DSwap is changing Hive-Engine
Are you familiar with DSwap? It's a new app that offers the possibility to run smart contracts on the Hive-Engine side chain. For the moment you can run a bot that plays the market maker on a hive-engine market.
What is a market maker?
A market maker is a person, an account or a bot that places orders on both sides of a market. He puts buy orders and sell orders. Between these orders there is a price difference, also called spread. By buying and selling on the market, thanks to this spread, a market maker can make small profits from these trades. The more trades it makes, the bigger the profits will be.
What are DSwap market makers?
The bot will look at the orders on the market and follow in most cases a top of the book strategy. This means that he will put the highest buy price and the lowest sell price on the market. The bot will check the market every 5 or 10 minutes and adapt these orders. It will constantly change the orders to remain at the top of the book on both sides.
How does this allow to earn money?
To understand how a market maker can earn money, let's take a little example.
| Buy Token Price | - | Sell Token Price |
|---|---|---|
| 100 | 105 |
In this example the market maker has put a buy order at 100 and a sell order at 105. His hopes are that both orders will be executed and like that he would earn 5 in the process. This is just a simplified version of it and of course it's much more dynamic, especially with a bot.
To earn money with such a market maker bot, the owner of the bot will choose a trading pair that has some transactions (otherwise the bot will be idle), a big spread (the bigger the spread the higher the earning potential) and a rather stable price (if the price moves only in one direction, it will drain these bots).
If you want to start such a trading bot, you might have a look at the prices. You need to invest around 100 Hive and stake an additional amount in BEE tokens. In addition to that you will need liquid funds to feed the bot.
How these trading bots will impact the hive-engine tokens
There are already some bots out there trading automatically on the market. With DSwap, such bots will become accessible to almost anybody and it will have a big impact on these markets.
With such a trading bot you have a certain edge and you can earn quite well. However we will probably see more than one bot on some trading pairs. First new bot owners will try to find tokens pairs which offer a certain profitability and where there is no other bot at work. They will first look for tokens that have a big spread, a certain volume and also a certain stability.
Once there are bots on all interesting trading pairs, we will encounter cases where there are several bots on the same trading pair. If they have all the same strategy (top of the book), we will see several things:
A bigger price stability and more liquidity
These bots will constantly re-balance themselves and put new orders on the market. This will have a stabilizing effect on the token price, simply because there will be a dynamic liquidity on the market.
Until now if you sold a big amount of a token, this would erase a big part of the order book and it would leave a huge spread until people started to refill the order book. With these bots, new orders will populate the order book within 10 minutes
Smaller spreads
If there are several bots on a same trading pair, with a top of the book strategy, these bots will actually close the spread step by step. The price between buy and sell is going to become smaller and smaller the more bots are at work.
More liquid tokens
With such market maker bots, you don't just need the bot, you also need the resources to populate the orders on a trading pair. These bots need Hive and the token they want to trade. You can't trade with staked tokens, so you will need a lot of liquid tokens to use a market maker bot. More liquid tokens means in general more volume on the market and also more demand for these tokens.
Improvement of the token economy
Thanks to these market maker bots, token markets will become much more dynamic, liquid and there will be smaller spreads. In general this will be quite positive for these tokens.
I believe however that it will only affect tokens that have a certain trading volume. Probably bot owners will concentrate on the most liquid token pairs at the moment. In the long term, I believe that there will be various bot strategies and there might be a constant volume of transactions generated by bot activity.
This will make these Hive-Engine markets much more interesting for everybody also for traders.
In a second step Dswap will also provide the possiblity to swap tokens. This will be an additional dynamic element for these token markets.
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Also happy that it has Smart Contract feature too
That actually opens a whole new world of possibilities...
Thanks a lot for your comment!
Great to read your views on DSwap. It's just the beginning of great things happening around Hive's second layer. We keep moving.
I believe that the second layer has amazing potential and we are just scratching the surface of it!
Thanks a lot for stopping by!
very interesting, I would like you to tell us the name of some of those bits so we can start testing them, reslmente I consider it a great idea.
Oh and by the way you have become my favorite blogger! 😍
Thank you man, you are going to make me blush 😚
You need 100 Bee invested and 200 or 1000 staked before you can do anything.
Also, its not working for me.
I cant change min. Or max. Values x)
And if you stake only 200, you need 1 bee for every change that you make in the settings. It can become quite an expensive business. I believe that the numbers of return that have been presented so far can't be reached if there are several bots on a same trading pair...
Thanks a lot for stopping by!
I know.
Still not working.
I have reach out and they look into it.
Great. I dont see how this is good for small users x)
I believe that you need to have quite a consequent budget to run such a bot. For small users this is not really an option. The advantage for the small user is rather as a market taker. He will get better prices if the market spread is smaller and if the market is more liquid. He will probably also be able to trade pairs that didn't have enough volume so far like swap.btc, swap.ltc. The whole hive-engine market will become more dynamic and the volume might grow thanks to these bots. Of course this is just an opinion and I might be wrong about it :-)
Yeah, that would prove handy!
Thanks a lot for your comment!
This sounds very interesting, and it can help a lot with raising the volume of trading on Hive-Engine tokens... I hope that it will be more of them for different tokens!
Great informative post! Thanks for sharing!
I believe that there are already quite a lot of bots on trading pairs like DEC/Hive. Once there are too many bots, the spread will be very small and bots owner will go to other trading pairs. It's an interesting development and I believe that it can be quite interesting for Hive-Engine markets.
Thanks a lot for your comment my friend!
very important information has been gven by you. I am really excited for Dswap and here you have given detailed information which is enough for any newbie to understand it. thanks for this post. resteemed !!!!
Thanks a lot for your kind feed-back and for the resteem! It's indeed an exciting time to be on the Hive blockchain!
This is really interesting information Achim, let's see if we get any bots trading on CTP tokens, it's not that cheap to start, but if you get going fast you should make that up pretty quickly I think, maybe we should start 2 bots like these just to get the price stable.
Hi Erik, I think that at first bot owners will concentrate on trading pairs with high volume but then when there are too many bots on them, they will come to markets like CTP/Hive. It is a very interesting coin for market makers because it is stable and there is quite a big spread. I believe we actually only have to wait and there will be some bots on the CTP/Hive pair quite soon. Probably there are already some of them because I can see the spread shrinking :-)
Maybe our Crowhale is on the job already lol.
That's seems possible :-)
Greetings my friend @achimo. You are providing very interesting information, where you are referring to bots operating with CTP tokens, it is not so cheap to start, but if you start fast, you should be pretty fast, it would be profitable if we manage to keep or at least set the prices.
Because at the moment I set up an order in the market I am expecting to receive profits quickly.
Because as I can see these bots will stabilize the price over the token price, simply because there will be a dynamic liquidity in the market.
Greetings friend, thank you for sharing with all of us.
Thanks a lot for your nice comment. I totally agree with you that this is an interesting tool for Hive-Engine tokens.
This is very interesting @achim03, I did not know this was happening, and it is great news, as it will allow access to this, which actually already has time running in other exchange houses, even in the internal market of Hive there are bots doing that. Those who master the science of programming have been able to take advantage of this.
Thanks for this information, I will check it out.
I think its a nice new feature but I believe that for the moment it's reserved rather for big players ;-).
Thanks a lot for your comment!