What Is a Liquidity Provider? The MBank Case

In this article, we will use the example of MBank to illustrate what a Liquidity Provider is and how it will help facilitate and accelerate the process of exchanging BIP for other world currencies.

Fast-forward to the most frequently asked question: only the best projects on the Minter network approved by a vote of stakeholders will be able to sell BIP at the official price. Automated systems with the atomic execution of orders will be able to buy.

A detailed FAQ is available at the end of this guideline ⬇

First of all, we need to outline two cornerstone principles of Minter network development. They are decentralization and autonomy. Decentralization implies providing all participants with equal access to all abilities of the network and the absence of a central authority wielding some superpowers. Autonomy means independence from the whole world, meaning only community members can set the rules and choose the course of action. To get a more precise picture of Minter, imagine a huge “spaceship” in which a brand new economic system is being established. Of course, we will be glad to work with everyone roaming the galaxy, but only on our own, appealing terms. We do not need anything from anyone; we will build everything alone.

Now, to the burning issues:

  • What are the rules of the first MBank?
  • Why are there no deposits and withdrawals, and just total conversion?
  • Why is it not the only one, and why is it not MBank?
  • What is a Liquidity Provider?

There is actually no bank in the usual sense. What there is, though, is a BIP-branded Liquidity Provider that offers a suite of exchange services for all users, based on its own logic of the work with the official price. It will also be integrated into wallets and websites at some point in the future. A Liquidity Provider does not engage in depositing and withdrawing as on the traditional exchanges; it does not sell or buy your coins, either. What you need to understand is that since we work with blockchain assets, there can be no typical deposits and withdrawals. There is only the exchange of one user’s units for another’s, nothing is created or deleted, and coins just change addresses.

Main Rules

The project that we will present in a few days will have three rules:

  • Any user will be able to place an order of any size and at any price (i.e., any Minter-based asset at a price they think is fair)
  • The service guarantees that a buyer will receive a Minter-based coin, and a seller will receive Bitcoin. The project will incur a higher portion of the fees
  • The project aggregates all sell orders and releases them into the market through an API, allowing exchange services and other Liquidity Providers to buy indefinite amounts of coins issued in the Minter network

Before we dive into the inner workings of the project whose code we will gladly open-source after trialing, let us once again take a look at how the conversion will be taking place. For example, very soon, people will be able to buy BIP and other coins with a credit card. The transaction will be processed as follows: the money will be charged from the card and converted into Bitcoin, and then Bitcoin will be exchanged for BIP or another Minter-based coin. Our partners will convert fiat currencies into Bitcoin, and our project will convert Bitcoin into the coin of your choice. Everything is seamless, fast, and transparent as the prices are denominated in U.S. dollars. Acquiring fees will be covered by the DAO, which has been created and funded specifically to help the network develop. And this is just one example of how to work with an aggregated base of coins for sale. But let us go a bit deeper: over time, the BIP Wallet will have a more detailed “Convert” section where one will be able to specify what coin they want to get and how they want to pay for it. At the end of the day, it will only take you to enter the addresses and press the button. For example, if you want to get BIP and pay with USD from PayPal, you will have a form where you will need to confirm the transaction. It works the same the other way round: the currency exchange is carried out by Liquidity Providers, including giving out cash at the ATMs.

Those Are Plans. What’s in Store for Today?

Jump back to today. We will soon roll out the alpha version that will at first let you:

If you are a seller:

  • Sell any coin by placing an order of any size and at any price
  • Receive Bitcoin with all the fees covered by the DAO
  • Get a personal link that you will be able to give to the users of your project so that they could buy custom coins directly from you
  • Set the price either above or below the market
  • Automatically sell the coins via a single API

If you are a buyer:

  • Buy any Minter-based coin by simply sending Bitcoin with no need to sign up or any other hurdles
  • Have the price fixed at the moment of purchase. You will never get less than you requested; on the contrary, in most cases, you will get even more
  • Buy any amount

Price Types

The project will have three types of price:

  • Fixed, with personal links
  • Official
  • Floating, based on all sell orders and recalculated once every 30 minutes

With fixed prices, it is all quite clear — users buy and sell as they wish, and the DAO acts as a guarantor, covering the fees if possible.

Projects determined by a vote of stakeholders will be able to sell at the official price. The higher the stake, the more powerful the vote that you can cast in favor of any project to your liking. Long-term interests lie within the cool projects that attract the audience. These projects do not go for trading as they need to develop a crystal-clear vision for what their economy will be during the next year. The fewer the risks, the more appealing the Minter network is for developers and integrators. But there is a catch: as we understand it, anything that brings Minter and its functionality to the world can be a project: websites, channels, groups, bots, services, validators, promoters, etc. As you may have already guessed, for the network, even an individual with an address that has been voted for is a project.

