Market analysis of cross-chain decentralized order book transaction protocol Serum (SRM)
1. Project introduction
Serum is a cross-chain decentralized transaction protocol of the Solana ecosystem based on order book. It is mainly launched by Sam Bankman-Fried, founder of FTX.
Therefore, Serum can be regarded as a decentralized “FTX”. The market logic of Serum’s launch is: Currently, the DEXs based on Ethereum, such as Uniswap and Sushiswap, are all in the AMM (automated market making) model. This DEX model does not need the high-throughput transaction required by the Order Book model, and popularized on-chain transactions. However, the Ethereum-based DEXs still have scalability problems, such as the high gas fee and inability to handle high throughputs. As a result, the loss from the high-frequency and small-value transactions would outweigh the gains.
To solve the problems, Solana, an infrastructure with better scalability, lower gas cost and greater throughput, was chosen and the Order Book model-based Serum was born. This combination will offer more possibilities for high-frequency and small-value transactions in the market. (Note: Solana’s TPS can reach up to 5,000,000)
Serum users can trade based on the Order Book mechanism. The mechanism can achieve prelisting and high-frequency trading through high transaction speed and low handling fees, making the long tail market more liquid.
In addition, Serum is not a DEX in a single ecosystem, but defined as a cross-chain DEX from the beginning to completely open up the cross-chain asset trading market:
· Serum has interoperability with Ethereum and ERC-20 assets;
· Serum assets will also flow into Ethereum;
· Serum provides a Bitcoin cross-chain scheme;
· Serum provides a solution to stabilize the dollar.
In terms of transaction ecosystem, Serum has improvements in the following:
· The native asset SRM can be used to reduce transaction costs or other uses;
· Cross-chain swap, trustless cross-chain asset swap;
· Order book: a decentralized order book, which can be used to submit limit orders. Besides, transaction matching is also automatically executed on the chain;
· Ethereum and Solana can be fully integrated: Solana can make Serum fast and efficient, and has interoperability with Ethereum’s ecosystem or ERC20 assets;
· Cross-chain contracts for physical delivery: users will be allowed to trade margin positions based on Serum;
· fBTC (SerumBTC) a trustless Bitcoin cross-chain generation mechanism. The asset SerumBTC that is pegged to the value of Bitcoin and can be issued in Ethereum or Solana;
· fUSD (SerumUSD): Decentralized dollar stable currency generation mechanism, which avoids the single point of failure of other stable currencies.
At present, Serum’s partners include many Solana ecosystem projects such as the AMM protocol Raydium, the front-end platform Bonfida, the application scenario Maps.me 2.0, the lending protocol Oxygen, etc.
The SRM total circulation is 10 billion tokens, including:
20% allocated to teams and advisors;
22% allocated to project contributors;
4% for locked seed and auction purchasers;
27% allocated to partner and collaborator funds;
27% for ecosystem incentives fund.
The initial supply of SRM accounts for 10% of the total circulation and grows at a rate of about 15% per year. All pre-sale, team and contributor sections will be unlocked within 1 to 7 years after launch.
The initial supply is allocated as follows: 175 million tokens are used for initial liquidity, of which 50 million tokens are used for circulating supply and 125 million tokens are used for reserves; 825 million ecosystem incentives for SRM holders and Serum users, such as staking rewards.
3. Primary and secondary markets
According to relevant information, 3% (300 million tokens) of the total number of Serum are auctioned in the form of MSRM in two stages through private placement, totalling 300 MSRM tokens.
The issue price of the first MSRM in the first stage is $50,000 USD, that is $0.05 USD/SRM token. After that, the price of each MSRM is $400 USD higher than the previous one.
In the second stage, the Dutch auction is adopted, and 75 MSRM are auctioned in batches. The starting price of this stage is the highest price in the first phase of seeding round private placement. Moreover, buyers with the highest bidding price win.
MEXC Global data shows that the opening price of SRM secondary market is 2 USDT/ token, and the highest price is 13.69 USDT/token. As of September 29, the market value of SRM is $972 million USD, ranking 92nd in market value.
4. Fundraising situation
In July 2020, Serum completed a private fundraising round of $20 million USD within three days. At present, Serum has received the support of Multicoin, 3Commas, Sino Global, Solana, Kyber, CMS, CoinGecko, TomoChain, Gauntlet Network, Bcoin, Proof of Capital, Compound founder Robert Leshner, and other organizations and individuals.
5. Practical value
1. One MSRM token can be synthesized for every 1 million SRM tokens, and the holders of MSRM can get 60% of the transaction handling fee reduction and exemption;
2. As a cross-chain solution, 10 million SRM tokens are staked in the Serum system to obtain MSRM. It will also become a verification node to provide cross-chain services and obtain service fees;
3. SRM can be used for governance voting.