FTX – a leading exchange and derivatives platform – has made a big splash today with the announcement of a Solona-based DeFi DEX called Serum.

In his most recent State of DeFi thread (all of which are worth reading) FTX CEO Sam Bankman-Fried outlines the details for a new DEX – Serum – built on a throughput-focused protocol called Solana.

With a strong emphasis on real-time settlement and low transaction costs, Serum is designed to be directly interoperable with Ethereum, a major advantage over centralized spinoffs like Binance DEX. Citing high transactions, FTX argues that leading DEXs like Uniswap and Balancer are becoming borderline unusable, with transactions currently costing $10 at the time of writing.

Given the continued interest in DeFi, Serum looks to offer a permissionless, frictionless trading experience that takes the best assets of Ethereum and makes them accessible in real-time at fractions of a penny.

Here’s what you need to know.

What is Serum?

As illustrated in the official white paper, Serum is “a fully functional decentralized exchange with trustless cross-chain trading, all at the speed and price that customers want”. In particular, this includes:

  • SRM: a native utility token offering trading discounts, validation bonds, and governance
  • Cross-Chain Swaps: Trustless interoperability between supported chains like Solana and Ethereum
  • Orderbook: Full-limit order books offering a more traditional trading experience in contrast to AMMs like Uniswap
  • Serum-native wrappers: Wrapped versions of BTC and USD which live specifically on Serum.

Distilling the vision down, it appears that Serum aims to offer power traders the familiarity and convenience of a centralized exchange like FTX in a completely permissionless and trustless fashion. The architecture is set to favor node operators with incentives to participate in staking thanks to SRM inflation, trading fees, and a delegation/referral system called “leaders”.

To act as a validator on Serum, node operators will need to hold at least 10,000,000 SRM (0.1% of the supply) in tandem with owning one MegaSerum (MSRM) – or 1,000,000 SRM tokens stacked together, with limited supply and bonus rewards. According to the announcement thread, 100% of net fees are used to burn SRM.

10,000,000,000 SRM was minted at inception as a max supply which will be allocated as follows:

  • 20%: Team and Advisors
  • 23%: Project Contributors
  • 3%: Locked Seed and Auction Purchasers
  • 27%: Partner and Collaborator Fund
  • 27%: Ecosystem Incentive Fund

The circulating supply at launch is set to be 1B SRM, or 10% of the total supply. The circulating supply is said to grow by approximately 15% per year.

All and all, it’s clear that FTX is leveraging it’s deep trading experience to create a token economy with strong fundamentals set to rival any exchange token the industry has seen to date.

DeFi Community Contention

While you’d be hard-pressed to find someone who does not think an improved DEX experience would be a win for DeFi, the decision to build on Solana has caused many thought leaders to raise questions about the intent behind Serum. While many were quick to suggest Etheruem-based Layer 2 solutions like Optimistic Rollups, Loopring, Deversifi, or Plasma would be more suitable, it should come as no surprise that FTX will look to pioneer new demand for one of the more promising Ethereum competitors in Solana.

To add a personal opinion, the website and whitepaper suggest the launch of Serum was one which was thrown together somewhat hastily. While I have no doubt that FTX will create a strong product that accomplishes their mission, it’s interesting to consider if Serum is meant to be a ground-breaking development, or more merely a mains for sophisticated traders to wreak havoc on the likes of DeFi’s retail audience.

If one thing is for sure, DeFi’s seeds are starting to grow roots in other ecosystems, a sure sign that we’re still in the early innings of crypto’s hottest sector.

To stay up with Serum, follow them on Twitter.

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