Ubiquitous Term of the Week #1: Orderbook
The What, Why, & How of Orderbooks in Yield Markets
Last week we touched on the term Capital Efficiency; we defined it and relayed to you how Capital Efficiency and Swivel go hand-in-hand. If you haven't read last week's blurb you can find it here.
Today's term is one many of you will be quite familiar with, “An Order Book”. As you may remember from last week, Swivel's use of an order book is what makes the protocol capital efficient and provides other added benefits.
What is an Orderbook, and Why Do We Use One?
The term order book refers to an list of buy and sell orders for a specific asset, usually a financial instrument.
An orderbook’s primary job is to list the amount of an asset that is currently being bid on or offered at any given price point.
In doing so, orderbooks help market participants understand current market depth, and the impact that their own positions may make on the market’s liquidity.
Further, and of most importance for Yield Markets, orderbooks allow liquidity providers to customize their positions with infinite granularity, and no cost, meaning LPs can significantly limit their exposure to impermanent loss.
This is extremely impactful for fixed-yield protocols like Swivel, as our liquidity providers can avoid the common pitfalls of providing liquidity to AMMs.
More specifically, in context of derivatives like Yield Tokens (nTokens), our LPs can avoid the IL that Yield Token AMMs have their LPs lock-in at maturity.
For more information, check out our blog on providing liquidity to Yield Tokens: Providing Liquidity To Yield Markets
And on why we chose an orderbook:
So, Why An Orderbook?
As a quick TL;DR, our orderbook provides:
0 Cost, 0 Slippage Limit orders — Best Potential UX
Combined nToken/zcToken (YT/PT) pools — Increased Liquidity
Infinite Granularity — LPs account for theta, delta, etc., reducing risk and IL exposure
About Swivel Finance
Swivel is the protocol for fixed-rate lending and tokenized cash-flows.
Currently live on Rinkeby and on Mainnet, Swivel provides lenders the most efficient way to lock in a fixed rate as well as trade rates, and liquidity providers the most familiar and effective way to manage their inventory.