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Title: Maximizing Bitcoin Liquidity Through the Make-or-Take Model Post by: is4tomj on June 24, 2012, 06:03:08 AM Hi, below is a link to a blog post on maximizing bitcoin liquidity on bitcoin exchanges through the make-or-take model.
http://blog.bitcointitan.com/post/25759461251/maximizing-liquidity-through-the-make-or-take-model Title: Re: Maximizing Bitcoin Liquidity Through the Make-or-Take Model Post by: Meni Rosenfeld on June 24, 2012, 12:00:25 PM The make-or-take model doesn't improve liquidity, it just gives the illusion of it.
See for example this comment (https://bitcointalk.org/index.php?topic=80149.msg888956#msg888956) where I try to explain the equivalence. Title: Re: Maximizing Bitcoin Liquidity Through the Make-or-Take Model Post by: is4tomj on June 24, 2012, 01:19:27 PM Whether the spread is the "right" spread as you call it doesn't have anything to do with what is the "fair" or "right" spread. The "right" spread has to do with the efficient market hypothesis. If you believe that markets are efficient then you believe that the right price is the last current market price. If you do not believe markets are perfectly efficient (which most people do not) then prices will not be the "right" prices, but will correct eventually as people take advantage of the arbitrage opportunity.
Intersango only offers a discount on commission to to market markers but that is still a penalty, market makers should be rewarded, and make money for each trade. hellobitcoin says they employ the make-or-take model, but in red words below their claim to use the make-or-take model, they state that they actually charge market makers 0.15% which is not the make-or-take model. Hi, below is a link to a blog post on maximizing bitcoin liquidity on bitcoin exchanges through the make-or-take model. Several exchanges offer a make-take price differential. Intersango,http://blog.bitcointitan.com/post/25759461251/maximizing-liquidity-through-the-make-or-take-model bitfloor and hellobitcoin come to mind. I feel that the differential they choose is somewhat arbitrary. I have always felt that the make-take commission differential should be no greater than the exchange's least count divided by the price of btcusd. And, all exchanges violate this condition. Why do I belive in this condition? For if this condition is not met, then as a trader, it sometimes is cheaper for you to bid at 6.51 than it is to bid at 6.50. Equivalently, here's, I believe, the problem from the exchange's perspective if you violate this condition. The make-take difference may help you achieve a tight spread and thus, a good price-discovery, but both are illusory. For, imagine that the true bid-ask frontiers should lie at 6.51-6.52. Imagine that your exchange is currently locked in at 6.50-6.51. Your exchange has seemingly discovered a price with a tight spread. Is this the correct price? Even if traders are convinced that the correct frontier should be 6.51-6.52, there is a *negative* incentive for a trader to try to correct that imbalance. Title: Re: Maximizing Bitcoin Liquidity Through the Make-or-Take Model Post by: Meni Rosenfeld on June 24, 2012, 01:30:48 PM Whether the spread is the "right" spread as you call it doesn't have anything to do with what is the "fair" or "right" spread. deego talked about a tight spread.Title: Re: Maximizing Bitcoin Liquidity Through the Make-or-Take Model Post by: is4tomj on June 24, 2012, 01:40:30 PM No, he agrees that the make-or-take model provides a tight spread. deego's issue was whether the spread was the "true" spread, but I changed that to "right" spread. Sorry if that was confusing.
Whether the spread is the "right" spread as you call it doesn't have anything to do with what is the "fair" or "right" spread. deego talked about a tight spread.Title: Re: Maximizing Bitcoin Liquidity Through the Make-or-Take Model Post by: MoneyIsDebt on June 24, 2012, 03:16:23 PM What happens if there are no fees on transactions? (Just on deposits / withdrawals or some other mechanism to keep the exchange operating)
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