It can be hard having a giant pile of crypto.
Especially if you want to trade it for a different giant pile of crypto.
Called the time-weighted average market maker (TWAMM), it’s an idea that assembles a variety of needs and insights from crypto’s recent days and is worth unpacking.
Oftentimes, when some entity or person wants to shift a large number of assets they would prefer that doing so had relatively little effect on the market. Odds are, the person who makes this kind of trade wants to basically trade at the current price. The problem is that large trades have a way of moving the price.
When people want to sell off a lot of one asset without a lot of so-called slippage, they go to specialized brokers who know how to tease out such a trade. If the priority is more the right price and not so much getting it done quickly, that’s a boon to market makers because it gives them liquidity to work with.
(Sometimes there are people who want to move a lot of assets really quickly, and that’s a whole different story but it’s not relevant here.)
There’s no great way to do a big, slow trade trustlessly in crypto yet.
As we’ve previously reported, we are in an era where decentralized autonomous organizations (DAOs) are getting forward-thinking about managing their treasuries, but they have largely had to rely on cutting sweetheart deals with venture capitalists to turn governance tokens into something more liquid, such as stablecoins.
Furthermore, Paradigm’s idea is based on one of the biggest successes for decentralized finance (DeFi) in recent years: enabling human traders to transact with robots, known as automated market makers (AMMs). instead of people, so they don’t have to trust a third party.