Research Summary
The report discusses the emerging narrative of Over-the-Counter (OTC) trading in the crypto space, focusing on the role of protocols like OT Sea. It highlights the limitations of liquidity pools, especially for low-cap coins, and how OT Sea provides an alternative venue for peer-to-peer (P2P) and trustless OTC trading. The report also outlines the main use cases for OT Sea, including avoiding token taxes, safeguarding whales, and trading low liquidity tokens.
Key Takeaways
OTC Trading in Crypto
- Emergence of OTC Trading: OTC trading, a well-established practice in traditional finance, is gaining traction in the crypto space. Protocols like OT Sea offer an alternative venue for P2P and trustless OTC trading, allowing traders to bypass liquidity pools, slippage, and price impact.
- Limitations of Liquidity Pools: Liquidity pools, despite their innovative role in decentralized cryptocurrency trading, have limitations, especially for coins with lower capitalization and liquidity. These limitations include high volatility, high slippage, low liquidity, token taxes, and Miner Extractable Value (MEV).
Use Cases for OT Sea
- Avoiding Token Taxes: Many ERC20 tokens introduce a buy/sell tax to discourage extensive trading. OT Sea allows users to exchange tokens P2P without taxes, thanks to the absence of liquidity pools and the use of a “transfer” function.
- Safeguarding Whales: Whales often face challenges in selling their tokens due to tracking, front-running, and potential price depression. OT Sea provides a solution by allowing whales to use its smart contract as a P2P intermediary to create an order, and its “Crowd fill” feature to sell holdings to several small holders.
- Trading Low Liquidity Tokens: Trading low-cap tokens in small liquidity pools often results in a significant price drop. OT Sea allows holders of such tokens to find a buyer, create an order, and get their whole sum without price slippage or token tax.
OT Sea Features
- Mini Markets: OT Sea’s Mini-markets feature allows projects to have OTC trading capabilities, boosting volumes on the platform and enabling the creation of decentralized OTC pools for any ERC20 token. This feature allows large holders to offload without impacting the chart, holders to sell at a discount compared to the market price, and avoidance of token taxes.
- MEV Protection: OT Sea trades bypass conventional orders and liquidity pools, protecting them from MEV. The P2P trades are private and use the “transfer” function, avoiding the mempool and MEV bot attacks. However, users are responsible for utilizing MEV protection when using OT Sea.
Actionable Insights
- Investigate the Potential of OTC Trading: With the emergence of OTC trading in the crypto space, it’s worth exploring the potential of protocols like OT Sea that offer an alternative venue for P2P and trustless OTC trading.
- Consider the Benefits of OT Sea: OT Sea provides several benefits, including avoiding token taxes, safeguarding whales, and trading low liquidity tokens. These benefits could be advantageous for traders dealing with ERC20 tokens.
- Explore OT Sea’s Features: OT Sea’s features, such as Mini Markets and MEV Protection, offer unique opportunities for projects and traders. These features could be leveraged to boost trading volumes and protect trades from MEV.
