How To Burn Central Exchanges To The Ground: Bootstrapping DEX Liquidity Using Free Market Forces
Until we get a DEX that can match central exchanges in speed, cost, and liquidity, the crypto community will be at the mercy of the central exchange cartels and the governments they are beholden to.
For crypto to be what it an be, **these central exchanges must be burnt to the ground.** Here's how the KMD team can do just that using free market forces:
# Market force #1: Arbitrage
Streamline arbitrage between central exchange balances and AtomicDEX balances.
Add an arbitrage module right into AtomicDEX. This module should support the most dominant central exchanges right now (like Binance).
User plugs in their central exchange API keys, and enters their settings for arbitraging their balances.
The arbitrage module does the rest:
On the AtomicDEX side:
* It keeps open orders in profit territory for their central exchange balances.
* It takes open orders when/if the spread becomes wide enough to support the arbitrage.
On the central exchange side:
* It executes the other side of the arbitrage if/when an arbitrage opportunity opens.
* It keeps open orders on the opposite side of the arbitrage in profit territory.
Arbitrage assets transfers:
User sets the transfer batch amount. User can manually transfer, or they can take on more risk with an API key with withdrawal rights, and the arbitrage module automatically deposits and withdraws the arbitrage assets.
# The end result:
Low risk profits for the central exchange holder. And liquidity for the AtomicDEX user.
Eventually, the volume would build in the AtomicDEX to overtake the central exchanges, and the spreads would tighten to those of the central exchanges.
At that point there would be little reason to use central exchanges.
# Constraint: FEES
Trade fees can compete with central exchanges right now in blockchains like BCH, but not in BTC, ETH.