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The Importance of Agile Software Development

The strategic value of software to companies continues to grow and businesses are increasingly seeking to software as the technology empowering and differentiating their businesses and products. Software is driving many of today’s key technology trends, such as cloud computing, freedom and social networking. Software embedded in goods can also be currently transforming numerous commercial businesses, such as the manufacturing, healthcare and communications industries. Organizations are challenged to create their business applications and software-driven merchandise faster. Compete, to successfully innovate and grow, organizations require experience and solutions to accommodate to competitive dynamics and customer needs.

Read more on how Empirica delivers its crypto software development services

 

Businesses utilize manual procedures and unsophisticated tools, including paper-based tactics and spreadsheets, to manage workflow throughout the software development lifecycle. These techniques are generally more suitable for smaller development projects handled by a team and cannot scale to meet the requirements of businesses and multi-team projects. The waterfall method gained prominence as the way to manage large software development projects. This strategy, which may take many months or years to complete, relies on rigid sequential execution of the many phases of the software development lifecycle, including analysis, design, coding, integration and testing that is final. Enterprises employing the waterfall method frequently structure internal branches around every development stage and utilize distinct legacy software tools for every phase and department, leading to siloed and disparate information, limited transparency and collaboration between teams, and increased risk of misalignment between software development and company initiatives. The next diagram illustrates the waterfall procedure:

 

Agile was introduced by a group of software visionaries in 2001 via a open letter. It represented a methodology for software creation and delivery designed to decrease costs and significantly improve quality, time-to-market and client satisfaction. Agile projects build software

 

Incrementally, in tiny batches, using iterations of one to four weeks which help keep development aligned with changing business needs. Agile is increasingly replacing waterfall processes across several industries because of the results it can provide. According to the Standish Group, software applications developed with Agile techniques have three times the success rate of applications developed using the waterfall process. The Standish Group defines an effective project as you delivered with functions and all the features, on budget, and on time. The following diagram illustrates the Agile methodology:

 

Agile techniques are being adopted by enterprises, replacing and disrupting the legacy software development methods that have comprised the market for application lifecycle software. According to IDC, the application lifecycle marketplace is comprised of this software configuration management, IT project and portfolio management, and automated software quality markets. In aggregate, IDC estimated these markets would reach $5.2 billion in 2012. Though these markets have been addressed by solutions supporting waterfall and other legacy methods of software development, we think that a transition to alternatives behind software development methodologies like Agile is ongoing. Our cloud-based platform of management alternatives is designed to address these markets and facilitate the adoption of Agile practices by businesses.

 

Furthermore, cloud-based alternatives have a small, but fast growing share of the total application development and installation market, which includes Agile management alternatives.

 

Organizations that develop business applications and software-related products face a range of business challenges. These are usually directly attributable to legacy software development methods. These challenges include:

 

  • Shortening time-to-market and increasing customer expectations. Competition for customers’ attention continues to intensify and, as a result, the importance of being first to market has significantly improved. With the proliferation of always-connected clients and mobile devices, Additionally, product reviews may be continuous and instantaneous. It becomes paramount that characteristics a product’s quality and consumer experience match or exceed customer expectations at launch, as poor client experiences can be readily shared. Customers’ demand for the speed and quality has set increased focus and pressure on how organizations handle the software development lifecycle.

 

  • Limited transparency into big development projects. Comprehensively monitoring the improvement of multi-team development projects and actively monitoring their priorities are challenges. These challenges are exacerbated when projects are big and teams are globally distributed. For projects with priorities and continuously-evolving demands, the ability to keep visibility into quality and progress is more challenging. Organizations who utilize legacy software management offerings may have separate applications for each role and phase of the development lifecycle. These organizations struggle with , out-of-date status info that is siloed and have limited into the work in advance. The ability to effectively adapt, optimize decisions and allocate resources necessitates a view of their software development process together with all teams.

 

  • For large-scale development projects, feedback and collaboration among developers, industry leaders and clients can be hard to coordinate. Collaboration must be continuous and the software development strategy has to allow for adaptation, since the comprehension of customer needs or business needs evolve.

 

  • Difficult transition to alternative development approaches and solutions. Approaches and tools used for managing the software development lifecycle frequently reflect. Because of this, there is a resistance to change, even if change can be demonstrated to boost time-to-market, productivity or software quality. Generally, legacy software management tools do not support the cycles utilised in Agile development. These applications are non-intuitive usually stiff, costly and, requiring implementations, increasing the challenge to some development business or attempting adjustments to its own processes.

 

  • Inflexible offerings. Conventional offerings for and approaches to managing the software development lifecycle can be hard to use or may lack the flexibility required to accommodate changing or varying goals and organizational needs. In addition to this downside, legacy offerings might require substantial resources and time to execute and can often be expensive. Further, after these offerings have been installed, updating, extending or adding new performance often necessitates bespoke development efforts which are time consuming and costly.

Read more on how Empirica delivers its crypto software development services

About us

Empirica is a trading software company focused on developing the potential that cryptocurrencies bring to financial markets. Empirica is offering solutions such as Algo Trading Software used by professional cryptocurrency investors and market makersrobo advisory systemcrypto trading bots and cryptocurrency exchange software development services .

Liquidity, the greatest challenge for crypto exchanges

There is a general consensus that liquidity is the most important factor for all tradable markets. The ability or lack thereof, of a market to allow assets to be bought and sold at stable prices, is a major issue associated with cryptocurrencies. 

According to a recent Encrybit report, one in every three investors is worried about the problem of liquidity on crypto exchanges.

