The Terms “Market Maker” And “Marketable” Are Familiar To Anyone Who Has Used Digital Currency Exchanges. As You Can See, The Word “Market” Is Common To Both. 

Digital currencies, like any other asset, need a trading environment. In other words, to trade digital currencies, we need a dedicated market, which is currently provided by digital currency exchanges in this market.

There are many types of digital currency exchanges today, and there are two types, Concentrated And Decentralized Are divided. How to make transactions and complete orders in these exchanges is different from each other. Newer and more decentralized digital currency exchanges use an innovation called ” automated marketing ” to conduct transactions.

Innovation of decentralized exchanges in the world of digital currencies is precious. However, the truth is that despite the growing popularity of decentralized exchanges, the largest number of users are still active in centralized exchanges. Because the facilities and opportunities that these exchanges offer are very diverse and it is still easier for most users to work with them.

Safeway focused on a mechanism called ” office orders » (Order Book) work.

These exchanges work because first, the users register their purchase and sale orders (mentioning the offered amount and amount) in the order book. The exchange’s automated matching engine then matches sales orders based on bid prices and completes them.

Therefore, there are two types of users in these exchanges: the user who registers the purchase or sale order and selects this order. The first group of users is called market makers or customers, and the second group is called market takers or order takers. In this article to help content Written by Binance Academy, we will examine the concept of market maker and marketable.

An overview of the mechanism of digital currency exchanges

Exchanges in all markets, including forex, securities, or digital currencies, are where buyers and sellers meet. If these intersections do not exist, people will be forced to advertise on social media or something similar.

For example, if you want Bitcoin Your with ethereum Exchange, you should post your offer on social networks and hope that maybe someone will find and accept your offer and be willing to trade.

Digital currency exchanges have solved this problem and provided a relatively secure environment for digital currency trading.

With digital currency exchanges, you no longer need to look for a party to the transaction and find someone who wants to buy your digital currencies or sell your digital currencies.

In digital currency exchanges, you will find many users looking to make a transaction, and therefore, your transactions are done in the shortest possible time and easily.

If you have used digital currency exchanges before, you are probably in market-making or marketable plans without your knowledge. You may even have played both of these roles in different transactions.

 Traders sometimes act as both market makers and marketers in a market.

Marketers and marketers are the lifeblood of many trading platforms, and it is their absence or scarcity that distinguishes strong exchanges from weak ones. As we mentioned in this article, we will talk about the concept of market maker and marketable; before that, let’s look at a key feature of digital currency exchanges and digital assets that you must have heard a lot about: liquidity.

What is liquidity?

What do we mean when we say, for example, that one asset has liquidity or another asset has no liquidity? Liquidity means how easy and fast an asset can sell. The higher liquidity of an asset, or in other words, the more “liquid it is,” the easier and faster it will be to sell and convert it into cash or any other asset.

An ounce of gold is an asset with high liquidity, or in other words, a ” liquid ” asset; Because in a short time, it can easily convert into cash. In contrast, assets such as real estate are less liquid or, in other words, “non-liquid “; Because more time is needed to sell them. Market liquidity is almost the same.

A liquidity market is a market in which you can buy and sell assets easily and at a fair price. In such a market, the demand for the asset is high, and the supply of those who want to sell it is very high.

When the volume of activity in a market is so high, the highest bid price for sale and the lowest bid price for buy will be nearby, where buyers and sellers come to a common ground. As a result, the difference between the highest bid and the lowest bid will be minimal. This bid-ask price difference is called the ” bid-ask price gap .”

In contrast, a low-liquidity market does not have any of these characteristics. If you want to sell an asset in such a market, you will have trouble selling it at a reasonable price; Because there is not much demand for it. As a result, the bid-ask price gap in low-liquidity markets is usually huge.
Now that we are familiar with the concept of liquidity, we turn to the two concepts of market maker and marketable.

Marketable and marketable

As mentioned, a market maker is generally someone who creates a buy or sell order and thus paves the way for a trade. A marketer sees that order as appropriate to their desired criteria and accepts it for the transaction. Traders operating in an exchange office have one of these roles. Of course, sometimes, a trader can be both market maker and marketable.

