Serum: A Blend of Speed, Convenience and Trustlessness

As the next-generation exchange system, Serum is making waves in proving its credibility in crypto-trading and decentralized finance transactions. It provides faster and frictionless orders with its automated order book system.

Serum provides incentives to its users which in turn favors so many developers. Some of these incentives are Serum Token (SRM) and MegaSerum Tokens(MSRM). With these tokens, one can achieve passive crypto income by staking their tokens on Serum.

Serum allows every member to stake their tokens. It doesn't only allow members with the highest token to stake, it also allows members with small tokens to stake too.

Seeing that Serum DEX has so much to offer, there's a need to know so much about it. In this article, we'll extensively discuss Serum DEX and its features. Also, we'll discuss the values and how it relates to other blockchains. Enjoy!

What is Serum?

The Serum is a decentralized exchange system built on the Solana ecosystem to provide unmatched low costs and speedy DeFi transactions. It charges as low as 0.0001 cents for transactions.

The system aims to offer users faster settlement times and zero centralization.

In offering a non-centralized side of its architecture, it centralizes price fees even without using Oracles services. Hence, we say the Serum system functions without Oracles. Oracle is a centralized service used by Defi protocols to verify, authenticate and query external data then send them to an already closed system.

Because Serum is based on the Solana blockchain, it offers fully decentralized services that are easy, fast, and affordable to use.

In Serum DEX, users can easily transfer assets amongst different blockchains and even trade stable coins and wrapped coins or even convert coins from one coin to another. For instance, converting Ethereum to FxT. Some of the projects build on Serum DEX are:

Furthermore, users can create customized financial products as they deem fit.

The Serum uses native Serum tokens(SRM) as its main governing assets and incentive for its ecosystem. With SRM, users can stake, trade, or participate in burn and buy fee incentives for reduced trading costs.

Also, with the SRM, users enjoy a further reduction in Serum-based transactions.

Aside from all of these, Serum aims to enhance frictionless cross-chain contracts in DeFi while traders trade synthetic assets. It provides many synergies with the Solana blockchain serving as its host application.

Solana Blockchain

As the fast-growing blockchain system, Solana has secured a spot in the top 10 cryptocurrency projects according to the market cap. Being able to carry out fifty thousand transactions in a second(TPS), Solana blockchain has demonstrated to be the quickest blockchain anywhere on the globe. So, Serum building their project on the Solana network will allow for quick fast transactions on the Serum network.

Solana, with all of its functions, is a layer-1 blockchain. So, to function effectively, Serum functions solely on a layer-1 solution system without layer-2 solutions. It operates solely on a decentralized clock that monitors time-stamps transactions together with an advanced Proof-of-Stake(POS) mechanism.

In recent times, blockchain developers have been designing decentralized applications using the Solana blockchain. This widely accepted choice from blockchain developers is due to Solana's reputation in providing fast and scalable smart-contract-enabled blockchain. It's this advanced blockchain system that the Serum network is built on. Clearly, Serum is just a project on the Solana ecosystem.

That said, Serum DEX mirrors the cost and speed of the Solana network. With this, it offers a fully decentralized trading arena with easy trading on centralized exchange systems. It also offers inter-operable features that allow users to exchange assets such as Ethereum (ETH), Bitcoins (BTC), SPL-based tokens, and ERC-based Tokens.

Serum Token (SRM)

A unique thing about the Serum token (SRM) is its means of collecting values. It accrues values via hyperinflation.

SRM accrues values through adoption and utility. Some are:

All Serum's net fees go to burn.
50% off on all Serum fees on holding a token.
Fees payment with SRM.

That said, most SRM have extensive unlocking terms with all sales fees inclusive. Serum achieves this by locking the tokens. SRM are locked cryptographically in a smart contract. It takes about a year or less to unlock a locked token.

The period where you cannot unlock a locked token is its unlocking period. Most SRM have an unlocking period of one year.

In some cases, some SRM take up to 6 years to unlock. This type equates to 1/2190 SRM in a day.

SRM amount to a maximum of 10 Million tokens, creating about 175 million tokens in its circulation. Because of this high number of tokens in circulation, Serum has been able to provide liquidity to their project. However, several token stakeholders have decided to hold on to a large number of their tokens thereby reducing the number of tokens in circulation.

Moving on, several traders stake SRM to achieve passive crypto income. They also do this by rescuing fees and staking rewards when trading on Serum DEX.

Howbeit, traders with SRM can still partake in on-chain governance. Traders who do this will vote on updates to specific markets on the project.

MegaSerum Tokens (MSRM)

A MegaSerum(MSRM) is equivalent to one million SRM. It means you have to have a million SRM as they'll amount to one MSRM.

