Serum Portal

Serum Summary

What is Serum？

'Serum' is a permissionless protocol layer on the Solana blockchain for decentralized exchanges (DEXs). It enables developers to create their DEX interfaces and features an on-chain, non-custodial order book for placing 'bid' and 'ask' orders at specific prices.

Serum's central order book enhances DeFi projects with true composability and ecosystem-wide liquidity. Built on Solana, it offers fast, low-latency trades at affordable network fees.

Serum has its tokens, 'SRM' and 'MSRM,' granting trading fee discounts based on token holdings. It ranks third in Total Value Locked (TVL) in the Solana ecosystem, currently holding over $222 million in locked assets according to Defi Llama.

Pros and Cons

Pros of Serum:

• Shared Liquidity: All projects built on Serum benefit from shared liquidity and a central order book, ensuring consistent price feeds and increased trading volumes.

• Ecosystem Growth: As more projects are developed on the Serum platform, the Solana ecosystem as a whole expands, enhancing Serum's role and relevance.

• Permissionless: Serum is a permissionless decentralized protocol, enabling users and projects to create market pairs without requiring permission or authorization.

• Composability: Projects constructed on Serum offer true composability, with the upcoming release of Serum Core expected to further improve this aspect.

Areas for Improvement:

• Documentation: Serum could enhance its accessibility for beginners by optimizing its documentation practices. Providing clearer information about project changes and detailing the status of security audits and DAO governance would be beneficial.

• Support for Newcomers: The official Discord channels seem to lack adequate support for newcomers, as evident from unanswered questions. Addressing this issue is essential for fostering a robust and engaged community.

In summary, Serum offers numerous advantages for DeFi projects and developers in the Solana ecosystem, such as shared liquidity and permissionless access. However, improvements in documentation and community support are needed to make the project more user-friendly, especially for newcomers.

Regulation

Unregulated.

Serum operates without direct oversight or regulation by governmental or financial authorities. It is a decentralized protocol built on the Solana blockchain, and it does not rely on traditional financial institutions or intermediaries for its operation.

Being unregulated means that Serum is not subject to the same rules and regulations that traditional financial institutions, such as banks or stock exchanges, must adhere to. Instead, it operates based on code and smart contracts, allowing users to trade and interact with DeFi products in a permissionless and decentralized manner.

While this offers greater freedom and accessibility for users, it also means that there may be fewer consumer protections and legal recourse in case of issues or disputes. Users should exercise caution and conduct thorough research when engaging with unregulated DeFi platforms like Serum to understand the associated risks and benefits.

Key Features of Serum Exchange

Serum Exchange, while no longer hosting its own trading user interface, has evolved into one of the most dynamic and liquid ecosystems in DeFi. It incentivizes developers and projects to build on its foundation, granting them access to substantial liquidity through its central limit order book system.

A Multitude of Exchanges on Serum

Numerous exchanges have been constructed on the Serum framework.

Facilitating DeFi Innovation

Serum's liquidity and ease of development enable developers to focus on creating efficient DeFi products with user-friendly interfaces. Consequently, Serum has emerged as one of Solana's preferred protocols for DeFi project development.

Four Key Success Factors:

• Central Limit Order Book and Efficient Matching Engine: Serum offers a central limit order book and a highly efficient matching engine.

• Serum's Developer Ecosystem and Services: It boasts a robust developer ecosystem and support services.

• True Composability: Serum promotes true composability within the DeFi space.

• Serum DAO: The Serum Decentralized Autonomous Organization adds to its appeal.

A few exchanges built on Serum

Central Limit Order Book and Matching Engine

Decentralized exchanges (DEXs) such as Sushiswap, Uniswap, and 1inch rely on automated market makers (AMMs) that employ liquidity pools for instant asset swaps, determining prices based on asset ratios. In contrast, centralized exchanges like Binance or Kucoin utilize an order book mechanism to facilitate asset trading.

AMMs vs. Order Books

Order books on centralized exchanges allow users to set limit orders and stop-loss orders, enabling them to specify the desired execution price. AMMs, on the other hand, offer a live price based on the asset pool's ratio, which users can use for buying or selling assets.

Challenges of DEXs with Order Books

Most DEXs are built on Ethereum, a network with relatively long latency, rendering an on-chain matching engine inefficient. Consequently, on-chain order books are not practically feasible.

Serum's Efficient On-Chain Solution

Serum, being built on the Solana network, capitalizes on its significantly faster block production rate, generating blocks every 400–600 milliseconds. This is more than 10 times faster than Ethereum's average block time of 14 seconds. Leveraging this speed advantage, Serum efficiently operates its on-chain central order book and matching engine.

AMM vs Order Books

Serum's Developer Ecosystem and Services

Serum provides developers and projects with the infrastructure to build highly efficient decentralized exchanges (DEXs). It offers access to a central limit order book and matching engine that shares liquidity with other projects and DEXs built upon its foundation. This shared liquidity enhances the attractiveness of the ecosystem.