Who is the market maker or the customer?

Exchanges usually set the price of an asset based on the last completed orders in the order book. The order book is where all buying and selling offers from users are recorded.

An order is actually an instruction that could be something like: “Sell 2 bitcoins for $ 45,000.” The order is registered in the order book, and the order is placed whenever the buyer agrees to buy Bitcoin for $ 45,000. After this transaction, the price of Bitcoin in that exchange will be $ 45,000 (until the next transaction is done at another price).

The example above is an example of a “Limited order ( Limit Order ).»

. Limited orders are orders for which special conditions are set. For example, at the time of writing bitcoin price, It’s a little over $ 39,000, and when you place an order to sell bitcoins for $ 45,000, you are actually making a condition that has not yet been met.

In contrast to this type of order, there are ” market orders ” for which there is no specific condition. They are executed almost immediately after the registration of the order (with the first available price). For example, when you place a market order to buy 2 bitcoins, you allow an exchange to buy you 2 bitcoins from among the lowest restricted sales orders.

Marketers are users who register “limited orders” in both the buying and selling areas in the exchange office of the exchange office, thereby increasing the exchange liquidity. By doing so, they actually “create” a “buying and selling market” for the exchange and increase the speed and ease of trading in the exchange.

Large traders and institutions (such as those specializing in high-volume trading) often take on the market maker’s role. Still, small traders can also easily play a market-making role by registering limited orders.

Who is marketable or customizable?

The role of the marketer or the ordering vector is exactly the opposite of the market maker.

Marketers register “market orders” in an exchange office and place their order in the shortest time and at the first available price. In fact, they use limited orders previously placed by marketers to trade.

So here’s what happens: Marketers increase exchange liquidity by placing a limited order in the order book; Because they make buying and selling easier for users. On the other hand, marketers withdraw some of this liquidity through a market order that we described earlier. By doing so, marketers complete the orders in the order book immediately.

If you have previously placed a market order or made an immediate purchase in digital currency exchange, you must have acted as a marketer or picker, and if you have used limit orders, you have appeared as a market maker.

Of course, it is important to note that some exchanges (generally lesser-known exchanges with little cash) do not use the “market order” feature and can only register “limited orders.” If you trade in these exchanges, you must register a limited order; But you can still be a marketer. The point is, if your order complements another limited order, you are marketable.

Marketing and marketability fees

Exchange offices earn a significant portion of their revenue by receiving commissions from transactions made between users. This means that every time your order is placed, you pay a small amount for the commission; But the amount of commission varies in different exchanges and depends on the volume of the order and your role in that transaction.

Marketers in digital currency exchanges are usually subject to some discount; Because they help to provide exchange liquidity. High liquidity is a vital and positive feature for exchange offices because trading in an exchange with high liquidity is more attractive, faster, and easier for traders than there is less liquidity.

Therefore, it makes sense for exchange offices to welcome market makers and charge them lower fees.

 In contrast, marketers often pay higher fees than market makers; Because they do not provide liquidity.

Of course, for most Iranian users who are not authenticated in foreign exchange offices and operate at a basic user level, the market-making and marketable fees are no different. For example, in the image below, you can see the transaction fee rate in Binance Exchange, which is 0.1% of the total value of the transaction at the basic user level (VIP0) for the market maker and marketable.

Conclusion

This article tried to explain market makers and marketable concepts in digital currency exchanges and examine their role in these exchanges. By reading this article, you must have realized that the existence of a market maker and marketable is defined in exchanges that use the order book; When we say exchanges that use the book of orders, we mean almost all the famous centralized exchanges that we know, in addition to a limited number of decentralized exchanges.

The number of market makers and marketable factors determines the trading volume of exchange, and the more credit an exchange has, the more market makers and marketable it will be.

You know that all the processes that take place in digital currency exchanges are online and offline. Therefore, the concept of “credit” is essential for these exchanges and determines the degree of their reliability. So the next time you plan to use a new exchange and validate it, it’s a good idea to take a look at its order book and check the number and variety of orders.