Managed liquidity

Get back to building what matters — your product.

Published on
April 23, 2020
Under the Hood
Managed liquidity

As the decentralized finance space matures, developers are beginning to coalesce around standard pieces of infrastructure to power their products and services. Examples include node management tools like Infura and Alchemy or onboarding standards like Wallet Connect. For many teams trying to bring their product to market, liquidity sourcing — or where and how your product exchanges asset X for asset Y — is becoming an increasingly important infrastructure level decision for builders early in the product development cycle.

Much like onboarding or node management, liquidity sourcing will determine how accessible and how scalable your product can be as it gains popularity. Unlike traditional consumer applications, however, “scale” or “product-market fit” is not some far-flung end-state in DeFi. In fact, we’ve seen it achieved in a relatively short timeframe for many products, where just 100 MAUs can bring a product into the top tier of performance in terms of volume or total value locked.

Why does this matter in the context of liquidity sourcing? As it turns out, early decision paths that may seem easy at the moment can often lead to issues with scalability and performance shortly thereafter. These issues manifest themselves in the form of slippage, or the ability to swap asset X or Y for a reasonable price at scale. When developers choose a single liquidity source (e.g., Kyber or Uniswap), they are effectively handicapping their product’s ability to scale efficiently, and, more importantly, they are choosing to manage their product’s liquidity sourcing in-house in perpetuity.

As a result, small teams are massively increasing the scope of systems that are orthogonal to their core product experience, which often leads to wasted sprint cycles spent resolving the liquidity sourcing issues stemming from their original infrastructure design choice.

At 0x, we’ve witnessed this issue play out over and over for teams building products across DeFi, and that’s why we decided to create Swap API, a powerful tool that serves up aggregated decentralized exchange liquidity in a single endpoint. By having a professional team at 0x always thinking about liquidity sourcing, performance improvements, and developer experience, 0x API helps developers by moving from a state of managing liquidity to managed liquidity with 0x.

With managed liquidity, our team abstracts all the complexity associated with scaling your DeFi product from Day 1 by aggregating the best-in-class sources of liquidity and surfacing them through a straightforward yet robust set of API endpoints. Additionally, we’re always adding updates and features that not only improve the depth of liquidity you can offer users but also enable you to create enhanced user experiences as your product matures.

We believe liquidity sourcing in DeFi should be analogous to accepting online payments in eCommerce. In essence, developers should choose a simple API (like Stripe), integrate it into their product, and get back to doing what they do best: building beautiful, robust, and accessible financial products for the masses.

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