What is the Avatea platform?
Market making is a term that is used in many industries and often has an ambiguous meaning. Market making in this article refers to the activity of maintaining and improving the price of a token or coin and optimizing the market’s behavior regarding its price movement.
In our previous article (Why current market making solutions do not fit the needs of the Web3 space) we discussed why traditional market making does not fit the needs of the Web3 landscape. The following three main reasons were thoroughly discussed:
DeFi is being neglected, for effective market making to take place, the makers need to make the market where the actual trading takes place. It is clear however that the market is urging for more decentralization and traditional market makers have not caught up. Currently (but not for long), there are no tools that help users to perform market making activities with existing DeFi protocols.
Only a fraction of the total supply is used to do market making, regular market makers have access to a very small part of the circulating supply, which mostly consists of the team tokens. Many projects fail simply because of unstructured and uncontrolled token liquidations of big investors, without any bad intentions from the investor’s side. Avatea’s market making algorithm has access to a significant part of the tokens from the private rounds of a token sale, which often consist of a great majority of the total token supply. Token dumps and rogue private investors destroying a promising project will become a thing of the past.
Hefty fees, limited management, and no direct control, Current market makers have a typical Web2 approach. Fees are often based on monthly retainers, averaging between 4000–8000 USD per exchange per month. Projects are not in control and often have no access to data or dashboards. With Avatea, projects themselves are in control and manage their own market making, paying transaction fees through smart contracts instead of retainer fees through monthly invoices.
Avatea is a decentralized market making platform that aims to solve the challenges faced by traditional market making in the Web3 landscape.
We at Avatea have experienced these major problems first-hand and have decided to create a solution that will solve all these challenges. The Avatea platform offers a full spectrum decentralized vesting and market making solution, giving back control to projects and providing market making tools to the public.
So let’s start with vesting. With vesting we refer to the process of earning ownership of tokens over time. For example, a DeFi project issues tokens to investors or team members, these tokens are subject to a vesting schedule that determines when they can be sold or transferred. Vesting is used to align the interests of token holders with those of the project and to ensure that tokens are not sold too quickly, which could negatively impact the project’s value.
Vesting schedules in the crypto and DeFi space can be complex, and may involve multiple vesting periods, cliff periods, and other factors that determine when tokens are releasable.
Vesting is thus important to counter heavy and direct selling of tokens and to align interests between investors and teams.
The Avatea platform simplifies this process by allowing projects to set up complete vesting schedules for all stakeholders, including investors, advisors, and team members. The platform offers both linear and periodical vesting options and makes it easy to set up and manage vesting schedules through its intuitive interface.
Now let’s move to trading, once tokens are no longer subject to vesting and thus are freely tradeable, investors might be looking to sell their holdings. Periodic token dumps can be a major problem for projects, as they can lead to a sudden and significant reduction in the value of the token. This can be particularly concerning when vesting periods are similar for many investors, as it can result in a large number of tokens becoming available for sale at the same time.
How could we counter this? Is there a way in which we can sustainably sell these tokens, and is there a way we can connect this with vesting?
These were some of the questions that we asked ourselves repeatedly. To address this issue, the Avatea platform offers a sustainable trading module that enables investors to sell their tokens in a more controlled and sustainable manner. Once their tokens are no longer subject to vesting, investors can use this module to set up a liquidation scheme that sells their tokens on preferred exchanges at a preferred price range over a specified timeframe. The proprietary Avatea algorithm then executes these sell orders in a way that minimizes price impact and maximizes profit for the investor.
As the vesting and the sustainable trading module are part of the same smart contract, tokens do not have to be manually released from one contract and sent to the other. Thus, the sustainable trading module can thus be fully automated, allowing investors to release vested tokens and sell (part of) their tokens without any manual intervention. This makes it easy for investors to take advantage of this functionality, while also ensuring that the process is seamless and efficient.
Decentralized Market Making
Decentralized market making is a key feature of the Avatea platform. In addition to enabling investors to use the Avatea algorithm for sustainable selling of tokens, projects can also use the algorithm to market make on decentralized exchanges.
To do so, projects simply need to stake their funds in a smart contract on the Avatea platform and build their market making strategy by selecting a preferred price range, a maximum buying and selling amount per day, and a maximum preferred drawdown. These settings can be adjusted and managed directly through the Avatea platform, giving projects full control over their market making activity.
Another benefit is that in contrast to traditional market makers, Avatea has access to a significantly larger portion of the circulating supply of a project. With traditional market makers the projects provide a certain amount of tokens to market make with, often a very small amount. With Avatea on the other hand, the algorithm includes the projects’ tokens as well as the investors’ tokens, to create a more complete and efficient market making strategy. The combination of the sustainable trading module and the decentralized market making module make for such a strong and efficient strategy.
Aside from accessing the sustainable trading module, investors can also access the Avatea liquidity module directly. This allows investors to dedicate part of their tokens (or vested tokens) to the liquidity pool of the project that they are invested in. Investors can select a percentage of tokens (released from vesting) to be staked in the liquidity pool of that project automatically every vesting period. Investors are being rewarded with liquidity rewards. For the projects itself this is hugely beneficial as so many starting projects struggle with sufficient liquidity and Avatea makes it significantly easier for investors to provide liquidity.
All in all, Avatea provides a full spectrum solution for starting projects and its investors, benefiting both sides. All whilst connecting all different functionalities, vesting, market making and liquidity, into one simple platform. Go to avatea.io to learn more about vesting, decentralized marketing making, and decentralized liquidity providing, and stay up to date on our latest developments by following our socials, mentioned below!