Shared Liquidity Model

Definition ∞ A Shared Liquidity Model is an operational framework where multiple trading venues or platforms pool their order books and available capital, allowing participants to access a deeper and more consolidated pool of liquidity. In the digital asset space, this enables more efficient trade execution and tighter bid-ask spreads across various exchanges or decentralized protocols. It aims to overcome market fragmentation and enhance trading efficiency.
Context ∞ The current discussion around shared liquidity models in crypto addresses the challenge of market fragmentation, where liquidity is spread across numerous platforms. A key debate involves the technical complexities of interoperability and the security considerations of connecting disparate liquidity pools. Future developments include the emergence of more sophisticated cross-exchange routing mechanisms and the increasing adoption of decentralized protocols that natively support shared liquidity across multiple chains.