In traditional financial asset exchanges, there are typically a few market makers that help provide liquidity and depth for trades. These market makers are usually highly regulated and KYC’d with only a few people being able to participate. In this structure these market makers gain significant advantages in return for providing this liquidity and are able to see client trades as they make them and can take a position to take advantage or profit from this.

On a decentralized exchange this liquidity/depth can be provided by anyone with an internet connection, a web3 wallet and some money. These market makers are paid for their services in the fees earned from each client trade. Transactions on the biggest decentralized finance blockchains are broadcast before they are included in a block, this also provides an opportunity to see client trades as they happen. This time though, anyone can take advantage of this, not just market makers.

The impact this may have on how we raise/pool funds as a society will likely be significant. Finance is currently the most popular application of how decentralized blockchains can democratize access to economic activity, in the coming years, there will likely be many more applications.