Despite the exponential growth of the STO/TSO industry, the industry still faces a key infrastructure issue, liquidity.
Looking into the most established STO exchanges such as Open Finance and TZero, you would realize that there is hardly any liquidity on these exchanges, and trades are done OTC (Over-the-counter) — these exchanges are simply Craig’s list for STOs.
Why is there no liquidity?
Unlike cryptocurrency markets, becoming an STO market maker requires tedious licenses which may take a long time to attain. Cryptocurrency market makers are unable to market make STOs and traditional market makers have no incentives to start, given the current size and uniqueness of the STO market.
Another key reason for the lack of liquidity is due to liquidity being sliced for each exchange an STO is listed on. This differs from traditional markets where there are central depositories that can easily account for share distributions. Due to this lack of liquidity, buyers who would like to enter the market are unable to purchase STOs due to the limited supply on each exchange.
The “Uniswap Effect”
Prior to the introduction of AMMs and liquidity pools, decentralized exchange volume was almost non-existent. This was largely due to the fact that there were no market makers on DEX platforms as many of the assets that were traded were smaller, less known altcoins that present similar characteristics to the STO market today.
As shown from the chart below, total monthly DEX volume increased from $39.5m to $43.5b in a year growing by 110,100%. The phenomenon was purely due to Uniswap’s introduction of the automated market maker.
Given that the total private asset market size ($7.5 trillion) is over 5x the size of the cryptocurrency industry ($1.43 trillion), the potential of growth is much larger. IX Swap aims to bring an even greater volume of liquidity to the STO market.
The IX Swap Solution
IX Swap is creating the world’s first liquidity pools and automated market makers for the security token industry. In simplicity, IX Swap is the “Uniswap” for the security token (STO) and tokenized stock (TSO) industry.
Given the complexities and the lack of market makers in the industry as discussed above, creating a centralized exchange (CEX) would not be feasible. But, by providing the ability to create liquidity pools with automated market making capabilities, issuers and individuals can create their own liquidity in the market and in turn “market make”, which also replaces the need for traditional market makers in the industry.
Furthermore, to address the slicing of a liquidity problem, IX Swap will allow for other licensed broker dealers to plug into IX Swap to facilitate the trading of their STO assets. This will allow other licensed exchanges to receive a share of the trading fees on IX Swap and will allow for IX Swap to be the liquidity provider platform for the STO ecosystem.
IX Swap is the last missing piece of the puzzle needed to bring life to the STO/TSO industry. IX Swap will revolutionize the STO/TSO industry and is the liquidity solution for all STO/TSO exchanges globally, bridging the gap between CeFi and DeFi.
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IX Swap is the last infrastructure piece needed to bring life to the security token/tokenized stock industry. IX Swap will revolutionize the STO/TSO industry and is the liquidity solution for all STO/TSO exchanges globally, bridging the gap between CeFi and DeFi.