---
title: who stands on the other side
canonical_url: https://ensurance.app/guide/who-stands-on-the-other-side
markdown_url: https://ensurance.app/guide/who-stands-on-the-other-side.md
subtitle: "a market maker keeps a price open for strangers. here is how a small natural-asset market gets one, and the line it does not cross"
category: act
---

# who stands on the other side

*a market maker keeps a price open for strangers. here is how a small natural-asset market gets one, and the line it does not cross*

A **market maker** is whoever stands ready to trade with a stranger. The SEC's investor glossary puts it in one line: a firm that stands ready to buy or sell a stock at publicly quoted prices. It quotes both sides at once, a bid it will pay and an ask it will sell at, and the gap between them, the **spread**, is its pay for being there. Its job is not to guess the right price. Its job is to keep a price open, so the next person who shows up can trade at all.

Start with a creek, because a price only matters if it reaches a place. San Jose Creek runs through Goleta, in Santa Barbara County, California, to the Goleta Slough and the Pacific. Steelhead of the Southern California coast have been listed as endangered since 1997. On its lower reach the creek runs through a concrete flood-control channel, and the City of Goleta has a project to modify that channel so steelhead can pass upstream.

[**Ensurance**](https://ensurance.app/?from=guide) gives a place like that an account and instruments people can buy. The creek has a [coin](/general/san-jose-creek?from=guide) with its own pool, and its launch supply funds [steelhead.basin](/steelhead.basin?from=guide), the account for the fish. Anyone who wants to buy that coin at two in the morning, or sell it next spring, needs someone on the other side of the trade. This post is about who that is, and the line they do not cross.

:::johnson
**a market maker is whoever stands on the other side of a stranger's trade.** — Making a market is standing on the other side. Painting one is standing on both.

[see the pools →](/pools?from=guide)
:::

## what a market maker does

### what does a market maker do?

A market maker sells **immediacy**. Without one, a buyer has to wait for a seller who happens to want the same trade at the same moment. With one, the buyer trades now, against the market maker's own inventory, at a price that was already posted. The market maker carries the risk that the price moves while it holds the position, and the spread is what pays for carrying it.

Stock exchanges write this into rules. On the New York Stock Exchange, a **designated market maker** has duties in the stocks assigned to it: it must trade for its own account to help keep the market fair and orderly, as far as is reasonably practicable, and it must keep a two-sided quote at the best national bid or offer for a minimum share of each trading day. The obligation is the point. Someone has agreed, in public, to be there when nobody else is.

An **automated market maker** is a pool that does the same job with a formula instead of a desk. Two assets sit in a pool. The Bank for International Settlements describes the common design: the pool sets the exchange rate so that the product of its two balances stays constant, liquidity providers deposit both assets, and they earn the fees that traders pay. Nobody at the pool decides each quote. The formula quotes both sides all the time, and the people whose assets are in the pool are the market maker. They are passive market makers: they choose to be there, and the math does the quoting.

That is the kind of market every ensurance coin trades in. What a liquidity provider earns, and the price risk they carry for it, is its own post: [getting paid to provide liquidity to a small market](/guide/getting-paid-to-provide-liquidity-to-a-small-market?from=guide).

## making a market vs painting one

### what is the difference between making a market and wash trading?

**Wash trading** is trading with yourself so that a market looks busier than it is. The CFTC's glossary defines it as entering into trades that give the appearance that purchases and sales have been made while the trader's market position does not change. The Commodity Exchange Act prohibits it. Traders call it painting the tape: the chart moves, and nothing happened.

The difference from market making is not the number of trades. It is who is on the other side and why.

| | making a market | painting one |
|---|---|---|
| **the other side** | a stranger who wanted to trade | yourself, under another name |
| **the reason** | a mandate anyone can read | the chart |
| **what changes** | someone's position, at a posted price | nothing but the volume figure |
| **who it serves** | the next buyer or seller | whoever reads the chart |

On ensurance the line has two parts, and every agent that trades has to pass both. First, a **public mandate explains every trade**: the agent's purpose and program settings are published, so anyone can read why it bought or sold. Second, an agent is **never its own counterparty**: it does not buy from itself, and it does not trade back and forth with a sibling to make a number move. Two accounts run by the same person trading only to move a chart would still be painting. The test is the reason, not the count of wallets.

## who stands on the other side here

The design calls for agents whose whole mandate is the market. Each is run by a named person, under a mandate published on the agent, and each is funded from a team operating account rather than by selling anything into the pool. Each does one job, and each is either built or planned:

| focused agent | its one job | status |
|---|---|---|
| **liquidity** | add a share of what it holds to an existing pool, so the pool can quote both sides | the add-liquidity action and a liquidity-provision program both exist |
| **price support** | buy coins across the protocol, or accumulate one target coin, by a set share each run | both programs exist: cross-coin purchasing and target accumulation |
| **floor sweep** | buy instruments offered below a floor its mandate sets | planned |

A focused agent provides. It does not paint. Its trades sit on a public ledger next to the mandate that explains them, and a trade the mandate cannot explain does not belong there.

## where the other side comes from

### how does a small market get depth without renting it?

A pool has two sides. One is the coin. The other is the **quote side**, the ETH or USDC a seller receives. Depth needs both, and the two sides have very different sources.

**The coin side is inventory the protocol already holds.** A coin launches with almost all of its supply in its own pool and about 1% to the creator, with the option of an initial buy at launch. Selling that creator share into the pool would pay someone by pushing the price down on everyone else; that is the shape of a rug. The honest use is the opposite. The creator coins and the initial buy go into the pool, never out of it.

