Project Serum: A Pioneering On-Chain Dex Building Infrastructure on Solana

Serum's goal is to develop an infrastructure that propels DeFi into everyday industrys. The launch of the protocol on the Solana mainnet has displayed the true power of the protocol and its on-chain orderbook.

By
Greg Gotsis
on
April 4, 2021
Category:
Project Insight

Introduction

Decentralized Finance (DeFi) has displayed the power of finance when handled in a decentralized and permissionless way. This sector of crypto has undergone extreme development and growth in the past year opening up limitless possibilities through smart contracts. Serum, a decentralized exchange ecosystem on the Solana Network, is dedicated to building out the infrastructure needed to support widespread adoption of DeFi. It was founded in mid 2020 by Sam Bankman Fried and other members of the FTX, a centralized crypto exchange.


Project Serum

Serum was built on the Solana blockchain due to its first in class throughput and robust network. Serum offers a fully decentralized exchange which boasts an on-chain orderbook. This Dex allows users to perform cross-chain swaps in less then a second. The Serum whitepaper outlines the seven main components as follows:

  1. Orderbook
  2. Serum Token
  3. Cross-Chain Swaps
  4. Ethereum and Solana Integration
  5. Physically Settled Cross-chain Contracts
  6. SerumBTC
  7. SerumUSD

Together these features will build out a robust and efficient DeFi infrastructure that anybody can build on. Project Serum has a vision of building a protocol which lays down all the infrastructure to create seamless composability. The goal here is to open up DeFi to traditional exchanges, social media, and anything imaginable that benefits from being on the blockchain.


Key Features

  • Decentralized and Permissionless Swaps (No KYC)
  • Nominal Trading Fees
  • 400ms Transaction Times
  • Intuitive UI/UX

Serum Swap and Serum Orderbook

Serum offers on-chain liquidity to all users, whether it be professional market participants or first time users. To begin, Serum offers an automated market maker (AMM) which utilizes the typical Dex AMM model to facilitate transactions. This Dex allows users to swap between tokens through a user-friendly UI. This Dex is perfect for the average user who simply wants to swap tokens and not worry about trading jargon.


More notably, Serum offers a Dex with an on-chain orderbook. This on-chain Dex is first in class, offering users the complete trading experience while maintaining decentralization. Here, users can submit orders with specific directions regarding pricing, size and order types. Typically on-chain order books demand too much computational power to decentralize but the Solana network offers robust infrastructure with over 50,000 TPS. Through integrating the Serum matching engine onto the network, the Dex can match orders in less then a second with fees as low as .00005 cents per transaction. These features make Serum one of the leading Dexs in the current DeFi landscape.


Serum Token

The SRM token is a fundamental part of the Serum Project and derives utility from a few different functions. SRM will serve as the governance token for the protocol. While most of the SRM ecosystem is immutable, the governance protocol will allow users to change parameters such as trading fees and other non low security risk parameters. SRM can also be staked or used to pay and reduce fees. Notably, users who hold SRM can reduce their fees up to 50%, and when holding 1 MSRM ( ) up to 60%.Further, all trading fees collected from the Serum Dex will be used in a SRM buyback and burn program.

The SRM supply follows an inflation schedule minting about 15% of the supply each year. There will only be a total of 10,000,000,000 SRM minted; this is a hard cap and the circulating supply will certainly be less in result of SRM burns. It is also important to note that all presale, team and contributor tokens will not be locked between 1-7 years after listing.


Cross Chain Support

Serum will integrate cross-chain support enabling trustless transactions between blockchains. For example, users will be able to trade native  ERC-20 ETH for native SPL SRM i. Cross-chain interoperability is a huge issue in the current DeFi landscape as users struggle to swap their tokens across chains. Through Serum, users will be able to facilitate these transactions in an efficient and secure manner.


Physically Settled Contracts

Serum supports custom cryptocurrency contracts enabling leveraged trading. If there is a Serum market for the pair, including cross-chain contracts, users will be able to open leveraged positions. These contracts even offer the ability to be tokenized and moved across the blockchain. Overall, Serum enables users to participate in margin trading in a public, decentralized, non-custodial and seamless manner.


Serum Wrapped Tokens

Serum also offers the capability to wrap non native tokens onto the Solana blockchain. In the whitepaper SerumBTC and SerumUSD are referenced; through the Serum ecosystem a decentralized and permissionless BTC token can be minted on the Solana blockchain.This is achieved through creating a series of contracts which expire in a set period of time. Upon expiry the SerumBTC will be redeemed for a BTC, maintaining the peg.


Roadmap

Currently Serum is on phase two of its roadmap after successfully launching the SRM token and their on-chain Dex. In phase two Serum continues to build out their ecosystem, aiming to create a cross chain bridge, a robust wallet, customizable markets, an active GUI ecosystem and grants for projects.

Looking ahead, there are plenty more innovations to the Serum ecosystem and im sure they don't stop after phase three. Phase three pushes for lending, yield farming, building projects on Serum, AMMs, margin trading, more SPL support and volume/TVL growth. While these innovations are underway, many are closer then they seem. Lending and borrowing is being developed by OXYGEN and margin trading is being spearheaded by MangMarkets. Overall there is a tremendous amount of development ongoing in the Serum ecosystem which aims to drive further growth.


Concluding Thoughts

Serum has just begun its mission and has a long way to go. The launch of the protocol on the Solana mainnet has displayed the true power of the protocol alongside the strengths of Solana. Being the first on-chain Dex that can support institutional flows of capital, Serum is on the right track. 

Using the Serum infrastructure the possibilities are endless. The goal of Serum is to further the reach of DeFi into everyday industry. This is an integral reason why Serum was built on the Solana network to allow scaling with the world. Through Solana it is possible to support a user base of over a billion people, bringing DeFi to the masses. Serum has identified this and aims to build a robust infrastructure to make DeFi and Solana composable. Serums mission is to build an infrastructure that can easily onboard and handle social media, financial markets, credit cards, structured products and really anything imaginable on the blockchain.


For those who wish learn more about Serum, check out the following resources:

Website

Twitter

Whitepaper


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Greg Gotsis

Greg (GoonTrades) is BSC News' Chief Editor and is also a writer for the team. Currently enrolled as an economics major, he finds himself as a cryptocurrency researcher, writer, and technical trader.