Liquidity as a Service: Crafting the Ultimate Smooth Trading Journey
07 May 2024

Liquidity is crucial for traders as it brings higher market fluidity, lower slippage, and faster order execution. These advantages mean that traders can secure fairer pricing, reduce trading costs, and execute transactions swiftly. Thus, liquidity is the lifeline for exchanges, whether centralized (CEX) or decentralized (DEX). To attract traders, exchanges are willing to pay a premium for liquidity, even if it isn't the most capital-efficient approach.

However, not all markets have the same level of liquidity. Some may have lower liquidity, meaning that buying and selling financial instruments can be more difficult and expensive. This can negatively impact traders' profitability and lead to poor trading experiences.

The emergence of Liquidity as a Service (LaaS) presents a promising solution to these liquidity issues.

What is Liquidity as a Service? 

Liquidity as a Service (LaaS) is a tool that connects liquidity providers with trading platforms, allowing traders access to a broader range of liquidity sources. LaaS can bring numerous benefits to market participants such as digital asset exchanges, market makers, institutional investors, and retail investors, including narrower spreads, faster order executions, and lower trading costs. It has become a vital solution for both centralized and decentralized exchanges, ensuring smooth operations, reduced slippage, and price stability.

Liquidity aggregation is a core technology of LaaS. It involves consolidating liquidity from multiple sources into one platform, often by connecting several cryptocurrency exchanges. Through liquidity aggregation, users can achieve better trading prices and deeper liquidity.

The goal of liquidity aggregation is to collect buy and sell orders from different sources and channel them to the execution venue, providing traders the opportunity to purchase assets at near-average market prices.

How Does Liquidity Aggregation Work? 

Liquidity aggregation platforms monitor quotes from various exchanges in real time and select orders from the exchange offering the best quote based on pre-set algorithms. For instance, if a trader wants to buy a Bitcoin and the platform finds that Exchange A offers a price of $10,000 while Exchange B offers $10,100, the platform will prioritize the order from Exchange A, saving the trader $100.

Moreover, liquidity aggregation has deeper global significance as it combats market manipulation behaviors.

Combating Market Manipulation with Liquidity Aggregation 

Cryptocurrency markets are often considered harder to manipulate than traditional markets because the supply of cryptocurrencies is pre-determined and cannot be artificially altered. However, this does not mean they are completely immune to manipulation. Large cryptocurrency holders (whales) can influence market prices through their trading activities.

Liquidity aggregation addresses whale manipulation by pooling order books from multiple exchanges, providing traders with deeper liquidity and fairer prices. Successful price manipulation by whales would require significant trades at a single exchange. However, with a liquidity aggregation platform, a whale's trades are distributed across several exchanges, diminishing their impact on prices.

Specifically, liquidity aggregation can help combat market manipulation in the following ways:

  • Enhancing Market Transparency: Liquidity aggregation platforms often provide detailed insights into order books and other market data, making it easier for market participants to spot potential manipulation.

  • Increasing the Cost of Manipulation: For manipulators, affecting prices on a liquidity aggregation platform requires larger volumes of trade since these platforms consolidate orders from multiple sources, thus diluting the influence of any single trader.

  • Increasing Market Participation: Liquidity aggregation platforms typically have lower entry barriers, allowing more traders to participate in the market. This can help reduce the influence of manipulators.

Liquidity aggregation is a powerful LaaS tool that can improve trading efficiency, reduce costs, and provide new opportunities for traders. Although it is a relatively new technology, it has the potential to fundamentally change how traders and trading platforms operate and enhance the trading journey experience.

Elements of Constructing the Ultimate Smooth Trading Journey 

The trading journey refers to the entire process a customer undergoes from considering a trade to completing it and receiving follow-up services. It includes stages such as account opening, fund access, placing orders, order execution, and post-sale service. A smooth trading journey can enhance customer experience, increase customer loyalty, and assist trading platforms in achieving long-term development.

In today's competitive financial market, trading platforms must provide an exceptionally smooth trading journey to attract and retain customers. This means offering traders a user-friendly interface, reliable and rapid trade execution, ample liquidity, comprehensive security measures, and quality customer support. By focusing on these key elements, trading platforms can provide a seamless trading experience, thereby increasing customer satisfaction, loyalty, and profitability. LaaS plays a key role in this process.

The Critical Role of LaaS in Providing a Smooth Trading Journey 

Establishing an ultimate smooth trading journey is crucial for exchanges and platforms as it can enhance customer satisfaction, loyalty, and profitability. Liquidity is one of the key elements in the trading journey, and insufficient liquidity can lead to slippage, delays, or even unexecuted orders, negatively impacting the trader's experience and potentially leading to significant user attrition.


LaaS plays a critical role in creating a smooth trading journey, helping trading platforms in several ways:

  1. Providing High-Quality Liquidity: LaaS integrates liquidity from multiple providers and exchanges, offering a high-quality liquidity pool. This means traders can access better market depth, more trading pairs, and more competitive prices on a single platform. High-quality liquidity ensures swift order execution and minimal slippage, providing a smoother trading experience.

  2. Addressing Liquidity Fragmentation: In traditional trading environments, liquidity is often scattered across different exchanges and liquidity providers, leading to fragmented liquidity and low trading efficiency. LaaS addresses this issue by centralizing and aggregating liquidity, improving trading efficiency and execution speed.

  3. Offering Flexible Trading Options: LaaS integrates multiple liquidity sources, providing traders with more trading options. Traders can choose the most suitable trading pairs and conditions from various markets, exchanges, and liquidity providers. This flexibility allows traders to better meet their specific trading needs and strategies, enhancing the personalization and customization of trading.

  4. Increasing the Stability and Reliability of Trading Platforms: LaaS integrates order books from multiple liquidity sources and exchanges, increasing the stability and reliability of trading platforms. Even if one liquidity source experiences issues or market fluctuations occur, other sources are available to ensure the continuity and executability of trades. This diversified liquidity source also helps reduce the risks of market and price manipulation.

  5. Optimizing Trade Execution and Cost-Efficiency: LaaS selects the optimal trading path and liquidity source through intelligent routing and optimization algorithms, achieving the best trade execution and cost-efficiency. It automatically selects the best liquidity provider based on the trader's needs and market conditions, executing orders at the most favorable prices. This helps reduce trading costs, minimize slippage, and provide better trade execution quality.

Constructing the Ultimate Smooth Trading Journey with ChainUp Bitwind Liquidity Solution When choosing a Liquidity as a Service platform, exchanges should focus on selecting the right solution to optimize their trading experience and create the ultimate smooth trading journey.

ChainUp Bitwind Liquidity boasts a leading LaaS solution in the industry, helping trading platforms provide high-quality liquidity, address liquidity fragmentation, and offer flexible trading options.

Through the ChainUp Bitwind Liquidity solution, trading platforms can:

  • Significantly enhance the trading experience, increasing customer satisfaction and loyalty;

  • Reduce trading costs and increase profitability;

  • Broaden trading opportunities, attracting more new customers;

  • Reduce market manipulation risks, maintaining market fairness.

Contact us now to learn more about the ChainUp Bitwind Liquidity solution. Together, let's craft the ultimate smooth trading journey!

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