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In the letter
- Swap, an automated market maker like Uniswap, has launched Serum.
- Serum provides a DeFi infrastructure using the Solana blockchain, a competitor to Ethereum with faster block times and higher transactions per second.
- Swap on Serum will pass Serum’s native SRM token to liquidity providers for one month to initiate participation.
DeFi users have a new option for exchanging crypto tokens, if they are willing to make the leap from Ethereum to the Solana blockchain.
Swap, a new decentralized exchange market, launched today on Serum, a DeFi platform developed to run on the Solana blockchain. Serum was developed by FTX exchange CEO Sam Bankman-Fried and uses the Solana blockchain to achieve faster transaction speeds and lower transaction costs than blockchains like Ethereum, which currently hosts the vast majority of DeFi protocols.
To get the DEX up and running, Swap will offer liquidity providers additional rewards in the form of Serum tokens distributed until November 25th. Serum tokens are used to pay transaction fees on exchanges powered by the Serum infrastructure.
The launch is part of Solana’s ongoing DeFi game. Earlier this month, it Wormhole shipped, a bridge from Solana to Ethereum, in an attempt to obtain DeFi projects to leverage its nascent blockchain. Last week it became the third blockchain a add the USDC stablecoin, which its co-founder, Anatoly Yakovenko, sees as “the lifeblood of the DeFi ecosystem”.
This move brought the commercial interests of Solana, Serum and broadcaster USDC Circle into line.
DeFi, short for decentralized finance, uses an automated code known as smart contracts to issue loans, provide interest on deposits or perform other banking-like functions, without the bank. Instead, DeFi applications harness the computing power of decentralized blockchain networks, with the vast majority running on the Ethereum blockchain.
Serum’s Swap is one of the first DeFi apps to be launched on a different blockchain, in this case Solana. Solana, currently in beta testing prior to full mainnet launch, offers block times of less than one second, meaning it can process and settle thousands of transactions per second.
That throughput should help keep transaction fees low to compete with record-breaking fees on Ethereum in recent months. The Ethereum blockchain can process around 15 transactions per second, increasing the cost of using DeFi applications when many users send transactions at the same time.
Serum, launched in July, provides decentralized infrastructure exchanges and has added several dollar-linked ones stablecoin to allow DeFi transactions to be denominated in the familiar US currency, inclusive To tie is USDC. Where previous decentralized exchanges used on-chain order books to match buy and sell orders, Swap is the first automatic market maker (AMM) released on Serum, similar to Uniswap on Ethereum.
AMMs facilitate swaps by using deposits from liquidity providers, who in turn are rewarded with trading fees for putting their crypto tokens to make trades possible. Instead of an order book, trades are automatically matched using pooled liquidity and do not require dedicated accounts or identity checks, as required on most centralized exchanges.
Adding AMM to Serum helps demonstrate that the platform is as versatile as Ethereum and offers several cost and speed benefits that could take years to match. If fees start to rise again as interest in DeFi continues to grow, it could lead to rapid growth for the fledgling Serum Swap exchange.
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