Serum: A Solana-Based DEX

With extensive experience as an electrical/software/coding engineer along with having a diverse financial background, Thomas Wettermann’s areas of interest include Machine Learning (ML), artificial intelligence (AI), and Financial Technology (FinTech). For the past few years, Thomas Wettermann has focused on the underlying technologies that support and promote all phases of cryptocurrency and metaverse ecosystems. 

What Problems does Serum Solve?

In light of the popularity of DeFi and the growth of DEX’s that rely almost exclusively on Ethereum, users and developers have been challenged by volatile gas fees and slow transaction rates. Serum meets these challenges head-on, while also enabling other key features, such as offering cross-chain transactions and providing a decentralized automated order book run by smart contracts. 

Speed

Over 70% of all DEX’s utilize Ethereum but these experience slow transaction times and high gas fees. To combat slow processing times and high gas fees, Serum opted to run on the Solana open-sourced blockchain. Solana is a huge attraction to dApp developers because of its network performance. Solana can handle up to 50,000 transactions per second (TPS), while Ethereum can only handle about 15–45 TPS. 

Transaction Costs

Solana charges a transaction or gas fee of only $0.00025 per transaction. Compare that to Ethereum's gas fees which can range anywhere from about $6 to about $250, depending on the network congestion.

Cross-Chain Swaps

With existing DEXs, how does a buyer having Ethereum trade or swap with a seller who only owns Bitcoin? Serum provides a solution.

Serum offers a completely decentralized solution to this exchange, without relying on a third party who must control or manage such a swap. Serum offers a more decentralized solution than can be offered by custodial exchanges, like Coinbase and Binance.

And by avoiding the need for a third-party to complete cross-chain swaps, trades on Serum are also more secure than trading through a third-party custodial exchange.

Order Book

DEX’s running on Ethereum are currently too expensive and slow to support an order book due to its system limitations. These exchanges must therefore utilize Automated Market Makers (AMM) which have certain inherent limitations, such as dealing with liquidity and slippage.

In contrast, Serum provides users with an on-chain order book. This enables participants the freedom to choose the price, the size, and the direction of trades. For example, Serum offers stop orders and limit orders typically included in centralized exchanges (CEXs) but are currently not available with most DEX providers.

Moreover, by offering an order book format, Serum also makes it easier for CEX users to make the transition to a DEX.

What is the Current State of Serum?

Based on transaction volume, Serum currently ranks as the fifth-largest DEX in the world. Over the last 24 hours, more than $550 million in transactions flowed through Serum.

And Serum’s market acceptance in the DeFi marketplace will probably continue to grow. For example, as the second-largest cryptocurrency exchange in the world, Coinbase recently began listing Solana’s ecosystem’s tokens. So, this will probably create greater exposure to Solana and its SPL tokens (which includes Serum).

And as can be seen from the seven-day Serum price action graph provided below, Serum experienced a bit of a bullish run shortly after Coinbase first listed Solana and its SPL tokens (February 1, 2022).

Serum Seven Day Price Chart (source:coinmarketcap.com)

Conclusion

Because of its speed and efficiency, Serum will continue to see growing developer adoption as it moves up the ranks of top DEXs. Serum is unique in that it is a DEX that offers several competitive advantages including cross-chain transactions and open books.

All the views expressed on this site are those of Thomas Wettermann and do not represent the opinions of any entity with which Thomas Wettermann has been, is currently, or will be affiliated.

Trading digital financial assets such as cryptocurrencies can carry a high level of risk, and may not be suitable for all investors. Before deciding to invest, purchase, and/or trade cryptocurrency you should carefully consider your investment objectives, level of experience, adversity to risk, and volatilities. The possibility exists that you may sustain a loss of some or all of your initial investment; therefore, you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with cryptocurrency trading, and seek advice from a qualified and independent financial advisor.

Thomas Wettermann is not an independent financial advisor. Any opinions, news, research, analyses, prices, or other information contained on this website is provided as a general market commentary of Thomas Wettermann and does not constitute investment advice. Thomas Wettermann will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. All opinions expressed on this site are owned by Thomas Wettermann and should never be considered as advice in any form.