I spent part of today going through TermMax’s market structure, and one thing I kept coming back to was the difference between liquidity and flexibility.
A two-way market maker can participate on both borrowing and lending sides, but what actually determines which side becomes more profitable? Is it mainly the spread, the amount of demand, or how the pricing curves are configured? I couldn’t find a simple answer in the documentation.
I also wondered why TermMax separates market makers from market takers instead of letting every borrower negotiate directly with every lender. My current interpretation is that range orders create a more structured way to organize liquidity, but does that structure also introduce fragmentation?
The RWA angle raised a bigger concern for me. If collateral is something that cannot be quickly sold during a liquidation, does physical delivery really solve the liquidity problem, or simply move that problem to the lender?
Then there are Curators. Their job seems to involve balancing yield with having enough liquidity available when borrowers actually need it. That sounds straightforward until market conditions change quickly.
If a Curator moves too much capital toward yield, liquidity could become thin. If they stay too conservative, returns may suffer.
So I’m wondering: who should ultimately bear that optimization risk, and what safeguards keep it from becoming a governance or concentration problem?
#termmax @TermMax
A two-way market maker can participate on both borrowing and lending sides, but what actually determines which side becomes more profitable? Is it mainly the spread, the amount of demand, or how the pricing curves are configured? I couldn’t find a simple answer in the documentation.
I also wondered why TermMax separates market makers from market takers instead of letting every borrower negotiate directly with every lender. My current interpretation is that range orders create a more structured way to organize liquidity, but does that structure also introduce fragmentation?
The RWA angle raised a bigger concern for me. If collateral is something that cannot be quickly sold during a liquidation, does physical delivery really solve the liquidity problem, or simply move that problem to the lender?
Then there are Curators. Their job seems to involve balancing yield with having enough liquidity available when borrowers actually need it. That sounds straightforward until market conditions change quickly.
If a Curator moves too much capital toward yield, liquidity could become thin. If they stay too conservative, returns may suffer.
So I’m wondering: who should ultimately bear that optimization risk, and what safeguards keep it from becoming a governance or concentration problem?
#termmax @TermMax