3 ms·

This is the very basic function of a market maker. They offer to "make" a market even when none exists. So if everyone wants to buy they will keep offering unti

This is the very basic function of a market maker. They offer to "make" a market even when none exists. So if everyone wants to buy they will keep offering until their inventory runs out. I haven't read the Bancor paper or code so I am not sure if this is implemented but every market maker's another objective is to make money. So they normally don't trade on a fair price, rather fair price - x/2 to buy and fair price + x/2 to sell where x is the spread to collect money. So effectively they buy low and sell high for a minute difference. As for a scenario where they have only buyers, the algos or people on the floor tend to take stock of the existing orders and start moving the ask higher to compensate. This happens until it becomes untenable to buy and some sellers start entering the market to make a quick buck. A good video on how trading works from Trading Places: https://www.youtube.com/watch?v=RLySXTIBS3c https://www.youtube.com/watch?v=RLySXTIBS3c

JumpCrisscross 9y ago
I was expecting something different given the novelty of the term "asymmetric price discovery" to this former equity derivatives market maker. Also, nitpick, a market maker has to actually trade for price discovery to have occurred. I can run around quoting "bid AAPL 2 at 10 billion" all day long, if nobody bites I didn't promote price discovery. TL; DR You can't asymmetrically discover prices.
- thisisit 9y ago
  One of the points Sirer brought up was exactly this - without an external feed, the Bancor network will never know if things are working correctly. A malicious party could very use the public nature of the transactions and manipulate prices such that they get cheaper coins or ensure the "asymmetrically price discovery" end up marking coins for hundreds of ETH. OT - Thanks for your illuminating posts. I am a software engineer by profession so most of my learning have been from trying to trade stocks at my country's local exchange so it is interesting to learn things from someone who worked in that field. I was checking your profile and had a question - What is a PE/VC trader? We can talk offline if you want :)

JumpCrisscross 9y ago

I was expecting something different given the novelty of the term "asymmetric price discovery" to this former equity derivatives market maker. Also, nitpick, a market maker has to actually trade for price discovery to have occurred. I can run around quoting "bid AAPL 2 at 10 billion" all day long, if nobody bites I didn't promote price discovery. TL; DR You can't asymmetrically discover prices.

thisisit 9y ago
One of the points Sirer brought up was exactly this - without an external feed, the Bancor network will never know if things are working correctly. A malicious party could very use the public nature of the transactions and manipulate prices such that they get cheaper coins or ensure the "asymmetrically price discovery" end up marking coins for hundreds of ETH. OT - Thanks for your illuminating posts. I am a software engineer by profession so most of my learning have been from trying to trade stocks at my country's local exchange so it is interesting to learn things from someone who worked in that field. I was checking your profile and had a question - What is a PE/VC trader? We can talk offline if you want :)