SBF

Chapter 13Market Making

Elaine Song used to work at Okcoin, an exchange. New projects would launch and want to be listed, and she would work on making that happen. She was there starting in late 2018, after the wild heyday of the boom that peaked in 2017.

She never met the Alameda Research team or worked with them, but she heard about them. The folks at Okcoin were curious about how this small crew of very young people were doing so well out there.

The company was glad to have them on its exchange. Alameda was the kind of customer that every exchange wants. Scratch that, they were the kind of customer that is basically essential to make any cryptocurrency exchange work. Alameda, by then, had become a market maker.

Market makers serve an incredibly important role on exchanges. They keep trades going.

You can think of market makers as time travel machines.

That is, people need to meet in two different ways in order to make a trade: place and time. Let's say you have a cow and you want money, and I have money but I want a cow.

Someone in the Old West might set up an exchange for us. They would build a big stable where everyone knows to come and meet with their cows or their money. They might be ready to make change and keep order, and whatever else it took to facilitate that kind of thing in the wild days.

But a place isn't enough. We're both busy ranchers, right? Do we want to stand around all day, waiting for the right person to trade with to appear? No, we don't want to do ...