RE: Announcing: Smart Media Tokens (SMTs)
The SMT tokens will be integrated into a DEX in the STEEM blockchain using a protocol similar to Bancor as explained in the SMT Whitepaper:
By leveraging a recently designed automated market maker concept [2], SMT-based ICOs allow a portion of STEEM tokens received to be sent into an SMT’s on-chain, off-order-book market maker in order to provide liquidity to the SMT at a specified reserve ratio.Beyond the social and specialized distribution mechanisms of SMTs, this feature advances the concept of automated market makers by pairing it alongside SMT’s decentralized markets, which also facilitate bids and asks by human participants. The combination of these two markets enables on-chain and trustless exchange opportunities for marketmakers while enabling liquidity for token users .
In other words if an ICO is run for a SMT it can be specified at launch that a certain amount of STEEM can be set aside as a reserve currency to provide immediate liquidity.
Thanks for the explanation. Will there be enough liquidity though? Or is also Steem Power being used as a reserve pool?
The tokens that use the reserve currency function will have instant liquidity. This is part of the Bancor protocol that the steem developers are emulating. From what I gathered on the white paper Steem Power will not be used a reserve pool.