Over-the-Counter (OTC) trading allows users to trade assets directly with one another without having to go through an exchange, such as Uniswap, or an NFT marketplace, such as OpenSea.
The YDF OTC Platform offers two types of OTC trades:
- Pools: Function similarly to liquidity pools on DEX swaps, such as Uniswap, to where a user can create a pool of tokens that other users can swap a pre-determined paired token for the pooled token.
- Packages: Allow users to bundle multiple assets (ERC20 tokens and NFTs) together to make one simple trade. A few common common use cases are expanded upon below.
There are countless use cases for OTC trades. Below are just a few of the more common ones.
- Market Value & Rate Slippage Market trades of assets with relatively low liquidity are greatly impacted when large market buy or sell orders are executed. A single sell order can cause a large price reduction if it's of big enough size, which can cause other participants to panic sell their positions as well. A large buy causes the asset's market value to rapidly increase, which can sometimes also cause others to sell and take quick profits. Additionally, when performing a single large transaction, the realized market rate of your transaction is determined by both the liquidity of the market it's executing against and any experienced price slippage. The market value of an asset may be $1 at the moment you sell your asset, but if the order is large enough your cumulative sell price will depend on how much of an impact your transaction will have on the project's liquidity. Your final sell price could end up being multiple percentage points below $1, or worse. OTC trading prevents these scenarios and allows large buyers and sellers to exchange tokens without significantly impacting a project's market value and at the exact price set by the OTC creators with zero price slippage.
- Cheaper Fees & Taxes Many projects tax trades a small percentage of their transaction that goes back into the project for various uses. NFT Marketplaces, such as OpenSea and LooksRare, not only charge platform fees, but NFT creators can also add on royalty fees to the buying and selling of their NFTs, which take away from the seller's profits. OTC trading circumvents these entirely, benefiting both the buyer and seller on their transaction. For example, the Bored Ape Yacht Club has a 2.5% creator fee on OpenSea, which is on top of OpenSea's 2.5% platform fee, combining for 5% taken away from the seller's profits as fees. The YDF OTC Platform only charges a flat 1% fee for OTC pool trades, which means selling a 72 ETH floor priced BAYC NFT on the YDF OTC Platform would only cost the seller 0.72 ETH rather than the 3.6 ETH that would be taken away if sold on OpenSea.
- Pre-Sales & Project Fundraising OTC Pools or Packages allow projects to sell a portion of their token supply before market trading goes live, to which the project’s creators could receive much-needed funds to finalize the project or raise liquidity and investors would have the potential to acquire the token early at a potentially cheaper price. These pre-sale tokens could even unlock over time!
- Multi-asset Offloading A common sales tactic is to sell items in bulk at a discounted rate in order to clear inventory. OTC Packaging makes this possible by allowing a user to package up any amount or combination of ERC-20 and ERC-721 tokens into a single bundle to sell. Making one large OTC transaction instead of several smaller ones also saves on Gas fees for both parties.
- Fundraising or Presales Our OTC platform allows projects or users to easily raise funds or even create a sort of presale by packaging tokens up and having them vest on some specified schedule.
- Linear unlock / vesting Combing YDF's innovative NFT Vesting with OTC packaging, a user can create a package of ERC-20 tokens that unlock and vest over a specified period of time. This vesting strategy allows users to distribute their tokens over time for a multitude of use cases, such as: influencer payments, pre-sale buyers, or even goods and services. Packages with linear locks will vest over the vesting period set during the OTC Package creation. Tokens will unlock proportionally every second and users will be able to claim the vested tokens at any time and as frequently as they choose over the vesting period.
- NFT + Token promotions As NFTs and Tokens can be combined into a single package, this opens the door for projects to run promotions for their token and NFT, such as "Buy an NFT and get X tokens for free", or vice versa of "Buy X tokens and get a free NFT". The possibilities are truly endless.
- For OTC Pools, 1% of the token pool is taken out at the time the pool is created. Please ensure the details you enter are correct before creating the pool, as this fee is non-refundable for any mistakes made when creating the pool.
- For OTC Packages, 1% of the list price is taken as platform revenue when the package is sold.
- There is a service fee of 0.001 ETH to create an OTC record. This nominal fee is to deter the spam creation of OTC Pools.
- Direct OTC Package trades will only pay the above service fee.
Some projects incur taxes from simply transferring tokens from one wallet to another. We effectively wanted to prevent unexpected behavior with these fee on transfer tokens, so we decided to not support them. For tokens with a transfer taxes, the project should whitelist our OTC contract from taxes in order to exclude taxes from being taken when interacting with the OTC contract.