Ask HN: How are markets initially bootstrapped given initial lack of liquidity?
I'm quite curious about is the process of bootstrapping an exchange like btc-e.com or vircurex.com. I know a little about market microstructure and orderbook dynamics seems really interesting from the perspective of having an efficient, scalable data structure that can accomodate an arbitrary number of added buys/sells and realtime modifications in a highly concurrent setting.
I think I understand the overall mechanics of an orderbook, but it seems like you would immediately (upon initial deploying or even during dev/testing) face the problem of "OK I will make the first trade of this new exchange" and submit a SELL order for 1 BTC for $351.5 (example figures), whereby nothing happens because you don't have any liquidity whatsoever... That is the first thing I am wondering about. Does every exchange just implement their own orderbook? I read this post that explained a good way to design an orderbook (http://www.quantcup.org/home/howtohft_howtobuildafastlimitorderbook) and it was useful in understanding how they work, but in the real world context of building a working application, I'm experiencing a disconnect in how to realistically get users that would be willing to use it early on when it's just running on testnet.
On a very superficial level this appears similar to the issue of any application that is dependent on a bidirectional relationship (Amazon has buyers and sellers, Airbnb has hosts and guests) but the unique aspect of an exchange web application is the fact that the orderbook concept doesn't really equivalently exist in other marketplace structures so the process of bootstrapping must be significantly different than what you'd do for a dating website (example).
I am looking for some input and just general thoughts about how the process of building out an exchange would entail with regard to making it a liquid market with a deep orderbook from as early on as possible.
Thank you in advance, I look forward to and would appreciate any feedback.