Serum (SRM) is a decentralized exchange built on the powerful Solana blockchain. Compared to other decentralized exchanges, Serum prioritizes speed, low-cost trading fees, and a user experience similar to centralized exchanges like Coinbase.
Using the permissionless Serum DEX, anyone can open an account and quickly trade crypto assets on a near-zero cost basis. Plenty is going on under the hood, so let’s unpack what Serum is and how it works.
The team behind Serum, a high-performance DEX built on Solana, believes decentralized finance should prioritize utility first. Plenty of DeFi apps and protocols feature impressive UI, but once you click confirm transaction, expensive trading fees and long transaction times await you.
Is there a better way? Serum believes there is — beginning with building differently.
Instead of offering yet another take on the AMM (Automated Market Maker) model, Serum features an integrated on-chain order book similar to what you use on Coinbase and Binance. This feature also enables cross-chain asset trades.
Using Ethereum to host an on-chain order book is prohibitively expensive because each interaction with the order book is a costly transaction and oracle query. That’s why the AMM model rules when it comes to Ethereum-based DEX protocols — trades are simple swaps with liquidity pools.
Serum gets around the cost barrier by using Solana, a faster and cheaper blockchain compared to Ethereum. By choosing to build on Solana, Serum delivers a blazing fast DEX experience that costs less than $0.00001 per trade to use.
The brains behind Serum include FTX mastermind Sam Bankman-Fried, Long Vuong of Tomochain, and none other than Compound’s Robert Leshner. With architects and advisors like these backing Serum development, it’s no wonder the exchange offers groundbreaking features.
If you regularly trade, especially on Ethereum-based DEXes, you know the pain of waiting minutes, hours, or even days for a trade to settle. Moreover, to get fast trade finality, you need to appease Ethereum miners with a fast gas offering.
Serum settles trades in less than a second. Take a moment to let this sink in: A decentralized exchange enables virtually real-time transactions on par with the fastest centralized order books in the world. That’s the power of Serum’s trading engine. And, it’s a significant reason why Serum may eventually become the crypto trader’s weapon of choice.
Serum’s implementation on Solana is what makes the on-chain order book possible. As you might have guessed, an on-chain order book is a big deal. It enables high-speed and accurate trades with minimal slippage compared to the AMM model. Additionally, you get complete control over your trade parameters, just like on Coinbase Pro.
Large market makers such as Alameda Research provide liquidity to the central order limit book, or CLOB, allowing Serum to match your order on the blockchain quickly. Matching up buyers with sellers in an almost instant fashion makes Serum amongst the most, if not the most, capital-efficient DEXes today.
Ethereum is the home of DeFi, but it suffers from significant network congestion, causing scaling woes across all network-bound apps.
On the other hand, Solana is capable of 50,000+ transactions per second and can query data on demand at almost zero cost. Serum leverages the best of both worlds by being fully integrated across both Ethereum and Solana.
Interoperability is a big deal in DeFi because it unlocks vast amounts of liquidity between ecosystems that remain otherwise inaccessible to each other. That’s why you can’t trade SPL, BEP-20, or Polkadot tokens on Uniswap — it’s running on Ethereum only.
Serum gains extraordinary exchange throughput from Solana to enable instant trading. However, on the Ethereum side, Serum has access to deep liquidity across countless tokens.
One of the biggest challenges in DeFi is decentralized cross-chain token swaps. Serum believes they’ve solved going from native BTC to native ETH without trusted third parties via a novel use of smart contracts.
Serum cross-chain swaps work by having counterparties send collateral tokens to a smart contract (readable on both Solana and Ethereum chains). Once the collateral arrives, participants swap tokens (BTC, ERC-20, or SPL).
If the tokens are received, both sides go away happy. If not, evidence is submitted to the smart contract, which then uses oracles to judges the situation, then releases the tokens in the contract back to the rightful owner.
As such, the Serum smart contract acts as a decentralized and objective arbiter between counterparties, enabling trustless token swaps between non-compatible token standards.
New cryptocurrency projects can hold IDOs (initial DEX offerings) on Serum to quickly raise funds and distribute their tokens to buyers. The IDO model is popular on Uniswap and Binance DEX. However, Serum’s speed and low cost make it an attractive way to offer tokens.
Well-known maps app Maps.me held its IDO on Serum, as did Raydium, a DeFi protocol for the Solana ecosystem. IDOs generate large amounts of traffic and trading fees to Serum which, in turn, means more SRM tokens burned from the supply to drive token scarcity.
Serum is more than just a DEX — it’s an ecosystem. Like any decentralized ecosystem, anyone can benefit by building on top of it or using its key features.
So it goes with Serum’s white-label DEX solution. If you’re keen to build your own decentralized exchange but don’t want to figure out the liquidity side, Serum has you covered.
In a nutshell, Serum code is open-sourced and enables anyone to build a GUI (graphical user interface) on top of Serum’s CLOB (central limit order book). This way, Serum takes care of the liquidity, and you take care of the design, audience, and markets.
Check out the Serum Academy to see dozens of projects built on Serum so far.
The vibrant Serum ecosystem utilizes SRM tokens for many purposes, all of which benefit SRM holders and the platform itself. Amongst the use cases for SRM token are:
Besides being highly utilized on the Serum DEX itself, SRM tokens have a long-term vesting period for the team, advisors, and early investors. SRM tokens are unlocked over a linear six-year schedule that aligns with the team’s grandiose vision of acquiring 1 billion users.
However, it’s clear that Serum’s true ambitions reside far beyond being a mere DEX. Serum’s permissionless, open-source nature makes it possible for anyone to build on top of the Serum order book, tap into the exchange’s liquidity, and push capital efficiency.
Serum’s IDO feature also puts the platform front-and-center for all things DeFi-related in the booming Solana ecosystem. As such, Solana DeFi projects like Mango Markets are plugging into Serum’s robust features to leverage deep liquidity, speed, and interoperability.