchanges, market makers maintain liquidity by creating limit buy/sell orders and order matching. In essence, they ensure an asset can always be bought or sold at a reasonable price. In return for ensuring liquidity and the smooth operations of an exchange, market makers profit from the bid/ask spread.
However, market makers in traditional finance are centralized, usually controlled and permissioned by certain authorities. To solve this issue of liquidity for Genius Yield’s DEX while ensuring decentralization, Genius Yield is open-sourcing its Market Maker Bot (MMB), a bot that enhances liquidity and the trader experience by placing buy and sell orders at different price levels.
Market Maker Bots — Create your own trading strategy
Since the MMBs are open-source, the community can create their own unique strategies to maximize profits. MMBs have parameters that can be modified. Over time, it is expected that users will modify bots to be more dynamic, taking into account factors on certain trading pairs such as volatility and the level of trade volume. In addition, macroeconomic and technical factors such as economic indicators and market sentiment can also be incorporated into strategies.
We expect MMB strategies to constantly evolve, as more participants enhance their MMBs to optimize profits. Similar to SORs, MMBs have risks. Price volatility, changing bid/ask spreads, and the devaluation of a coin or token held in the wallet used by the MMB are risks to running these bots. Like SORs, running a MMB is an active responsibility and there is no guarantee of profit.
We look forward to seeing the enhanced liquidity the community provides with MMBs for the Genius Yield DEX. Unlike other DEXs with centralized or permissioned batchers, we have placed the operations and liquidity of the DEX in the hands of the community. For questions and discussion on MMBs, please visit the dedicated community channels on Genius Yield’s Discord server where members can help each other.
To set up and run your own market market bot, please see the link below:
Access the DEX Contract API here!
Access the MMB Repo here!
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Disclaimer: The market maker bot and smart order router code is provided open source as-is, with no warranties or guarantees of any kind, either expressed or implied, and is not intended to be used as a substitute for professional investment advice. It doesn’t include official technical support. The user does not receive any investment advice from Genius Yield in connection with any trades, and no suitability review or similar of any trades or strategy is conducted by the Genius Yield team. The use of this bot is entirely at the user’s own risk. The user assumes all risks associated with the use of this bot, including but not limited to financial losses, tokens losses, loss of data, business interruption, and other unforeseen circumstances. The user is solely responsible for the final configuration and operation of this bot, and it’s recommended to seek professional trading advice before using it in mainnet.
