Building Web3 Internet of Finance
Whatever anyone would say, crypto is not for everyone yet. Despite that initially, crypto was intended to be accessible for everyone freely, and without any prequalification requirements, most people still see it as full of barriers.
The most common complaint about crypto: it’s toooo complicated!
Indeed, crypto doesn’t require anyone to be a genius to use it. It just seems complicated because the whole crypto industry infrastructure is exceptionally inconvenient and cumbersome. It reminds more of a chaotic set of disconnected fragments, rather than a holistic symbiotic system.
Too many stand-alone blockchains, wallets, exchanges (centralized, decentralized, and hybrid), OTCs, dark pools, etc. They all have different rules, fees, interfaces, deposit requirements, trading pairs, and APIs. How not to go crazy here?!
Breathe out. Web3 technology will save you from madness. The latest developments in Web3 finance aim to unify all these isolated scattered fragments and make them interconnected. To achieve these, two tasks need to be solved simultaneously: crypto liquidity aggregation and cross-chain interoperability.
Once this is done, we will get what is called Web3 Liquidity Aggregation.
Understanding this concept is crucial not only for sophisticated traders or institutions but for everyone who wants to succeed with crypto. Once you decide to start playing with crypto, you will already know what essential factors should be considered for your crypto investment strategy to make it more profitable and less risky.
As we all know, knowledge is power.
So let’s dive in. I promise to keep things simple.
Liquidity refers to the ease with which an asset (a real estate, currency, security, or crypto) can be bought or sold without affecting its market price.
So, let’s say you need cash fast and wish to exchange for that your asset. If the market is liquid, you can do it smoothly and joyfully.
Simply put, good liquidity exists where the market can meet your buy/sell whims quickly and at the best price.
In terms of crypto, liquidity is the ability of a digital asset to be easily converted into cash or another crypto. Exactly the same meaning as on the traditional market.
Because digital assets’ prices are vulnerable to liquidity deviations. In other words, liquidity changes move in tandem with the volatility of price changes.
Low liquidity levels mean that market volatility is present, causing spikes in cryptocurrency prices. High liquidity, on the other hand, means there is a stable market, with few fluctuations in price.
For any asset holder, poor liquidity creates multiple risks.
One of them is the inability to exit a position quickly or at its market price. Your asset might probably have value, but buyers for it have temporarily evaporated. Or there are just a few buyers so that you can only sell your asset imminently at a fire sale price.
In the described case that the market for the asset is deemed
So as we see here, liquidity is a very important concept to understand in order to avoid or at least mitigate the risks related to it.
As was mentioned earlier, the crypto space is terribly fragmented. So is the liquidity.
The fragmentation of the whole industry is rooted right in blockchain technology development: so many different blockchain protocols appear every day (ok, not every day, but often), and most of them are heterogeneous. That means they have nothing in common in their design and can not seamlessly communicate with each other.
Then we have a plethora of stand-alone apps and projects hosted on different blockchain protocols or networks. They are not interoperable as well.
On the top layer of this cake are multiple trading venues: CEXs, DEXs, hybrid exchanges, semi exchanges (those that aggregate liquidity but do not execute orders on their sides). All living according to their unique rules and acting like independent sovereign states.
Let’s say I have a wild dream to start trading seriously and earn a pile of cash monthly. I strongly believe in the potential of one “fly me to the moon” coin and am interested in playing with it. The problem here is that my coin circulates on different independent exchanges with different volumes and at different prices. By the way, I’m actually not even sure whether these volumes are true and not washed…🤔
My next steps?
Oh, I’ll start my exchanges research, checking trading pairs, volumes, order books, fees, prices, and APIs of each. Then I will pick up a few of them, open up several accounts, each depositing with money at my own risk and accepting their terms and conditions, each stating, “Go to hell with all your future claims. We owe you nothing!”.
No prob, I’ll accept this painful reality and proceed.
Then I need to keep in mind how to manage all these accounts, remember exchanges’ fee structures to build on them my trading strategies, understand the depth of their order books, follow the updates, chat with the support in case I accidentally forgot to turn off my VPN and exchange blocks me because I look suspicious…
At the same time, I just keep successfully accumulating
Can anyone advise me a good therapist not to go crazy with all this??? Ahhh, I have no time for therapy. I’m too busy orchestrating billions of different elements of my digital investor’s life.
That could be really embarrassing, even for those who meditate all day long.
This is exactly why many people perceive crypto as something complicated and opt to stay just observing and missing out on its shiny opportunities.
