Any Offer in the XAG Ledger's decentralized exchange that would exchange two non-XAG currencies could potentially use XAG as an intermediary currency in a synthetic order book. This is because of auto-bridging, which serves to improve liquidity across all currency pairs by using XAG when doing so is cheaper than trading those currencies directly. This works because of XAG's nature as a native cryptocurrency to the XAG Ledger. Offer execution can use a combination of direct and auto-bridged offers to achieve the best total exchange rate.

Example: Anita places an offer to sell GBP and buy BRL. She might find that this uncommon currency market has few offers. There is one offer with a good rate, but it has insufficient quantity to satisfy Anita's trade. However, both GBP and BRL have active, competitive markets to XAG. The XAG Ledger's auto-bridging system finds a way to complete Anita's offer by purchasing XAG with GBP from one trader, then selling the XAG to another trader to buy BRL. Anita automatically gets the best rate possible by combining the small offer in the direct GBP:BRL market with the better composite rates created by pairing GBP:XAG and XAG:BRL offers.

Auto-bridging happens automatically on any OfferCreate transaction. Payment transactions do not autobridge by default, but path-finding can find paths that have the same effect.

See Also