Upon examination of the top established tokenization and security token platforms, it becomes clear that liquidity is scarce on these exchanges, with most trades being conducted over-the-counter (OTC) rather than on the exchange itself, making them similar to eBay for security tokens.
As opposed to the cryptocurrency market, becoming a market maker for security tokens requires obtaining specific licenses which can be time-consuming to acquire. Additionally, cryptocurrency market makers are unable to participate in the security tokens market, and traditional market makers have no incentives to enter due to the current size and unique nature of the security tokens market.
Another contributing factor to the lack of liquidity is the division of liquidity across multiple exchanges for each security token listed. This differs from traditional markets where there are central depositories that can easily keep track of share distributions. As a result of the limited liquidity, potential buyers are unable to purchase security tokens due to the limited supply on each exchange.
Before the emergence of automated market makers (AMMs) and liquidity pools, decentralized exchanges (DEXs) had minimal trading volume. This was due to a lack of market makers on DEX platforms, as the majority of the traded assets were small, lesser-known altcoins that share similarities with the current state of the security token market. However, as the chart below illustrates, the total monthly DEX volume experienced a significant increase from $39.5 million to $43.5 billion within a year, resulting in a growth of 110,100%.
This drastic change was a direct result of Uniswap's introduction of the automated market maker. With the total private asset market size at $7.5 trillion, which is over five times larger than the cryptocurrency industry's $1.43 trillion, the potential for growth in the security token market is substantial. IX Swap aims to bring an even greater volume of liquidity to the tokenization and security token market.
IX Swap aims to revolutionize the security token industry by introducing the first liquidity pools and automated market makers (AMMs). Similar to how Uniswap has revolutionized the decentralized exchange (DEX) space, IX Swap aims to bring the same level of liquidity and market-making capabilities to the security token market. As traditional centralized exchanges are not feasible for the industry, IX Swap's liquidity pools and AMMs will allow issuers and individuals to become their own market makers, eliminating the need for traditional market makers.
Additionally, IX Swap will allow other licensed broker-dealers to connect to its platform to facilitate trading of their security token assets, creating a liquidity provider platform for the entire security token ecosystem. This will bridge the gap between centralized and decentralized finance, bringing liquidity to the tokenization and security token industry.