We wanted to take a moment to talk with you about something that you are going to bump into quite regularly while using the platform and that is ‘conversion’.

A lot of questions are still in the air about how exactly the conversion mechanisms are going to work, so we will do our best to outline everything before the release.

The basic mechanics of the conversion are laid out in the whitepaper: you invest your GVT into the investment program, where it converts to the currency of the manager and subsequently back to GVT when the profit is withdrawn.

The conversion will happen at the current price.

However, as many of you in the community have rightfully noticed — such an approach would cause sharp price fluctuations and noticeable slippages. You were absolutely correct in thinking so, with one exception: that would only happen if you perform conversion by putting market orders in the current market books.

But we have thought of a solution to this problem!

And no, it is not some cutting-edge matching algorithm or some other modern computer magic, it is a solution that has been used for decades on the conventional markets. And that solution is…

Market Making

In many ways, the current crypto situation is very similar to Wild West: people discover the new land, there is not much regulation, some outlaws, all that stuff. In this crypto Wild West, everything is called a market maker: washing trading, PnDs, various price manipulations etc..

In contrast to the crypto Wild West, conventional trading is already civilized and regulated. In this world, both traders and exchanges love and need market makers. Classic exchanges pay a big buck to market makers and are happy to disclose the market makers they are working with as a marketing tool.

So who are market makers?

The market maker has two main objectives: 1. ensuring asset liquidity 2. spread retention.

First, we need to address the other side of the story: market takers. Market takers are traders, investors, and all of the other parties that participate in a trading process, “borrowing” liquidity from the market.

Market makers are on the opposite of the equation, serving as an invisible hand of the market by providing liquidity.

Here is an oversimplified explanation of how they work: one party comes to a market maker and sells an asset. Then, the market maker sits on this asset until another party would want to buy it. In case you want a better explanation, feel free to consult the Wiki article on the topic.

You can actually understand whether an asset has a market maker, judging by order book alone. Let’s take a look at two screenshots. First one we are going to look at is our GVT token:

Seems lovely and peaceful, right? The spread is substantial, close to one hundred Satoshis, and the overall amounts are kind of small. Now let’s look at the second screenshot:

Wow! Have you noticed all of the amounts? The spread is ridiculously tiny; you can’t even have an order between the spread!

Can you guess which asset does have a market maker? That is correct, the second one. It is a great visual example of the importance of market making.

So why are we talking about all of that? The truth is that we will be using our own market maker. The market maker will start working in November, but it will be continually improved as the time goes on.

The goal of using a market maker is the same as always — it will provide liquidity, retain the spread and keep the volumes in order books. All of it should substantially improve the conversion situation and reduce slippages and spreads, creating a user-friendly solution for this obstacle.

We’ll see you soon, Visioners!