Most tier-1 exchanges will not list a token without a designated market maker in place, and most projects sign their first market making agreement without understanding which of two very different deals they are signing. This page is about that decision.
The Two Deal Structures
| Loan and call option | Retainer | |
|---|---|---|
| You provide | A loan of tokens | A monthly fee plus working capital |
| Market maker earns from | A call option on the borrowed tokens | The fee |
| Their incentive | Token price rising above the strike | Meeting the agreed spread and uptime |
| Your exposure | Tokens leave your control for the term | Cash cost, tokens stay yours |
| Suits | Projects without cash | Projects that want control and measurable terms |
The loan model is the one offered most often because it costs the project nothing up front. It is also the one that ends badly most often. The market maker holds a call option, so their return depends on the price going up – and if it does not, they are holding your tokens with no obligation to support anything. Several well-documented cases of tokens collapsing after a “free” market making deal come down to exactly this structure.
The retainer model costs money and is almost always the better deal, because it is the only one where the market maker is paid for doing the job rather than for the token going up.
What to Measure
A market making agreement without numbers in it is not an agreement. These four belong in the contract, not in a monthly report:
| Metric | What it means |
|---|---|
| Spread | Gap between best bid and best ask, as a percentage. The headline number, and the easiest to game by quoting tiny size |
| Depth at ±2% | How much can actually be bought or sold before the price moves 2%. This is the number that matters |
| Uptime | Percentage of time two-sided quotes are live. Quotes pulled during volatility are worse than no quotes |
| Order book resilience | How fast depth returns after a large trade |
Spread alone is meaningless. A maker can quote a 0.1% spread on 200 dollars of size and report an excellent number while the book is empty. Depth is where the honesty lives.
Volume Is Not a Deliverable
Any market maker who guarantees a daily volume figure is describing wash trading, whatever the contract calls it. Real market making produces volume as a side effect of other people trading; it cannot be promised in advance because it depends on demand that the maker does not control.
This matters beyond ethics. Exchanges run wash trading detection, and the penalty is delisting – which costs more than the listing did. If a proposal contains a volume guarantee, that is the whole review complete.
How We Work
We do not run a trading desk. We place projects with market makers we have worked with, negotiate the structure, and hold the agreement to the metrics above – which is the part that is normally missing, because the project has no independent read on whether the maker is doing anything.
That independence is the point. A maker reporting on their own performance has an obvious conflict, and most projects have no one able to check the claim.
Frequently Asked Questions
When is a market maker needed?
Before the listing, not after. Most tier-1 exchanges ask who the designated market maker is as part of the listing process. Arriving without one delays the listing. See exchange listing for how the two run together.
How many exchanges does one maker cover?
Usually several, but each venue needs its own inventory and its own quoting. Adding a venue is not free, and thin quoting spread across many exchanges is worse than solid quoting on two.
Can we do this in-house?
Technically yes, and it is a full-time engineering and treasury job. Projects that try it usually discover the cost is not the software but the working capital sitting idle in exchange accounts.
What does it cost?
Three things set the price: how many venues you need quoted, how much depth is committed, and the length of the term. What is worth knowing before any conversation is that the cheapest-looking option, the token loan, is the one with the largest hidden cost.
Tell Us About Your Listing
Send the token, the venues and the timeline. If you already have a market making proposal in hand, send that too – the structure and the metrics in it usually answer most of the question by themselves.