HBS’S Liquidity Providing in a Nutshell

The recent DeFi boom leads to a large number of tokens being issued and offered every day. While the hype is on, people rush to buy and/or transact these tokens. However, once the wave has cooled off, liquidity will inevitably become an issue. Conventional exchanges operate an order-book model, wherein sellers place sell order and buyers place buy order, and transactions or trades only happen when there is someone else willing to match your order., when the selling and buying price (or ask and bid price) do not match, no trade happens, and the token become illiquid. Unfortunately, an illiquid token holds little value.

This limitation of order book models gives rise to the so-called liquidity provider entities. A liquidity provider comes into the game with a deep liquidity pool, and is willing to buy whatever amount people would like to sell, and sell whatever amount people would like to buy. In the world of fiat currencies, liquidity providers are banks. Clearly, in the presence of significant price spread which often results in little market activity, liquidity providers keep the market going, asset flowing, needs being met. HBS contributes to DeFi ecosystem as such by providing liquidity on JustSwap. This enables HBS to earn a trading fee worth 0.3% total transacted volume, which serves as a healthy and sustainable source of income for HBS.

While it sounds simple, daily operations of a liquidity provider are rather intricate. The most obvious bits are portfolio rebalancing and price adjusting. These problems are intractable, and often beyond an individual’s reach. Fortunately, HBS have researched and developed a complex and well-designed set of algorithms to handle these challenges. The efficiency of our designs are evidenced by a sustained and continuous flow of transactions we facilitate on JustSwap, which we publish on scan.hbsplatform.com.