So what will save us from madness here?🤔
A solution that will properly pull together all stand-alone pieces of the crypto industry and make them interoperable.
Nope, it’s not Trello.
I’m talking here about a solution that would aggregate for me all the crypto liquidity from multiple desynchronized sources in one place, show the best prices and enable cross-chain transaction execution securely, seamlessly, and at low fees.
Is there any out there?
To aggregate liquidity on the crypto market is way more challenging than on the traditional one. Why so?
Because of the same damn fragmentation problem.
For the execution of an order using the liquidity from multiple different sources, the last must have some connectivity and be interoperable.
When we talk about effective crypto liquidity aggregation, we imply not only gathering buy/sell orders for digital assets but also solving a bigger and more complicated problem — the problem of cross-chain interoperability.
At the same time, we should not lose here on the fundamental benefits of crypto: decentralization, peer-to-peer interactions, and security. These are all tasks of Web3 liquidity aggregation.
Now let’s look at the existing technology that can help facilitate it.
Here is a smart
“blockchain interoperability is a composition of distinguishable blockchain systems, each representing a unique distributed data ledger, where atomic transaction execution may span multiple heterogeneous blockchain systems, and where data recorded in one blockchain are reachable, verifiable, and referable by another possibly foreign transaction in a semantically compatible manner”.
If that sounds heavy, think of interoperability as a possibility to transfer value from one blockchain to another without losing on security and data reliability.
To achieve such interoperability is not an easy task. The cross-chain transfer involves multiple questions to consider:
Currently, there is no standard way that different blockchain systems talk with each other.
Below I’d just list some of the existing blockchain interoperability solutions that are widely applied at present.
If you want to get nerdier on blockchain interoperability solutions, check out this in-depth study “
Getting back to Web3 liquidity aggregation, its underlying architecture should be the best-balanced combination of interoperability principles and techniques. Such architecture should enable a user for seamless, high-speed, and low-cost exchange of any digital assets regardless if they are running on different protocols or circulating in various trading venues.
The unlimited access to all digital assets in one place and the possibility of their seamless cross-chain exchange are just parts of the task to make a user’s experience in crypto hassle-free.
There must be a single gateway trading environment, also offering a great
At the same time, it shall preserve all the perks that crypto stands for: security, decentralization, and p2p permissionless transactions at a low cost.
Having vast experience in FinTech and a deep understanding of retail and institutional traders’ needs,
Particularly, Yellow offers to interconnect multiple stand-alone exchanges in one automated non-custodial trading hub, providing a user with the aggregated liquidity and price feed and seamless high-speed cross-chain transactions at minimal fees.
On the level of technology, Yellow offers a
On Layer-1 of Yellow Network are multiple blockchain protocols (ETH, BTC, Solana, etc.) that validate transactions.
These protocols are paired up with a Layer-2 scaling solution called “state channels,” allowing users to transact with one another with high speed and at low cost.
And the Layer-3 is Yellow Network, offering a P2P cross-chain overlay mesh network built on top of
The network will reach Layer-1 blockchains through Layer-2 state channels and procure low-cost, high-speed cross-chain transactions suitable, even for high-frequency trading(HFT). It will also share the liquidity and price feed aggregated from all the exchanges integrated with the network.
Also, Yellow Network facilitates non-custodial trading, which means that users will be able to deposit and withdraw funds using their addresses on a specific blockchain. So trading on Yellow Network, users do not face counterparty risk, as they remain in complete control over their private keys and digital assets.
Another attractive technological component of the Network is the sharded order book.
Yellow uses sharding as a method for distributing its aggregated order book across the Network nodes. The sharded order book has unlimited capacity for the Network’s participants’ requests and at the same time is resistant against any work interruptions, as it has no one point of failure.
If any network node goes down, it would in no way affect the global order book’s accessibility by traders.
Wrapping it up, here are the main benefits that an end-user will get from Yellow Network, whether they are a retail trader or institutional one:
Sounds like something that will skyrocket mass adoption of crypto, doesn’t it?
With developments of new Web3 finance solutions, like Yellow Network, offering cross-chain crypto liquidity aggregation together with a convenient and full-stack trading experience, the crypto industry will no longer seem so complicated and inaccessible for users. What is more, it would reach the same level of professionalism and maturity as traditional financing markets while surpassing it in choice for instruments and higher profits.
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Stay tuned as Yellow Network unveils the developer tools behind Yellow Network, brokerage nodes stack, and community liquidity mining software!