 

The importance of the liquidity problem requires tools and methods to manage markets liquidity. This document proposes an approach to monitor and manage liquidity. Monitoring is intended for the exchange management to understand their platform’s current liquidity level and how to improve it. Liquidity management starts with the exchange engaging professional market makers or using proper tools to take care of  liquidity. Last but not least exchanges should track the market impact of trades of different sizes, and oblige their market makers to fulfil certain conditions.

 

Empirica brings experience, tools, know-how and best practices in the area of technology for liquidity analytics and liquidity provision from capital markets to digital assets. We have been active in the market since 2011, working with stock exchanges and market makers with a track record on automated liquidity provision and measurement. 

 

How can an exchange manage its liquidity

 

Both for those who are just launching a new exchange or who have been operating an exchange for some time already, it is crucial to monitor liquidity metrics of all markets.

 

Read more about our tool for monitoring crypto exchange quality – Liquidity Analytics Dashboard

 

As in any tradable market, liquidity is provided by market makers, who mostly use automated market making algorithms. However, crypto exchanges have an alternative to the external market makers, as they are able to take this crucial aspect of exchange – the provision of liquidity – into their own hands.

 

Regardless of whether they use external market makers or an internal market making desk, crypto exchanges should outline to the liquidity providing party certain conditions pertaining to how the liquidity is provided and then constantly monitor the execution of these obligations. 

 

With proper tools, exchanges are able to track liquidity metrics and are able to react accordingly if agreed conditions are not met. Analytic tools also allow exchanges to compare liquidity in their markets to other crypto exchanges.

 

Monitoring liquidity

 

When executing a transaction, most investors only consider explicit transaction costs (taxes, commissions, fees). But that is only a part of the total cost. The larger the trade, the more dominant the part of the cost taken over by implicit costs.

 

Total transaction costs = Explicit transaction costs + Implicit transaction costs

 

One of the most important implicit costs to consider is market impact, also referred to as slippage. Market impact is a result of the price slipping down or edging up when you trade an asset. As the investor can not execute the entire order at the best offer, the trade is moved down the order book.

 

Exchanges, which want to attract not only small but also bigger investors, should monitor market impact and other important liquidity metrics in all of their markets.

 

Liquidity provision

 

To increase liquidity, crypto exchanges use market making services from external parties. This is a standard practice in any financial market.

 

Market makers

 

A market maker is a company or individual that regularly buys and sells financial assets at a publicly quoted price to provide liquidity to the markets. Their role is to satisfy market demand.

 

Crypto exchanges need market makers. If liquidity is low on a venue, exchanges usually try to attract market makers by the following methods:

  • Decreasing maker trading fees
  • Sharing profit from taker fees
  • Paying market makers for their activity

 

It’s  a “chicken or egg” problem. New exchanges and exchanges with low liquidity need market makers to attract other investors. The market makers, however, do not want to enter illiquid markets as there is not much volume to be made from takers and there is also additional business risk involved. Hence many illiquid exchanges need to pay market makers for their services. 

 

While working with crypto exchanges we often hear multiple reasons as to why crypto exchanges are not happy with their market makers. The main problems include:

  • Market makers choosing to support trading pairs that are most liquid; they are not interested in making markets on less liquid pairs
  • Spreads maintained by market makers are too wide
  • Market makers come and go in the markets that they promise to take care of, so exchanges would like to have tools tracking the activity of their liquidity providers
  • Market makers do not keep the order sizes as promised

Liquidity provision tools for crypto exchanges

 

Crypto exchanges have an alternative to market makers, or a complementary approach. They are able to run an automated market making desk themselves. In order to do that, though, they need funds, proper liquidity provision algos and a trader to monitor them.

 

Market making requires a good combination of technology and some trading skills. The algos must be low-latency and capable of scaling to thousands of orders per second, on numerous trading pairs. It needs a disciplined approach to trading and risk management. 

 

There are many market making tools on the market. They range from simple black-box bots to sophisticated algorithmic engines with market making capabilities.

 

When searching for self liquidity provision tools one should be considering the following criteria:

 

  • Reliability

 

Market making algorithms should work 24/7, and be able to recover from unexpected situations like connection problems with an exchange.

 

  • Security

 

Market making systems have  access to the funds of the exchange, so it is important to choose from proven solutions.

 

  • Transparency

 

In the case of black-box algorithms, the bot developers should be widely known in the community. Exchanges should consider skipping bots and going for proven institutional-grade market making solutions available on the market.

 

  • Parametrization

 

In the case of algorithmic market making it is good practice to choose solutions that enable parametrization and tuning up of execution according to the current market situation.

  • Access to source code and custom changes

Ideally crypto exchanges should have an option to take over the market making algorithms source code and let their team develop and tune it further. Very often exchanges might want to add secret sauce to the algorithms that will create their competitive advantage in the market. 

 

Read more about our tool for market making strategies for crypto exchanges  – Liquidity Engine

 

Competing with other exchanges is a challenge today. In July 2019 services like CoinMarketCap or coinpaprika listed about 260 exchanges. However, Empirica’s internal research shows that there are currently more than 600 crypto exchanges in various stages of maturity, and further new exchanges being launched every month. Every exchange is trying to attract new investors, but it is clear that at some point only those exchanges with the best liquidity will survive. That is why crypto venues should not only manage their own liquidity but also observe the liquidity level of their competition, and identify inefficiencies that can be addressed.

 

About us

Empirica is a trading software company that specializes in liquidity measurement and liquidity provision software that can help exchanges manage their liquidity. Empirica is offering solutions such as Algorithmic Trading Platform used by professional cryptocurrency investors, crypto market makersrobo advisory systemcrypto trading bots and cryptocurrency exchange software development services.