Using automated market makers to unlock liquidity

Using automated market makers (AMMs) to exchange tokenized real-world assets is a transformative development in finance. It bridges the gap between traditional finance (TradFi) and decentralized finance (DeFi), unlocks hidden liquidity, enhances market efficiency and democratizes access to physical and financial assets. The future of using AMMs to exchange tokenized real-world assets in general – and fiat currencies in particular — is promising. It has the potential to revolutionize various industries by improving liquidity, transparency and accessibility.

Compared to TradFi markets, where liquidity ebbs and flows depending on the trading volume and the presence of buyers and sellers, AMMs permanently provide liquidity due to their algorithmic design; they allow trades to occur anytime without needing a counterparty, thus democratizing trading. While major financial institutions or specialized firms, possessing substantial capital and wielding significant influence on the market, traditionally act as market makers, AMMs allow virtually anyone to become a liquidity provider, thus creating a more diverse and equitable trading environment. In addition, traditional markets come with complex and costly access requirements that can be daunting for smaller investors. Since AMMs operate on decentralized platforms, often with lower costs and minimal entry requirements, they make markets more accessible.