How market makers operate

Market Makers provide quotes and profit by capturing the spread between the price on Liquorice and the hedge on centralized exchanges (CEX). Market makers use LP pools on Liquorice to increase their capital efficiency, allowing them to keep just a fraction of the funds they would normally keep on-chain to make a trade. This creates a capital-on-demand system that makes Market Maker operations much more efficient.

By leveraging LP pools, Market Makers are able to reduce their costs and increase their profitability, as they no longer need to lock up as much capital on-chain to provide liquidity. This allows them to take on larger or short positions with less capital, ultimately benefiting themselves and Regular Traders on Liquorice.

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