Moreover, the Serum protocol operates seamlessly in the background, allowing developers to concentrate on creating user-friendly graphical interfaces (GUIs) and innovative financial products.

A Thriving Ecosystem

The official Serum portal page currently showcases 30 GUIs, each offering a diverse range of decentralized financial products. For instance, Mango Markets specializes in margin trading and perpetual futures, Raydium provides spot and limit order trading services, and Jupiter Aggregator excels in swap price aggregation. This thriving ecosystem contributes to Serum's popularity and versatility in the DeFi space.

True Composability

Serum addresses the liquidity fragmentation issue in the Ethereum DeFi ecosystem. It achieves this by creating a unified space where various applications and participants can share middleware. This modularity enhances flexibility and maintains key design principles and composability.

The Serum DAO and Governance

The Serum DAO is responsible for overseeing the protocol's governance. The SRM token serves as the governance token, enabling users to cast votes in favor of or against proposals. Community members can engage in discussions on various topics through the Serum DAO's forum page, leading to the creation of governance proposals for crucial matters on the official governance platform.

Participating in Governance

To initiate a governance proposal, users must possess a minimum of 25,000 SRM tokens. To vote on a proposal, users need to connect their wallet to the official governance platform and deposit all their tokens. Subsequently, they can indicate their support or opposition to a specific proposal. During the voting period, the tokens are temporarily locked. Once the proposal concludes, the tokens are released and can be withdrawn from the governance platform.

Serum DAO

Serum Core: Revolutionizing Order Books

Serum Core, a creation of Bonfida, introduces an innovative concept known as the 'asset agnostic order book.' Although it's yet to be officially launched, it promises to reshape the trading landscape.

To simplify, consider this: the Serum protocol, functioning as a fully on-chain order book, conducts trades by invoking smart contracts and transferring SLP tokens once orders are matched. This means the basic Serum protocol necessitates the transfer of SLP tokens.

However, this poses a challenge for projects aiming to introduce products like perpetual futures trading under the Serum framework. They would need to tokenize users' positions, a complex task involving encoding various details like collateral, position size, and entry price.

This is where Serum Core comes in. Serum Core allows the on-chain order book to store 'state' information and facilitate position matching without the need for tokenization. Within Serum Core, the order book itself acts as a matching engine. When a match occurs, Serum Core initiates the creation of a position owned by the taker and held with the maker. Furthermore, Serum Core empowers projects to create their own order books or collaborate with existing ones, ushering in a new era of trading possibilities.

Fees in Order Book Exchanges

Order book exchanges typically employ two types of fees: maker fees and taker fees.

A maker fee is imposed on users who create orders or add liquidity to the order book, while a taker fee is applied to users who execute orders or remove liquidity from the order book.

Under the Serum protocol, fees are exclusively charged for taker orders. This means that maker orders, which contribute liquidity, are exempt from fees. The Serum matching engine handles these maker orders, while taker orders incur fees ranging from 3 to 4 basis points (bps).

The fee amount depends on the quantity of SRM tokens held by the user. The collected protocol fees are divided into two parts: 80% of the fee is allocated to the buyback and burning of SRM tokens, while the remaining 20% goes to the project or GUI that hosts the activity.

Serum Fees Discounts

For details on various fee discounts and their corresponding SRM holding requirements, please refer to the image above.

In addition to these fees, it's important to note that different GUIs developed on the Serum framework may have their fee structures. Furthermore, the Solana network imposes nominal transaction fees, and in specific scenarios, it may also levy what is known as an 'open order account rent fee.'

The 'open order account rent fee' stands at 0.02 SOL per market pair. This fee is incurred when trading a market pair for the first time and is utilized to establish the intermediary “open order account” that interacts with the DEX. Importantly, this fee can be reclaimed if you do not intend to use that particular market pair again.

Serum KYC and Account Verification

Serum operates as a decentralized protocol, meaning it does not implement any Know Your Customer (KYC) or account verification procedures. It's worth noting that various GUIs constructed on the Serum framework might have their own KYC or Anti-Money Laundering (AML) processes in place. However, the decentralized nature of most GUIs typically results in the absence of KYC or AML requirements.

To utilize the platform, all you require is a self-custody Solana wallet and a supply of SOL tokens to cover network fees.

Security

Serum has been privately audited. A public audit for the next version of Serum, called Serum V4 or Serum Core, is currently underway.

Cryptocurrencies Supported on Serum

Serum facilitates the trading of any SPL token, provided that there exists a market for it with sufficient liquidity. Furthermore, the forthcoming launch of Serum Core will introduce the capability to trade DeFi products like Perpetual Futures without necessitating tokenization on the network.

