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Serum: The World’s First Decentralized Derivatives Exchange

Serum claims to be the first decentralized exchange that solves many problems that DeFi has been struggling with. IEO sale goes live on Friday. Let us see what this project is.

Cryptocurrencies may be the gold standard for decentralized mechanisms and technologies today. From decentralized money to smart contracts that enable almost anything imaginable, there’s no better way to showcase the potential of trust-less systems that function optimally. Surprisingly though, most crypto exchanges continue to be centralized. And several DeFi projects continue to follow similar models. This might be set to change.

Serum claims to be a completely decentralized derivatives exchange and is set to create ripples in the DeFi ecosystem. DeFi has been struggling with underlying weaknesses, and it seems Project Serum has the antidote. The Serum protocol is permission-less and allows trust-less cross-chain trading – truly walking the talk with its decentralization objective here.

Tackling Current Problems with DeFi

Serum aims to lead the way in decentralized exchange (DEX), and as liquidity and trading volumes increase, this seems to be the perfect time to provide users with such an exchange. 

Let us take a look at some of the problems with DeFi that Serum will be tackling:

  • Centralization

Often, in the most crucial step, a lot of DeFi protocols bottom out in a centralized oracle. Plus, many decentralizing protocols are computationally intensive. Therefore, it has been challenging to fit them into the ETH blockchain in a cost-effective manner. Serum enables decentralization and allows for making cheaper and faster trades.

  • The Stablecoin Dilemma

The need for a stablecoin that is always worth a dollar and does not rely on a bank account not being shut down has always been felt in the DeFi ecosystem. Serum also provides a solution to the stablecoin problem.

  • Order books

Since the ETH network can be slow and expensive to support sophisticated order books, DeFi systems often do not feature them. Serum, however, packs in order books and supports the best technology from centralized exchanges.

  • Cross-Chain Support

If any asset could be seamlessly moved anywhere, regardless of the native blockchain, processes would become so much smoother. Serum has overcome this hurdle and provides cross-chain support. With Solana being the native blockchain, Serum will be completely interoperable with Ethereum.

Serum Tokenomics

The term tokenomics refers to the study of how cryptocurrencies operate in their broader ecosystem and involves all the factors that may affect the value of crypto tokens. In the case of Serum, the tokens we’re dealing with are SRM (Serum) and MSRM (MegaSerum). They have been designed with certain principles in mind. Let’s take a closer look:

Serum tokens accrue their value through utility and not through hyperinflation. A commitment to Serum is one of the primary aspects that is rewarded in this ecosystem since over 90 percent of the tokens have extended unlocking periods, and all seed-sales have long-term lockups. Clearly, they are not meant for quick profits, but long-term supporters of the Serum ecosystem. 

While the SRM token gives specialized governance power over Serum, MSRM is a scarce asset that gives increased utility to core believers in Serum.

Serum’s Unlock Schedule | Source

Other Salient Features

In addition to its speed, low cost, and cross-chain support, Serum has certain other salient features.

  • It has physically settled cross-chain contracts, which will allow easy margin positions in DeFi on synthetic assets.
  • The order book is decentralized and fully automated on-chain, and orders are from Serum end users.
  • The SerumBTC is a model for creating an ERC20 or Solana tokenization of BTC, and therefore it would be a fully trustless BTC coin.
  • The SerumUSD, on the other hand, is a model for creating a decentralized stablecoin that does not have a single point of failure.

Participating in the Token Sale

Serum’s ecosystem is set to hold a token sale on Friday, 7th August 2020, to enable users to participate in its Initial Exchange Offering (IEO). The IEO will be held on the FTX derivatives exchange. By default, each user will be given one ticket to enter. Those who have held FTT and have higher trading volumes will get bonus entries into the IEO. The specifications are as follows. To be eligible to enter, users must be KYC level 2 compliant.

  • Your average daily FTT holdings will be considered for the 30 days prior to the IEO. If these are greater than 10, a one-ticket bonus will be given, while two and three ticket bonuses will be given for greater than 100 and 1000 average daily FTT holdings, respectively.
  • Bonus tickets will also be given for trading volumes in the past 30 days, depending on whether the volume exceeds $100,000, $1 million or $10 million.
  • Auction bids will be accepted in USD fiat or USD stablecoins. In addition to these, users may bid up to 36 FTT, which will serve as tie-breakers.
  • The FTT collected from this sale will be burned, and all the SRM won in the IEO will be listed next Tuesday and fully unlocked.

With a bid size of 2500 SRM and 1200 buyers (3mSRM), this IEO will provide an opportunity for people to become part of an ambitious DeFi project at an early stage.

The Team Behind the Project

Serum has been made possible by some of the best minds in the industry. The members have been part of other major ventures too. Take Alameda Research, Solana blockchain and FTX, which is a cryptocurrency derivatives exchange. The FTX CEO Sam Bankman-Fried and company chose the Solana blockchain as the basis for Serum since it is more scalable and cost-efficient compared to Ethereum. Robert Leshner, who was the founder and CEO of Compound protocol, along with Calvin Liu, who was a Strategy Lead for the same, are also part of the Serum team. Leshner was a former economist, Chartered Financial Analyst, and also the founder of two software startups. 

Sam Bankman-Fried and Gary Wang, the founders of FTX, have been instrumental in creating Serum. Prior to founding Alameda and FTX, Gary was a software engineer at Google, while Sam was a trader on Jane Street Capital’s international ETF desk. Other notable names associated with this project include CEO and founder of TomoChain, Long Vuong; Dan Matuszewski, co-founder of CMS; Clement Ip of Genesis Block; Shane Molidor of BitMax; Santiago Roel Santos, and Dan Friedberg.

Does Serum look like it can achieve their goals? Let us know in the comments below.

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