DeFi exploded in the last bull run. Many projects got their start and rode that bull all the way to the top of the mountain without a second thought. Among these successful DeFi projects, one decentralized exchange (DEX) saw a gap in the market and initiated a campaign to fill it.
For years, users and developers in the DeFi space have been held back by high gas fees and slow transaction speeds. Serum aims to resolve this and other issues that plague traditional DEXs.
Serum is built on the Solana blockchain. Solana uses a different consensus mechanism (to verify transactions) than Ethereum, which is quicker and more affordable. For reference, Solana can reach 65,000 transactions, with transaction costs at sub $0.01! For more on consensus mechanisms, including those used by Ethereum and Solana, click here.
What is Serum?
Serum is a decentralized exchange built on the Solana blockchain that enables fast, affordable transactions. It uses an order book model similar to centralized exchanges, offering many advantages over the AMM model traditionally used in DeFi.
Let’s quickly look at what the order books model is:
The order book model differs from the traditional AMM (automatic market maker) model used by other decentralized exchanges. This order book model is typically used by centralized exchanges. It makes for a very clean, clear, familiar user interface for traders. Users can also choose the price, size and direction of their trades.
What is SRM?
SRM is the native token of Serum. It is a utility and governance token. Users receive discounts on protocol fees and can vote on proposals presented by the platform.
The SRM token offers traders up to 60% off trading fees. These proceeds are then reinvested back in to benefit SRM. The fees are used to purchase and burn SRM tokens, making it a deflationary asset.
Users can stake 10 million SRM to run a node that can validate transactions. This staking feature seems to be the primary utility. However, since it’s unlikely a user will have access to 10 million tokens, it’s not very practical. This lack of real utility may be Serum’s big weakness.
Conclusion
At the end of the day, Serum is where most of the trading/swapping occurs in the Solana ecosystem. Nearly every protocol built on the Solana blockchain leverages Serum order books in some form or another. Like GenesysGo, which we also covered recently, Serum is an integral part of the Solana ecosystem. Arguably, no Serum equals no Solana. The offering of cross-chain swaps is also a big step in the right direction for Serum.
