The P2P Marketplace on Airtm is a place where two people meet in order to make a transaction, in this place there is a trusted third party, which provides security and support. This third party, that is, Airtm, sets some base conditions for carrying out the exchange, for example: the validity period of an exchange, the requirements that users must meet to participate, and the available payment methods, Airtm also proposes in each market or payment method an exchange rate or initial price, based on the market variables.
This price is composed as follows:
The first thing is a base or gross exchange rate. This is the exchange rate between the currency of the payment method in question and 1 USDC. This base exchange rate does not include commissions.
The next component of this price would be the cashier's commissions, how much the cashier will earn for completing the transaction. Here there is a variable commission (a percentage according to the amount) and in some payment methods there is also a fixed commission (a fixed amount, independent of the transaction amount).
Finally, the third element of the price are the platform’s commissions. Here we also have a variable portion (percentage, according to the amount), called Service fee, and a fixed portion (independent of the transaction amount), called Escrow fee.
The sum of these elements results in a final or net exchange rate between the payment method currency and 1 USDC.
How are these Exchange Rate and Cashier Fees calculated?
Price determination in Airtm is based on Supply and Demand, on one side there are customers who need, who demand to make a transaction and on the other side there are Cashiers, who offer their services to supply that demand.
Airtm uses variables specific to its business to calculate an initial price, which is then automatically adjusted through an algorithm, which monitors multiple metrics in real time and responds to supply and demand variations within the platform. That is to say, ultimately, prices are decided by market participants, by operating freely and voluntarily within the platform.
Broadly speaking, it can be said that the price determination algorithm works in 2 stages:
1st stage) Multiple data sources are consulted and compared, from which a base exchange rate is obtained, representative of the real value of the dollar in the country's local currency or payment method.
2nd stage) Once this base exchange rate is obtained, the second stage begins, in which the algorithm compares in real time the supply against the demand within the Airtm Marketplace and adjusts the commissions that the cashiers will earn when processing both types of transactions.
In the following example it can be better understood how we start from an initial price, and subsequently it is the market players themselves, through their participation, who determine the final price:
Suppose that, for a particular country, Airtm initially stipulates an exchange rate that is 50% below the true value of the dollar.
What would happen on the platform? Many clients in that country would place funding transactions, trying to buy USDC with their local currency, since the price is very low, far from reality, that is, we would have an increase in add transactions from clients, however, obviously, these operations will not be accepted by cashiers, since they will not be willing to sell their dollars for half of what they are worth in their country. In other words, within the Marketplace, we would have a lot of demand for USDCs and little supply of USDCs. This alteration in the performance metrics will indicate to the pricing algorithm that it is necessary to increase the final exchange rate, modifying the Cashier commissions, up to an equilibrium point where the price is attractive enough for customers to continue requesting transactions, and attractive enough for cashiers to complete them.
This adjustment process happens in real time 24/7, for all payment methods within Airtm.
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