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Wintermute is now the Tron ecosystem’s official market maker, helping the crypto project’s native TRX token improve liquidity across various exchanges.
Market makers are vital agents in the world of finance, crypto included. They assist in making trading pairs more liquid by acting as a buyer and seller on both sides of a trade.
When a crypto trader places a sell order for their tokens, there may not be an immediate buyer at the trader’s asking price. To fill this trade, the price drops until a buyer has been found. The difference between the sell price and the buy price (or the offer and the bid) is called the spread. When spreads are large, it’s an indicator that a specific market is illiquid, and can mean lots of volatility.
Market makers like Wintermute thus operate as an intermediary of sorts to fill these trades, reduce volatility, and keep a trading pair’s spread as tight as possible.
Other firms like B2C2, Alameda Research, Cumberland, and Genesis Trading offer similar services. And insofar as it can be risky to fill these orders, these firms also charge a nominal fee. Many of these firms also offer their services across various decentralized finance (DeFi) protocols.
Besides providing liquidity for TRX, Wintermute will also assist in the continued development of the Tron ecosystem, Wintermute’s business development director David Micley told Decrypt.
“Whether it’s through judging the recent Grand Hackathon, joining the TRON DAO Reserve as a whitelisted member, and most recently launching our partnership as the designated liquidity provider for TRX, Wintermute is proud to utilize our DeFi and market-making expertise to strengthen the Tron ecosystem,” he said.
Unpacking the Tron ecosystem
Tron’s DeFi ecosystem is crypto’s second-largest after Ethereum in terms of Total Value Locked (TVL).
TVL measures how much money is being used within the various projects built atop a specific blockchain. Across Tron’s 10 projects, there’s currently $5.84 billion in TVL. Ethereum boasts $35.22 billion, which is drawn from 553 different projects.
The Justin Sun-led crypto project has enjoyed a hefty spike in activity since the launch of its stablecoin USDD. Initially planned as an algorithmic stablecoin, USDD's model was revised after the collapse of Terra's algo stable UST in May. It subsequently adopted a hybrid model, combining elements of an algorithmic stablecoin with collateral backing.
JustLend, Tron’s Aave or Compound equivalent, currently offers nearly 10% returns on USDD.
USDD is also tied to Tron’s native token TRX; each time users seek to mint more USDD, they must burn TRX. The stablecoin is overseen by the TRON DAO, and whitelisted members of the DAO, which includes Wintermute, are able to use this mint-and-burn mechanism to make more of the stablecoin.
“There is a lot of exciting activity taking place in the TRON ecosystem and it’s been great to find opportunities to contribute,” Micley told Decrypt.