MegaSerums are rare and there are only 10%. This is so as there are just fewer users that show belief and commitment to the Serum network. It's just those 10% that can lock their SRM with MSRM.

Project Serum Cryptocurrency Ecosystem

The project Serum, built on the Solana ecosystem, provides usable services to developers and other users from the start of their project to its deployment. On a large scale, this ecosystem provides a suitable platform for non-technical users planning on delving into Decentralized Finance(Defi). This they can do on Serum's user-friendly App(dApp).

That said, in the Serum ecosystem, developers are automatically eligible for grants once they build on this network. With this, projects receive the support and funding to enhance their user adoption and brand awareness.

A good example of a project like this is the Phantom project. The Phantom project is a Defi(Decentralized finance) and NFT crypto wallet. Another example is Coin98 that offers users smooth running payment gateway services.

Also, Project Serum provides developers contact points and resources. With that, you can view on-chain codes, clients codes, and repositories. The project also offers tutorials for developers which can be found on the "Developer Resources" on its website.

Finally, the Project Serum allows users to comprehensively overview all Serum's tokens and integration within its ecosystem. And to top it all, the project provides a link to its whitepaper.

Serum and Staking Nodes

Before one becomes a Serum node, one must take at least 10million SRM including a minimum of 1 MSRM. However, at 100 million SRM or 100 MSRM tokens, nodes stop staking tokens.

Nodes collect several rewards based on their network participation, the aggregate of activity, and performance within the Serum ecosystem. Generally, nodes are in charge of some blockchain operations like cross-chain settlement validation.

Staking

Oftentimes, traders can't continue the Serum project and earn passive income via Defi because they can't stake 10 million Serum tokens. This shouldn't be a challenge as there are alternatives to this.

Serum token holders can now stake tokens as regards a node. A node is formed by a leader and consists of members of that network. The node leader doesn't necessarily have the highest tokens. But the leader can be the founder of the node and will receive small fractions of node staking fees.

In a node, anyone or the leader can stake a node on behalf of another member. Still, Serum nodes will offer trading fees and governance rights within its ecosystem.

However, there're mechanisms to provide an overload of tokens in the ecosystem. As many readers stake their SRM tokens, the system cools down following unstacking tokens. This period, known for just a week.

Node Rewards

In a node, rewards are distributed through native SRM. However, the nodal leaders receive more proportion of the node than other members. Commonly, the leader receives 15% of the rewards while the 85% is distributed among other members.

Annually, nodes receive a 2% percentage yield (APY) based on their staked funds. However, this percentage can increase to around 13%. This can only be possible if members of a node increase their performance duties and challenges. Also, nodes get special rewards for special challenges. One of these challenges includes providing collateral for SRM tokens. The aim of this is to prevent funds from burning.

How to Use Serum

Serum exchange doesn't require that users own an account before a transaction. All you need to transact on Serum DEX is an internet connection, a wallet, and some cryptocurrencies.

First, if you're carrying out a transaction on Serum, you’ll be needing a Solana wallet. Asides from the Solana wallet, there are other wallets that Serum interacts with.

Some are:

To switch between the wallet, click on the change wallet at the top right corner of the interface. Then pick your desired wallet.

Here is a breakdown of how to use the Serum before we delve into each process extensively.

Create a Solana wallet

Here is a link that explains how to create a Solana wallet.

After creating a Solana wallet, on the first opening, you’ll be asked to write down your recovery keys. Make sure to write them somewhere first as you’ll be needing them some other time.

Often, we advise users to create a password immediately after creating their Solana wallet.

After creating a password, you’ll be asked to re-enter your new password for confirmation.

After doing this, you click on continue. There you have it. You have just created your Solana wallet.

On your Solana wallet, you can deposit Eth and convert it to Sol and vice versa. As you’ll expect, there are conversion fees associated with this.

From another exchange system, you can click on the cryptocurrencies you have there and transfer them to your Solana wallet. In withdrawing your cryptocurrencies, you’ll be needing your already copied Solana wallet link to be able to receive your money.

To successfully withdraw, you will need to authenticate your transactions.

After a complete authentication, you can head to your Solana wallet. It’s critical to mention that this transaction doesn’t take long. It only takes a maximum of two minutes to complete a transaction.

Seeing that your cryptocurrency has arrived in your Solana wallet, you can add tokens by clicking on the add token feature on the interface. One may choose to add Serum unwrapped Bitcoin to the Sol.

These wrapped tokens can then be in the deposit and become real underlying assets.

Also important to note is the small fee attached to adding tokens to a Solana wallet.

The next thing to do is to find a Serum-based DEX to connect to this wallet.

Connecting your Wallet to Serum DEX

Connecting your wallet to Serum DEX shouldn’t be challenging provided you follow these easy steps. Below are simple steps on wallet connection.

