What is Serum? SRM coin explained
The summer of 2021 has seen the Solana blockchain having its own “DeFi Summer”, and one project that is central to the emerging DeFi ecosystem on Solana is Serum.
Serum’s ultimate vision is to drive forward the mass adoption of DeFi, keeping the lofty goals of one day reaching 1 billion active users and 10 trillion dollars of on-chain value.
So what is Serum, and what makes the team so confident that they can become one of the most dominant DeFi projects of the future? Read on to find out, and to have the SRM coin explained.
What is Serum?
Serum is a permissionless decentralized exchange (DEX) and blockchain ecosystem that is built on Solana, and developed by the Serum Foundation. The project was co-founded by Sam Bankman-Fried, the CEO of the FTX exchange, and an active contributor to the Solana ecosystem.
In the DEX, and also in the larger ecosystem, Serum aims to improve on the state of decentralized exchanges by bringing all the benefits of a centralized exchange to the DeFi space.
These benefits include having adequate liquidity for every trade, a common hurdle for new DEXes. To ensure that this is never the case on Serum, the team has enlisted Jump Trading, one of the world’s leading providers of liquidity for financial applications. It is also backed by Bankman-Fried’s Alameda Research, which provides market maker services to ensure that accurate price information is available at all times.
Also, Serum is designed with an orderbook-style exchange, giving a familiar interface that may attract traders who prefer the user experience of centralized exchanges to the experience provided on automated market maker (AMM) DEXes such as Uniswap.
These features are also matched with the benefits of decentralized exchanges, such as complete transparency and the security of decentralized node architecture (leaving no one centralized point of failure).
This means there are no KYC (know your customer) requirements, and that users can add their own markets (instead of projects having to pay huge fees to have their asset listed on the exchange).
SRM explained: What are the use cases of the Serum SRM coin?
Like with many centralized exchanges, holding the SRM coin grants discounts to traders. The discount tiers start at 100 SRM and increase in increments of 10, all the way up to 1 million SRM.
SRM coins can also be staked to help run the project’s decentralized nodes. The people running these nodes receive rewards based on the node’s performance, with 10% of net fees incurred on the exchange being sent out to stakers.
2% of Serum fees go to EcoSerum, a community building initiative which offers token grants to developers who are building projects on the Serum blockchain.
A further 20% of fees go to the projects or GUIs that are hosting activity on Serum, whilst the remaining 68% are bought back by the team, and burnt. There is a maximum total supply of 10 billion SRM coins that have been minted, but only 50 million of these are currently in circulation, so SRM cannot be considered a deflationary currency just yet.
A handful of centralized exchanges, such as FTX, also offer custody of SPL-based tokens and conversions.
Why Solana is a good blockchain for Serum
Tokens that trade on Serum are governed by Solana's SPL token standard, which is similar to Ethereum’s ERC-20 standard, and allows them to mint new tokens, and take advantage of Solana’s low transaction costs.
DEX exchanges that take place on Solana then benefit from the fact that transactions cost only $0.00001, making exchange fees pretty much redundant.
Solana’s speed also makes it an ideal home for decentralized exchanges, with an estimated transaction throughput of 50,000 to 65,000 TPS (Transactions Per Second). Also the Solana team believes that in the future, the blockchain could theoretically scale to as high as 710,000 TPS.
A number of non-custodial wallets are able to interact with Solana, including Phantom Wallet, Ledger devices, and the Solana ecosystem’s own Sollet.io wallet, which also facilitates ERC-20 - SPL token conversions. Ethereum based non-custodial wallets, such as the popular Metamask, are not yet able to interact with Solana based dApps.
We have however seen USDC migrate to Solana, with over 50M USDC-SPL minted on Solana as well as Tether. Stablecoin supply is vital to DeFi applications, and these are two of the largest stablecoins in the cryptocurrency ecosystem, so it will be interesting to see if their usage on the Solana network takes off.
Serum is not the only DEX based on Solana, with Raydium providing a more Uniswap-like alternative, but it is well-placed to be a central part of the Solana blockchain, as other Solana-based dApps can plug into Serum in order to benefit from its liquidity.
What does the future hold for Serum and SRM coin?
The Serum white paper suggests that many DeFi applications are not fully decentralised because they rely on a centralised oracle to give them price updates and other live information. Time will tell if being ‘fully decentralized’ will be a game changer in the long run.
Items on the Serum roadmap include the addition of DeFi staples such as borrowing, lending and yield farming capabilities. The project also plans to add more cross chain bridges to the exchange, which would greatly increase it’s exchange potential.
Bankman-Fried, who helped to ‘save’ Sushiswap after it’s original developer attempted a rug pull, has already linked up Sushiswap and Serum to help Sushi implement faster and cheaper transaction fees.
But considering the dominant network effect that has been snowballing for Ethereum, Serum’s ability to achieve its ambitious goals may rest on integration with the Ethereum Virtual Machine, and an improvement on the user experience of the other popular DEXes that currently saturate the marketplace.
With Ethereum still processing over 1 million transactions per day, and Uniswap boasting a TVL (total value locked) of almost 7 billion dollars, Serum has a lot of catching up to do, even before the project has found its own momentum.
The Solana SOL coin can be safely stored in the Exodus multi-coin wallet. If you enjoyed this article, "What is Serum? SRM coin explained", don't forget to subscribe for more Exodus blog updates .
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.