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  • in Academy
  • 8 min read

Exchange Types Explained: CLOB, RFQ, AMM

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Since Hummingbot is an open source bot platform that connects to many different exchanges, we have developed a deep understanding of the nuances between various exchange types.

In this post, we discuss the three main methodologies that digital asset exchanges use to facilitate asset transactions. We hope that this post helps crypto traders and developers choose the right exchange for their needs.

TLDR

Exchanges perform the fundamental role in free markets of bringing together and coordinating buyers and sellers. Exchanges provide a venue for these parties to discover one another, negotiate and agree terms, and ultimately transact. Exchanges have adopted multiple methodologies to achieve this:

  • in Academy
  • 4 min read

Hummingbot vs Uniswap: Two Approaches to Liquidity

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Since both Hummingbot and Uniswap are both open source projects that allow users to make money by providing liquidity, many people have asked how they compare to each other.

Below, we shed more light on their similarities and differences and explain why the two projects are highly complementary.

  • in Academy
  • 10 min read

The Thin Crust of Liquidity

The role of market makers and importance of liquidity in the crypto industry

Eric Noll was getting frustrated. It was November 2011, and the senior Nasdaq executive was struggling to explain to a mostly disinterested House of Representatives panel why the changing stock exchange landscape was wreaking havoc for smaller public companies:

Today's US markets are increasingly fragmented and volatile. Liquidity in US stocks is dispersed across 13 exchanges and over 40 other execution venues. The declining cost of launching and operating electronic order crossing systems has led to a proliferation of decentralized pools of liquidity. However, the unintended consequences of that market fragmentation have been a lack of liquidity and price discovery in listed securities outside of the top 100 traded names. Such fragmentation of trading creates a thin crust of liquidity that is easily ruptured, as occurred on May 6th (i.e. the 2010 Flash Crash)

Stifled yawns from Congressional onlookers aside, Noll was describing an unintuitive but important phenomenon that would make Milton Friedman roll over in his grave: more competition from exchanges leads to less liquidity for small issuers and greater systemic risk.