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Serum SRM: An Order-book DEX and Cross-chain swaps on the Solana and Ethereum blockchains

By 2sats | 2sats | 18 Jan 2022

*obligatory not financial advice*


What is Serum?

Serum is a decentralized exchange that runs on the Solana and Ethereum blockchains.

Decentralized exchanges are currently very limited with their features and are in no shape to fully replace decentralized exchanges. That is because most DEXes, like Uniswap, use liquidity pools and AMMs to enable decentralized trading. Such AMMs were invented because Ethereum couldn't handle order-books due its slow speed, but they do have some limits. For example, they only offer spot trading and you cannot make any limit orders. Serum utilizes Solana's insane speed for decentralized order-books, which allow traders to have the same experience they would have on a centralized exchange but in a trust less manner.

The exchange of cryptocurrencies is obviously is a big part of decentralized finance. To let crypto and DeFi reach their full potential it is necessary to make them fully independent from centralized exchanges. Serum makes this possible. You can make limit orders and you can even create and tokenize custom cryptocurrency contracts which you can use for things like leverage trading.

The DEX is running on both Ethereum and Solana, which makes it possible to trade ERC20 tokens from Ethereum but with the efficiently and speed of Solana. It basically uses Solana as second layer for Ethereum. So far, there are trading pairs for bigger Ethereum tokens and there are leveraged tokens for ETH and BTC.

The DEX also makes it possible to trade coins from other chains like BTC because it offers cross-chain swaps. If Luke wants to sell ETH for BTC, then he can send ETH to the Serum smart contract. If Lea wants to buy the ETH, she can send her coins to Luke and the smart contract can check the Bitcoin blockchain to confirm that she did and will send the ETH to her. Both of them need to send a collateral which can be slashed if they attempt to scam the other one.

Serum is competing with Loopring, which also enables cheap and fast order-book trading with Ethereum assets but not with tokens from other chains.



The SRM Token

SRM is the governance and utility token of Serum. Holding at least 1 SRM gives you a 50% discount for trading fees and 80% of all fees are used to buy and burn SRM. There is also a second token called MegaSRM, or MSRM, that can be minted by locking 1,000,000 SRM. This MSRM gives you a discount of 60% on fees if you hold at least 1.

The protocol requires nodes that provide various blockchain data and collateralize cross-chain transactions, such nodes have to stake at least 10,000,000 SRM and this stake must include at least 1 MSRM. Holders can also delegate their tokens to a node. 20% of all trading fees are given to stakers and nodes as a reward.

There is a max supply of 10,000,000,000 SRM and its constantly being burned. 4% of the supply was sold, 42% was given to the team and contributors, 27% was set aside for partnerships and 27% was put in an ecosystem incentive fund. The funds of the team are being vested and will periodically unlock between 1 and 7 years. The distribution is really far from optimal because almost all of it is being controlled by the founders.

The value of SRM directly depends on how much trading is happening on Serum. The DEX supports many great features and allows the trading of Ethereum and Solana assets as well as cryptocurrencies from different blockchains. However, running a node requires a HUGE stake, the supply is rather centralized and the Solana blockchain that Serum is using is also kind of centralized. But its still a useful DEX and the SRM token is deflationary.

SRM can be bought at Binance and KuCoin. You can use a MetaMask or Phantom Wallet to store you tokens and use the DEX.




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