**The quote side has to arrive from somebody.** A pool stacked with coins and nothing on the other side is a sell wall, not a market. Here the quote side comes from the certificate buyer. When someone buys a certificate for a place, the mint split has this shape: the buyer's dollars go straight to the people named on the split, the crew or steward, with no pool in between; a protocol share is taken on the mint; and a share flows through proceeds into coin pools across the protocol. That last share is money that came from a buyer of a real certificate, not a wire from a treasury. Every certificate sold pays the people and is designed to add to the market that prices the place, in one transaction.

Team operating accounts hold those funds. Each is a team smart vault whose split can be read through [`/proceeds`](/proceeds?from=guide), so the custody of any protocol-held position has a name. Why owning depth beats renting it, and what owned depth still cannot buy, is the subject of [what protocol owned liquidity can and cannot buy](/guide/what-protocol-owned-liquidity-can-and-cannot-buy?from=guide).

One distinction stays out loud. When the protocol or its agents put money into a place's market, that is a **pipe**: seed money, moved from one part of the system to another. It becomes a **payor** only when someone who depends on the place, a utility, a water district, a city with a bill, refills the account from its own balance sheet. Both are useful. They are not the same thing.

## the number a place's market has to reach

A market maker's real product is a clean trade: one that fills without moving the price much. In a constant-product pool, a trade moves the price by roughly its size divided by what sits on the other side. That gives a rule of thumb: **the largest trade that fills at 1% slippage or less is about the pool's total value divided by 200**.

| clean trade at ≤ 1% | full-range pool | concentrated range |
|---|---|---|
| $100 | about $20,000 | about $5,000 |

So $100 is a target, not a report. It is the size of trade a place's certificate sales have to make possible before its coin can change hands in that size without lurching. The pool's own numbers are on [`/pools`](/pools?from=guide), and how a pool works is in the [manual](/manual/pools?from=guide).

## anyone else can stand there too

The other side of a trade does not belong to us. Any wallet can add to a pool and earn the fee traders pay, on the same terms as any agent. There is no farm and no extra token paid on top to rent depth; the fee is the pay, and the price move is the risk.

People who stand on the other side of other people's trades for a living have their own reasons, and none of them requires caring about steelhead:

- **a liquidity provider or vault** wants the fee from a pair it would be glad to hold both sides of
- **an arbitrageur** wants the gap when one pool's price drifts from another's, and closing it brings the pools into line
- **a professional market maker** wants a book where the quote it posts is the one that fills
- **a group or DAO** wants its own treasury in the market of a place it already holds

Each of them is welcome to stand on the other side for their own reasons. The architecture routes the fee to whoever provides the depth and the proceeds to the place's accounts, whoever they are. Nobody is asked to care about the river. They only have to want the trade.

If you run liquidity, a vault, or a market-making desk and want to look at a place's market, [talk to us about standing on the other side](/contact?from=guide&topic=the-cavalry-is-not-coming). If you run a group or an agent, start at [onchain groups](/solutions/onchain-groups?from=guide&topic=the-cavalry-is-not-coming) or [capital providers](/solutions/capital-providers?from=guide&topic=the-cavalry-is-not-coming). The case for forming the first capital from inside, before anyone else arrives, is at [the cavalry is not coming](/guide/the-cavalry-is-not-coming?from=guide).

## sources

[Investor.gov, "Market Makers"](https://www.investor.gov/introduction-investing/investing-basics/glossary/market-makers) — SEC investor glossary definition of a market maker

[SEC Release No. 34-86151, NYSE Rule 104 filing (2019)](https://www.sec.gov/files/rules/sro/nyse/2019/34-86151.pdf) — designated market maker duties: dealing for its own account to keep a fair and orderly market, and the continuous two-sided quote

[BIS Quarterly Review, December 2021, "Trading in the DeFi era: automated market-maker"](https://www.bis.org/publ/qtrpdf/r_qt2112v.htm) — constant-product pools, liquidity providers, and fees paid by traders

[CFTC Glossary, W](https://www.cftc.gov/LearnAndProtect/EducationCenter/CFTCGlossary/glossary_wxyz.html) — definition of wash trading and its prohibition under the Commodity Exchange Act

[NOAA Fisheries, "Southern California Steelhead"](https://www.fisheries.noaa.gov/west-coast/endangered-species-conservation/southern-california-steelhead) — endangered listing (1997) and range of the population

[Southern California Wetlands Recovery Project, "San Jose Fish Passage Project"](https://scwrp.org/projects/san-jose-fish-passage-project) — the San Jose Creek fish passage project and the creek's place in the Goleta Slough watershed

[Central Coast Regional Water Quality Control Board, San Jose Creek Channel public notice (2025)](https://waterboards.ca.gov/centralcoast/water_issues/programs/401wqcert/docs/2025/r3-san-jose-creek-channel-pn.pdf) — City of Goleta's fish passage modification of the concrete flood-control channel

## the series

[the cavalry is not coming](/guide/the-cavalry-is-not-coming?from=guide) (start here)

1. [every market starts empty](/guide/every-market-starts-empty?from=guide)
2. [the first check](/guide/the-first-check?from=guide)
3. [who stands on the other side](/guide/who-stands-on-the-other-side?from=guide)
4. [what turns the flywheel](/guide/what-turns-the-flywheel?from=guide)
5. [the first print](/guide/the-first-print?from=guide)
6. [why the second buyer pays more](/guide/why-the-second-buyer-pays-more?from=guide)