As a reaction to the recent work on MM and incentives. It would be good to see some more interaction with market-making in practice. My goal is to make the business of MM more widely available to anyone. The hurdles to understanding the actual work and the implementation is very high. I’ve been fairly active in the discord to discuss the implementation and strategies.
The goal of MM as a strategy is mostly similar to any trading strategy - high risk adjusted returns (sharpe ratio).
In my view the issue of MM relates to trading on 0x versus central exchange. 0x is an alternative to centralised trading, it doesn’t exist in isolation, but in a big marketplace with ~2B$/day traded.
The calculation for Profit function is roughly: risk adjusted profit = current volume * potential spread captured. Current volume is ~100k$ and capturing 0.20% is feasible. So that’s 200$/day in revenue. Given the higher integration cost its really maybe 50$/day in profit which is at best 20’000$ p.a. At current rates market-making for professionals is not feasible. It might be ok for some people to earn some money on the side with this strategy. With MM pool I am working on enabling more people staking smaller amounts to earn returns.
It would help to bring to more awareness the advantages on trading on 0x versus central exchange, ie. lower custodial risk. The more those are available to the public, the more will switch from central to decentral. Most users will compare the alternatives that are available to them.