Documentation
Tradeable Items
An explanation of what Tradeable Items are, and how they are used.
The Definition of a Tradeable Item
A Tradeable Item is a commodified product, good, asset or currency for which only the quantity of the item is relevant. You set up a Tradeable Item for each product or asset for which you want price discovery.
This system abstracts the concept of trading away from what is being traded by generalising "things you can trade" as Tradeable Items. Users can then set up their own Tradeable Items to represent their products, assets, tickets, goods or contracts, and exchange them for any currency or other Tradeable Item.
Commodification
A commodified item is something such as an agricultural good, asset, product or currency for which only the quantity matters.
The defining characteristic of a Tradeable Item is that only the quantity matters, not the identity of the individual items.
Examples of Tradeable Items
- Mass-produced products: Each new instance of a product, like a camera of a particular brand and model, is the same.
- Barrels of oil and agricultural commodities: Traders exchange amounts of oil within a grade; they do not care which actual barrels of Brent Crude they are buying.
- Contracts: CFDs and Futures Contracts can be transferred in trades, with the owner remaining responsible for the underlying contractual obligations.
- Tickets: A ticket grants entry to an event and may be transferable between people.
- Currencies: The quantity of currency matters, not which individual notes or coins make up that amount.
- Tinned foods: Each tin of beans, within brand, is identical.
Defining Tradeable Items
The idea behind this system is that trading all commodified "things" is the same, because only the amounts matter. Users can set up their own Tradeable Items that apply to their business domain.
A Tradeable Item can be set up to represent the product, good, asset or contract that is relevant to your business.
Anatomy of a Tradeable Item
When you define a Tradeable Item that is specific to your business, you can set these parameters:
- Name: A short name, such as the name you use for a stock item or an SKU code.
- Description: Longer text that can include more detailed information, links to product definitions on your website, legal qualifiers or disclaimers.
- Tick Size: The smallest amount of your Tradeable Item that can be exchanged in a trade.
- Expiry (Optional): A point in time in the future after which the Tradeable Item is invalid, and any Markets trading it will be automatically closed.
- Max and Min (Optional): Limits on the permitted Order quantity.
Tick Size in Detail
Tick Size is probably the most important element of a Tradeable Item.
A product would usually have a Tick Size of 1: you can buy 1, 2, 3 or more units, but you cannot buy less than one unit. For example, you cannot buy half a camera.
A currency would have a Tick Size such as 0.01. US Dollars, for example, can be exchanged to the cent level but not below it. A cryptocurrency such as Bitcoin would have a Tick Size of 0.00000001, one satoshi.
Your business may have products with any degree of fractionality, so you can set up a Tradeable Item as you need. You can even set Tick Size as greater than 1. For example, you might have a product sold individually with a Tick Size of 1, and another Tradeable Item representing packs of 12 with a Tick Size of 12.
When traders enter Orders with amounts in your Tradeable Item, they are restricted to using integer multiples of the Tick Size, removing any issue with people trying to buy 2.5 cameras.
Expiry in Detail
The optional Expiry setting allows you to set a point in the future (as a combination of date and time, in UTC) beyond which the Tradeable Item should not be traded.
Ticketed events have a date on which the event occurs. After this date, the ticket becomes meaningless and you would not want to have a running Market in such expired tickets. Futures Contracts have an expiry date, beyond which the contract is no longer tradeable.
Your business may have contracts, events or other time-dependent products or services that make a Tradeable Item irrelevant after a particular point in time. This Expiry setting allows you to configure the Tradeable Item so that any Market involving it automatically closes, and cannot be reopened, after the Tradeable Item expires.
Max and Min in Detail
The optional Max and Min settings for Tradeable Items allow you to configure limits on the acceptable Order sizes traders may enter.
You may have a Market intended only for wholesalers, for example for camera products. You could set a Tick Size of 12 to indicate that one pallet or shipping box contains 12 units. You could then set a Min value of 120 so that only reasonably large Orders are accepted.
Conversely, you could service a retail market, and reject oversized Orders that might indicate reseller activity rather than ordinary retail use. You could set a Max value of 5 units per Order. Someone determined might still game the system and put in multiple Orders, but you would at least have friction in place to deter this behaviour.
Markets
A Market is defined by the two Tradeable Items that are exchanged within it. Once you have your own domain-specific Tradeable Item, you can exchange it for a currency, whether local, global or cryptocurrency, and create your own Market. Currencies are provided as pre-configured Public Tradeable Items, as most use cases will involve trading something in return for a currency.
You can also have Markets where the second item is not a currency, and instead is another Tradeable Item in your domain. This would be analogous to a swap market.
Farmers might want to swap livestock for supplies without going through a currency, especially if a local currency is unstable, and they meet regularly in face-to-face markets to settle the swaps. An online game might have a Market between virtual assets (such as skins) and in-game consumables, to allow players to convert their collected resources into unique status symbols.