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Actually, AMMs (automated market makers) work by ensuring that there's always a buyer (hence, "automated") as long as there's liquidity -- by automatically adju

by dvt 5y ago

Actually, AMMs (automated market makers) work by ensuring that there's always a buyer (hence, "automated") as long as there's liquidity -- by automatically adjusting prices based on supply/demand.

NovemberWhiskey 5y ago
Help me out here. I'm going to issue a hundred trillion MostExtraordinaryShitCoin (MESC). What's the bid for MESC from these AMM pools?
- dvt 5y ago
  (Sorry for late reply, HN time-limits nested comment replies.) Basically, if you were to issue N tokens into an AMM, you would also need to provide the counter-party liquidity. So let's say you're sending 100 MESC to a pool, and the initial price is 0.01 USD (to keep it simple), you would also have to seed the pool with 1 USD. Once that's done, people start trading -- some other people might even provide liquidity (and buy LP -- liquidity pool -- tokens) which they can earn interest on.
  - NovemberWhiskey 5y ago
    This whole discussion starts from your response to a comment that "[t]okens _are_ worthless if no one wants to buy them", asserting that this was "[f]undamentally not true". But it seems very much that it is true. Did you mean to make a different point?
    - dvt 5y ago
      I'm not sure if we disagree, my point was a technical one: traditional markets are "order book" markets where for every buyer, there's a seller. Crypto exchanges use AMMs, where there does not need to be a buyer for every seller, as the AMM handles that automatically. If your point is that tokens without liquidity are worthless, then that's true (that's why initial decentralized exchange offerings always involve seeding liquidity pools, as mentioned). If your point is that tokens can get arbitrarily close to zero if everyone sells, that's also true. But if you get a token that's being actively traded on exchanges and has healthy liquidity pools and a healthy market cap, that certainly is a better deal than some percentage "equity" an early-stage startup dangles in front of you.

by dvt 5y ago

Actually, AMMs (automated market makers) work by ensuring that there's always a buyer (hence, "automated") as long as there's liquidity -- by automatically adjusting prices based on supply/demand.

NovemberWhiskey 5y ago

Help me out here. I'm going to issue a hundred trillion MostExtraordinaryShitCoin (MESC). What's the bid for MESC from these AMM pools?

dvt 5y ago
(Sorry for late reply, HN time-limits nested comment replies.) Basically, if you were to issue N tokens into an AMM, you would also need to provide the counter-party liquidity. So let's say you're sending 100 MESC to a pool, and the initial price is 0.01 USD (to keep it simple), you would also have to seed the pool with 1 USD. Once that's done, people start trading -- some other people might even provide liquidity (and buy LP -- liquidity pool -- tokens) which they can earn interest on.
- NovemberWhiskey 5y ago
  This whole discussion starts from your response to a comment that "[t]okens _are_ worthless if no one wants to buy them", asserting that this was "[f]undamentally not true". But it seems very much that it is true. Did you mean to make a different point?
  - dvt 5y ago
    I'm not sure if we disagree, my point was a technical one: traditional markets are "order book" markets where for every buyer, there's a seller. Crypto exchanges use AMMs, where there does not need to be a buyer for every seller, as the AMM handles that automatically. If your point is that tokens without liquidity are worthless, then that's true (that's why initial decentralized exchange offerings always involve seeding liquidity pools, as mentioned). If your point is that tokens can get arbitrarily close to zero if everyone sells, that's also true. But if you get a token that's being actively traded on exchanges and has healthy liquidity pools and a healthy market cap, that certainly is a better deal than some percentage "equity" an early-stage startup dangles in front of you.