Liquidity

Parapad requires liquidity the same way central exchanges require Market Making

When a buyer enters the market the order must be matched with a seller. Buyers place a bid — the highest price one is willing to pay for an asset — while sellers place an ask, which is the lowest price one is willing to sell.

Market makers match these two parties by covering the spread between the traders’ asks and bids. These large financial institutions inject liquidity into the market in exchange for a small cut out of each trade. Without market makers even the highly fungible money market would function less smoothly.

Stock markets and foreign exchange of currencies rely on large financial institutions to maintain the flow of assets. The forex market is the world’s largest financial arena — it’s worth $2.4 quadrillion, with a daily volume of $6.6T.

Its scale is no surprise. National currencies are plentiful and fungible. That means the money involved, can be converted into other currencies equal to their value instantly, such as euros to dollars. In contrast, real estate has very low fungibility because each one is unique (just like NFTs) and will take time for the demand for it to buy it.

High fungibility translates into high liquidity. This is the ability for an asset to be exchanged swiftly without it quickly changing its value. Likewise, in the crypto world, liquidity is the ease with which token A can be swapped for token B.