Projects will be able to sell BIP at the official price exactly to the amount determined by the votes of stakeholders. Stakeholders will be voting for the most prominent and promising. The functionality of voting and selling at the official price will be launched within a month. For counting votes, we have created a coin with the ticker symbol of the same name: COIN.

A floating price is formed as a weighted average that is derived from the volume. A buyer collects all orders, starting with the cheapest, so we help the most impatient to make the exchange faster. Anyone who wants to work on their own terms can place an order and wait for it to be filled. When doing so, they can rely on the current average price. By observing the market, we can safely say that “quick” orders usually trade below the real market by 20–50% and are significantly inferior in volume. Just one large-size order can significantly exceed all the small orders combined. With us, anyone will be able to find a perfect balance between how fast they want to make an exchange and at what price.

Why Do We Need MBank after All?

Our goal is to create a toolkit and set of liquidity for the API, through which each of the Minter projects will be able to start accepting any type of payment in exchange for their coin right via their website, app, or bot.

Thanks to our community, this project is not the only one of its kind: from the very first days of the Mainnet, similar projects were launched. And we do not aim to be a one-stop entry point. As is the case with other parts of Minter, we are producing code that anyone will later be able to use for themselves by running their own Liquidity Provider. Not all of our ideas will work, and this should be treated pragmatically — the weak ones we will drop, and the solid ones, develop.

The very concept of Liquidity Providers is designed to connect our autonomous world with others. A Provider has accounts in two systems at once, and can, for example, accept MILES to their account with Minter, crediting you with air miles to a specified account with American Airlines. For a partner, this is a regular business as they know where to get miles in airline systems and understand what to do with MILES at the addresses on the blockchain. They will reflect all of their commissions and surcharges in the exchange rate applied when converting the MILES coins into the actual miles of a specific airline.

All Providers will sign the agreement outlining the rules of operations in the network with the Minter Development Foundation, thereby guaranteeing the execution of orders that convert blockchain assets into off-chain assets, and vice versa. The rules are so detailed that non-compliance can lead to an instant class-action lawsuit filed by network users, so it is best not to deceive anyone. MDF, being in an extremely transparent legal field and having sufficient funding, will be able to win all the cases. Therefore, before applying to provide services as a Liquidity Provider, the entities will have to think twice whether they will be able to abide by the terms and conditions imposed.

There are almost 200 countries in the world, more than 100 large e-money systems, millions of ATMs, and a billion businesses that will gradually switch to cryptocurrency due to its nature of being a fast and simple payment method. Our objective is to ensure that off-line conversions pass through authorized Liquidity Providers, and the main transactions occur on the Minter network itself. Think of it as the Internet — local providers use specialized cables to connect you to the outer world. Only in our case, we connect you to the Internet of Money.

FAQ

Where is MBank?

As such, MBank does not exist. It is only an implementation of the concept of a Liquidity Provider. A Liquidity Provider ensures that coins are accepted within the Minter network and other items are given away outside the network, and vice versa. Off-chain items can exist on other blockchains, too; then the Provider will tend to do atomic as well as any other swaps — up to receiving cash and tangible goods.

Why do we need the official price?

Through the price determined by a vote of the stakeholder network, automated systems will conduct atomic exchange operations. BIPBTC will be the first atomic swap pair. For automated systems, precision is needed both in price and order execution, so the easiest way for them to buy and sell BIP will be exchange at the official rate.

How to sell BIP or my own coin?

It is enough to fill in the Bitcoin address where the funds will be credited, select a coin for sale, and indicate its price. After submitting the order, you will receive a personal link with which you can sell coins to your users. At the same time, all your funds will enter a single system from which anyone will be able to buy coins through a uniform interface or API.

Who can sell at the official price?

Anyone can place an order at the official price. If there is demand, however, it is only projects for which stakeholders have voted that will have the ability to sell. Supporting the projects is Minter’s priority, which is why they will be able to sell their coins at the official price in the first place.

How is the floating price formed?

Once every 30 minutes, the weighted average price is calculated based on the volume of all sell orders. It is this price that will be indicative for the next 30 minutes, and all Bitcoin that has gotten into the mempool will receive BIP at precisely this price, immediately after two confirmations. Even if a Bitcoin transaction takes 24 hours to finalize, a buyer will receive BIP at the exchange rate at the time of BTC getting into the mempool.

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