On the Serum DEX interface, click on "connect" on the top right corner of the interface.

Ensure you must have selected your desired wallet before clicking connect.

And if you wish to change your wallet, you must disconnect from the current wallet, then, you can click the select wallet feature to pick your new wallet.

The Value of Serum

As of the time of writing this article, Serum values was the 11th most trending cryptocurrency. On the other hand, it was 141st on the coin market cap on that same day.

On the coin market, Serum was $8.10, a market price of $404.8 million, and a 24-hour value of $117.71 million.

To Wrap It Up

Serum DEX offers a platform for developers and other users to trade speedily and conveniently. For developers, it provides contact points and resources. Such that, they can view on-chain codes and attend tutorials. All that Serum offers is because of its conjunction with the Solana network.

Also Read Solana: Exploring the Blockchain

Compound Chain: A Comprehensive Guide

Compound Chain is a distributed ledger with the ability to transfer value and liquidity between peer ledgers. It means that Compound Chain allows users to borrow and lend cross-chain assets from different blockchains like Polkadot and Tezos. It will have its own native token called CASH, which will be used to pay for transaction fees on the platform.

The traditional Compound Governance structure will still execute the governance of the blockchain. Its traditional governance structure relies on COMP tokens on Ethereum. The team is building a limited-feature testnet implementation that will be released in early 2021.

According to the statement by Compound's founder Robert Leshner, "we want to announce the designs for a blockchain that can scale Compound ver the next century." The whitepaper revealed that there are three major limitations of the current Compound supported by the Ethereum blockchain. The limitations include high gas fees, the inability to serve assets on other chains, and all the supported assets aggregate each supported asset's risk.

All those new supported assets were not thought to be limited to blockchains of the trustless, permissionless variety as well. The new Compound Chain will support the forthcoming and rumored digital assets from investment banks and central banks. This new blockchain will be a reimagination of the Compound protocol, serving as a stand-alone distributed ledger.

It will possess the capability to solve the Compound Protocol's limitations by proactively positioning for rapid adoption of growth and digital assets on emerging blockchains like Eth2 and the central bank digital currency ledgers.

The Compound Chain is now part of the blockchain interoperability efforts. However, it is unique to attempt to do so in an application-specific manner.

The Governance of the Compound Chain

Although it is an entirely new and standalone blockchain, the Compound chain will be governed by the COMP token. This is the same Ethereum based system that runs Compound v1. Immediately the Compound Chain is live; it will be a considerable new set of powers accruing to the owners of COMP.

While the COMP token will govern the Compound Chain, the platform also introduces a new cryptocurrency called CASH. The native CASH token will be used to pay for transactions on the network. It will be minted the same way as DAI, as a debt against locked collateral held on the Compound Chain.

Cash will start arbitrarily pegged to the United States dollar, but its peg will be subject to governance decisions. Unlike DAI, all CASH will earn a yield from a portion of the interest that will be paid against loans on the blockchain. The actual amount will be one of the things that will be determined by COMP holders that take part in governance votes.

The main essence of the chain is to function like Compound but in a cross-blockchain way.

How Compound Chain will Improve Interoperability

Immediately a user uploads an asset on the Compound Chain ecosystem, the asset will also be available or lending to other users. However, users can decide to borrow against their assets or not. While on the Compound platform, such users can be able to borrow any supported asset. They will start with CASH, which is unique to the Compound Chain.

The one foreseeable prerequisite is that the blockchain should be able to support smart contracts. Smart contracts required for moving assets between Compound and the smart contract chains are all referred to as "starports." According to the Compound whitepaper, "The Compound Governance system on Ethereum established a distributed decision-making process. It is also capable of streaming governance actions to the Ethereum starport, which the Compound Chain validators receive instructions from."

Also, the chain can mint new assets. However, early user's ability to upload assets from other blockchains will be seen as more important. Users can upload an asset by moving the asset into a smart contract on layer-one chains (an example is Ethereum or Cosmos). The Compound Chain validators will witness the assets' move and then mint the corresponding Compound Chain wallet. According to the whitepaper, compound Chain is designed to enable bridging value between its connected "peer" chains.

More Information Underway

At the time of this writing this post, Compound Labs is yet to indicate the type of technology Compound Chain will be built on. They only revealed that it would rely on proof-of-authority architecture. All parameters will be set by the decisions of the participating COMP holders. The proof-of-authority is similar to proof-of-stake, but it is important to note that validators are only selected based on COMP holders. Leshner said that if a user can appoint malicious validators, it is the same as the user stealing all Compound funds. As an incentive to operate the protocol efficiently, validators earn a portion of the interest paid by CASH borrowers, for every block they author. The incentive (reward) for validators scales with the amount of cash in existence, thus increasing as a function of assets.

