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Real Estate and Community, AMM and Liquidity (Day 509)

Clicked on a trending topic on Twitter: This couple bought a villa in Bali before ever visiting the island and transformed it into a paradise compound, and started thinking about real estate, community, and liquidity.

What makes a real estate property expensive? "Location, location, location!" Why is the location important? It's because of the community surrounding the property. Be that a school district, job market, networking opportunities, restaurants, personal safety, etc. Nature may be a factor, too, like weather, fault lines, flood zones, etc., but not as much as the community.

Similarly, what makes a marketplace or exchange valuable? It's the community, too. Having a community brings liquidity (in most cases). Sellers want to trade on a platform where there are buyers and vice versa.

While it's impossible to "bootstrap" a community in real estate--or that process could take a long time--it is possible to bootstrap a marketplace or exchange with liquidity via market making.

We've witnessed the liquidity bootstrapped via incentive on Sushiswap--a $1 billion liquidity migration within 24 hours! And we've also seen liquidity built through aggregating liquidity on many markets. And AMM (automatic market maker) is another way to bootstrap liquidity. AMM in DeFi is super interesting because it empowers "the little guys" to participate in a big league.

There is a lot to take in, from risk assessment to risk management and all the math and engineering to build the AMM on the blockchain. For example, Uniswap built the Constant Product Market Maker ( x * y = k ) due to the limitations on Ethereum. Now with Solana's real-time engine, there are more ways to build out an AMM. I'm still very new to the AMMs, but definitely, that's part of my personal roadmap to learn more about both the theory and implementation of AMMs.


Image credit: https://www.insider.com/bali-villa-renovation-photos-oasis-compound-canggu-2021-9

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