Design and User Experience on the Serum Exchange Platform

Serum distinguishes itself by not hosting its own trading interface. Instead, it relies on a multitude of diverse DeFi projects that have chosen to build on its foundation. These projects often offer exceptionally user-friendly and efficient graphical user interfaces (GUIs).

These GUIs present users with tailored and distinctive trading experiences, enriching the Serum ecosystem's diversity. Within this ecosystem, users can explore a wide array of DeFi products, including derivatives exchanges, swap aggregators, crypto indices, lending platforms, and more, all developed on the Serum framework.

Serum's core design principle was to serve as a foundational protocol for various DeFi ventures within the Solana ecosystem. Remarkably, it has consistently upheld this vision, fostering a thriving and dynamic environment for DeFi innovation and accessibility.

Deposits and Withdrawals at Serum

Serum operates as a non-custodial protocol, facilitating peer-to-peer trading among various wallets within the Solana blockchain. Consequently, Serum itself does not impose any deposit or withdrawal fees.

It's worth noting, however, that the different GUIs built on top of Serum may introduce their own custodial features. These features could include collateralization accounts for derivatives or margin trading, which may have associated charges or requirements. Users should consider these aspects when engaging with specific GUIs on the Serum platform.

Serum Tokenomics (SRM & MSRM)

Within the Serum Project ecosystem, there are two tokens: SRM and MSRM. These tokens are implemented as SPL tokens on the Solana blockchain.

Utility

The SRM token serves a dual purpose within the Serum ecosystem. It acts as both a utility token and a governance token. SRM token holders have the privilege to participate in voting on governance proposals within the Serum DAO. Additionally, they can access trading fee discounts that scale with the number of SRM tokens they possess.

In contrast, the MSRM token is distinctive, with a limited total supply of 1,000 tokens. MSRM tokens are generated through the lockup of 1,000,000 SRM tokens within a dedicated contract. Holders of MSRM tokens enjoy exclusive benefits and privileges, including enhanced discounts and the capability to operate a node within the network.

Token Supply and Emissions

In terms of token supply and emissions, SRM has a capped maximum supply of 10,161,000,000 SRM tokens. On the other hand, MSRM has a maximum supply limited to 1000 tokens, equivalent to 10% of the SRM supply.

The Serum ecosystem initiated with an initial 10% of its token supply unlocked. The remaining 90% is gradually entering circulation through validator and staking rewards, distributed over a span of 6 years. This emission process commenced on August 11, 2021, with an approximate daily emission rate of 1/2190.

Price History

SRM Price History

SRM tokens entered the trading arena in August 2020. Since then, they've experienced various price milestones. The token achieved its peak value of $13.72 in September 2021 and its lowest point of $0.11 during its Initial Exchange Offering (IEO) in 2020.

As per data from CoinMarketCap, the current trading price of SRM stands at $0.90, accompanied by a market capitalization of $236 million. This price level reflects the prevailing sentiment of reduced interest in DeFi projects within the context of the current bearish market conditions.

Customer Support

Serum operates as a decentralized initiative overseen by the Serum DAO, which plays a pivotal role in allocating funds to projects contributing to the Serum ecosystem. While traditional customer support channels may not be available, users can seek assistance and clarification by engaging in the project's Discord or Telegram channels.

It's worth noting, however, that in comparison to many other crypto Discord servers, the level of activity and responsiveness in Serum's Discord channel may not be as high. As a result, users might encounter longer response times or may need to reiterate their queries before receiving a satisfactory answer.

Conclusion

In summary, Serum is a permissionless Solana-based protocol for decentralized exchanges (DEXs). It provides a non-custodial order book for precise trading. Serum's key strengths include shared liquidity, true composability, and a permissionless environment.

Serum has two tokens, SRM and MSRM, which offer governance rights and trading fee discounts. However, it needs to improve documentation and community support.

Regulated by no one, Serum offers decentralized finance freedom but requires users to exercise caution.

The future looks promising with innovations like Serum Core, set to revolutionize decentralized trading. Despite challenges, Serum is a vital player in Solana's DeFi ecosystem, fostering innovation and accessibility.

FAQs

Q1: What is Serum's main purpose？

A1: Serum serves as a decentralized exchange (DEX) protocol on Solana, empowering developers to create their DEX interfaces with an on-chain order book.

Q2: How does Serum handle fees？

A2: Serum charges fees only for taker orders, with the amount depending on SRM token holdings. Makers, who provide liquidity, pay no fees.

Q3: Are KYC and account verification required on Serum？

A3: No, Serum is decentralized and doesn't implement KYC or account verification. Some GUIs on Serum may have their own procedures.

Q4: What are SRM and MSRM tokens used for？

A4: SRM tokens serve as governance and utility tokens, offering voting power and trading fee discounts. MSRM tokens have limited supply and special benefits, including the ability to run a node.

Q5: How does Serum address liquidity fragmentation？

A5: Serum tackles this issue by fostering composability among various applications and participants on its platform, creating a unified space for shared middleware and flexibility.