Serum DEX: Backbone of Solana DeFi Ecosystem

The Serum is a protocol that delivers decentralized finance, exceptional speed and cheap transaction costs. It’s based on Solana and requires no permissions. Serum’s on-chain central limit order book allows ecosystem partners to exchange liquidity and enable market-based functionalities for institutional and retail customers. In particular, Serum’s on-chain central limit order book and matching engine provide traders and composing projects liquidity and price-time-priority matching. The flexibility to determine their trades’ price, size, and direction is a feature of this exchange mechanism for users. Serum’s existing architecture has bootstrapped liquidity, and matching services benefit the composing projects.

Serum Features:

Serum core

Asset agnostic order book for matching any Solana-based trading product, including options, futures, borrow lending positions, and any other financial or non-financial instrument that can use Serum’s backend matching engine.

True Composability 

Serum allows many applications and participants to share middleware in a single location. Thanks to the AOB’s design, Serum’s architecture is better suited to modularity. Serum-based programmes will offer more flexibility while still adhering to basic design rules like composability.

Developer Services and Ecosystem

Developers have complete control and freedom with the decentralized on-chain order matching tool that provides infrastructure for trading applications. Permissioned marketplaces provide much more freedom and conformity. Serum DEX, built on top of the Asset Agnostic Order book, gives the ecosystem a larger pool of pooled liquidity and a shared resource to support trading functionality.

Serum Token (SRM)

SRM is the Serum ecosystem’s utility and governance token. SRM is fully integrated with Serum and it takes advantage of buy/burn fees.

Solana Speeds and Costs

Solana’s ultra-low transaction fees of $0.00001 per transaction allow for sub-second trade and settlement.

Tokenomics 

The Project Serum ecosystem has two tokens: Serum ($SRM) and MegaSerum ($MSRM), which generate value from usefulness and governance. The list of $SRM features:

  • Fees can be reduced by up to 50%.
  • Weekly “buy and burns” participation 
  • Specialized governance (such as future fees)

$MSRM, which can be redeemed for 1,000,000 $SRM, comes with additional features and benefits not found in $SRM. There are just 1,000 MSRM in supply. To run a node, you need at least one $MSRM. Holding $MSRM provides fees discount on trading upto 60%. Demand Side Buy and Burn: A buyback-burn system, in which tokens are bought and burned at a proportion of platform fees, is a fundamental mechanism for boosting the value of $SRM. This mechanism receives 68 percent of the fees of the platform. 

Initial Token Distribution of Serum

On Aug. 7, 2020, the Initial Token Distribution was held with two exchanges (FTX and BitMex) selling 3 million SRM at around $0.11 per token (for a total of $660,000). Both IEOs needed KYC, and the total number of participants was limited to 1,800. Pre-sales for 400 MegaSerum (equal to 400 million SRM, or 4% of total supply) were held before the IEOs, raising around $20 million. All pre-sales are locked up for the following 1-7 years after the sale. Serum token distribution:

  • Team and Advisors account for 20% of the total supply.
  • Project Contributors account for 22%, while Locked Seed and Auction Purchasers account for 4%.
  • The Partner and Collaborator Fund was allocated 27% of the total supply.
  • The Ecosystem Incentive Fund was allocated 27% of the total supply.

Serum’s Token Supply Schedule

10% of all SRM tokens are unlocked at the start. The remaining 90% all follow the same unlock schedule: they are entirely locked for the first year, then open linearly over the next 6 years, at about 1/2190 every day. All seed sales were also locked. The protocol uses 60% of the fees it generates to buy back and burn SRM tokens. These buys and burns are conducted approximately every week.

Governance

Governance is an essential aspect of the Serum ecosystem, which uses a staking-based governance mechanism to give SRM stakeholders a say in the future of the project developments. Stakeholders in the SRM are grouped into nodes, which have voting rights over fees, new markets, revenue usage, buy/burns, and ecosystem grants. To pass a vote, more than 60% of the world’s total staked SRM must vote in favour (this parameter may be further changed via a proposal, within bounds). The serum also recently debuted its governance voting programme, a self-upgradable programme regulated by a multi-sig. This is the first step toward decentralizing, transparent, and secure governance for Serum.

Conclusion

Serum supports the whole Solana DeFi ecosystem through its large pool of liquidity. It is the best order book based decentralized exchange in crypto. The daily volume of assets traded on Serum is in millions. The total value locked in Serum is around 750 million dollars. These figures show that it is currently, Solana users’ go-to platform for buying and selling cryptocurrencies.  As the Solana blockchain will attract more users in future, it will automatically benefit Serum. Few changes in tokenomics of Serum token can also help in driving its price upwards.