Liquidity Mining as a Community-Based Market-Making Model
Summary
The document describes a partnership between Hummingbot and Binance focused on attracting algorithmic traders and expanding token liquidity-mining campaigns. Hummingbot is presented as software for automated crypto trading, including market making and arbitrage. In the described model, token issuers can sponsor campaigns that reward community traders for providing liquidity, as an alternative or supplement to hiring conventional market makers.
The article reports that four token projects ran campaigns and gives participation, reward, and filled-volume figures from their first two weeks. It also outlines the proposed issuer referral program and Binance’s planned contribution of fees from new users to Hummingbot’s development. These are claims in a dated partnership announcement, not an independent evaluation. It gives no campaign methodology, risk-adjusted performance, market-quality comparison, or evidence that liquidity-mining incentives produce durable liquidity after rewards end.
Key ideas
- Liquidity mining can reward community traders for supplying liquidity to token markets.
- The described campaigns use automated trading software to support market making and arbitrage.
- The article presents issuer-sponsored campaigns as a lower-cost alternative to traditional market makers.
- The announcement provides early participation and trading-volume figures but no independent performance analysis.
- Incentive-driven liquidity may not persist once rewards stop, a limitation the article does not evaluate.
Tags
Full text
# Hummingbot Collaborates With Binance --- date: 2020-03-24 authors: - coinalpha categories: - Partnerships --- # Hummingbot Collaborates With Binance  Hummingbot is excited to announce that it is working with [Binance](https://www.binance.com/en) on two strategic initiatives: 1. Bringing new algorithmic traders to Binance using Hummingbot and 2. Expanding liquidity mining with an issuer referral program. Hummingbot is an open-source crypto trading software client that allows users to trade cryptocurrency with high-frequency trading strategies such as market making and arbitrage. Hummingbot currently supports nine exchanges, both centralized and decentralized. Binance was among the first exchanges that Hummingbot supported at launch. Binance is a global cryptocurrency exchange that provides a platform for trading more than 100 cryptocurrencies. Since early 2018, Binance has been considered as the biggest cryptocurrency exchange in the world in terms of trading volume. In early March, Hummingbot launched the inaugural liquidity mining campaigns, a series of community-driven liquidity programs for four token projects listed on Binance. Within the first two weeks, 155 individual traders participated in the campaigns, earning as much as $200 in weekly rewards and collectively generating over [$7 million of filled order volume](https://www.reddit.com/r/Hummingbot/comments/fkxlsl/daily_update_march_18_2020_two_week_recap/). To turbocharge the growth, we are working closely with Binance to expand the usage of Hummingbot on the exchange as well as participation in liquidity mining. Hummingbot provides all users easy-to-use infrastructure for automated trading of their favorite tokens on Binance. We believe that working with Binance will allow us to combine the strengths of both Binance’s state-of-the-art platform and our innovative high frequency trading infrastructure. Binance will be contributing a portion of the trading fees generated from new Binance users trading with Hummingbot to help further develop the Hummingbot platform and community. We encourage members of the Hummingbot community to sign up and create new Binance accounts to help support us! In addition, Binance will be working with the Hummingbot team to support liquidity mining by referring token issuers who want to support liquidity for their tokens to run liquidity mining campaigns as an alternative to hiring traditional crypto market makers / quant hedge funds. Compared to traditional market makers, liquidity mining provides a lower cost, data-driven way to generate liquidity. It gives issuers a way to diversify sources of liquidity, reward their own communities for contributing to market making, and encourage Hummingbot’s community of quant/algo traders to trade in the issuer’s tokens.
Shown in full with attribution under the source's licence. Licence: Apache-2.0
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.