According to Leshner, proof-of-authority is just the launch setup. The governance can remove itself and switch to a fully open proof-of-stake system. However, this might take a while before taking effect. This system's main intent seems to be to help drive DeFi into all parts of the crypto ecosystem. The compound Chain team is already considering new business lines that could be enabled by this new chain.

For instance, some centralized digital currencies like the JPM coin may need known liquidators that have passed through compliance checks. This could be the role that the team could play for some more-restricted assets. Upon its launch, the aim is to replicate the user experience of Compound but with a completely clear path to be able to support all blockchain systems and assets.

The Fear of Centralization by the DeFi Community

Since it announced the launch of Compound Chain, there have been several negative reactions. Many respondents have expressed their concerns regarding the perceived centralization associated with the project. One of the major critics of the project is Set Protocol's, Anthony Sassano. Anthony pointed out that the reason for the expensive Ethereum gas fees is because of its high decentralization. According to Anthony, for Compound Chain to have fewer gas fees means that it will be less decentralized. Also, it is a proof-of-authority chain where COMP governors will choose the validators.

Conclusion

The new chain adopts a more centralized consensus mechanism, which has received a mixed reaction from the DeFi community. If the interoperability feature is exactly as the whitepaper has described, then it will be a great addition to the blockchain community.

Also take a deep dive in Uniswap V2 Protocol.

Decentralized Finance Categories Explained

In this article, you will get to know about the Decentralized Finance categories and projects associated with each category.

Introduction:

Decentralized Finance (DeFi), is finance but on the blockchain. In simpler terms, DeFi is permissionless dealing with finance, meaning, the intermediary such as banks, insurance companies, brokers, and more in real finance are replaced by smart contracts in Ethereum.

Read more about Decentralized Finance here.

Decentralized Finance Categories:

DeFi projects fall into different categories, these categories are:

Lending:

In Centralized Finance (CeFi), lending is when you allow someone or an organization to utilize assets by borrowing and paying it back later on. The Decentralized Finance categories also include lending, which is not that different. In DeFi, as the name suggests, the assets are cryptocurrencies or tokens, with no central authorities. Lending protocols allow the lender to earn interest as an incentive.

In the traditional finance system, you have to give proof of your identity in order to take out a loan. DeFi removes all of this friction. The collateral amount is all you need to take out a loan, there is no need for proof of identity.

The number of tokens or cryptocurrencies you can take out as a loan varies depending upon the rate of that token or cryptocurrency. At times, the amount of collateral put is greater than the loan.

A new lending protocol lets you borrow money without submitting collateral, i.e. via flash loans.

Flash loans or zero risk loans are contracts lending money. But there is one catch, it has to be paid back by the end of the execution of the same transaction. If he or she fails to do so the whole transaction will be reverted as if it never happened. This is only possible in the blockchain. The interest in flash loans is either zero or nominal.

Projects:

Some of the leading Decentralized Finance lending projects are:

DEXes:

Decentralized Finance categories also include DEXes, which deals with the exchange or trading of cryptocurrencies or tokens. Being part of the blockchain there is no need for a central authority. As a result, DEXes don’t have one point of failure. Your cryptocurrencies or tokens stay in your wallet, hence it reduces the number of risks. You are not putting your assets under someone else’s control, like in centralized exchanges where you put your assets in the exchange. The only time your assets leave your wallet is when a transaction takes place. DEXes don’t require some long procedure to verify your identity and provide legal documentation, as long as you have assets, you can trade them without restrictions. Smart contracts help to make all of these features possible.

DEXes use the concept of either order books or liquidity pools.

Using Order Books:

Order books are essentially just books with trade orders in it. The process of using order books is as below.

Users willing to exchange submit a buy or sell request, this request is stored in order books. This ordering turns the user into a “maker”.
These order books hold records about which tokens the user is willing to exchange and for what in return.
To validate the order, makers sign it with the private key.
This order is broadcasted through the exchange network and takers come forward with a trade.
If the maker is satisfied they confirm the order, and the smart contract takes care of the rest of the process.

Using Liquidity Pools:

The problem with order books is that they bring back the obstacle of centralization.

Decentralized Finance projects jump over this obstacle with the help of liquidity pools. The market makers are referred to as liquidity providers in this model.

Let’s look into how liquidity pools work.

Take a simple pool, this pool holds two tokens, when a new liquidity pool is created, a liquidity provider supplies both tokens of equal value to the liquidity pool and sets their initial price. Every person adding tokens to the liquidity pool will provide an equal value of both tokens. Liquidity providers earn LP tokens, based on how much liquidity they provide to the pool, when a trade takes place, a fee value is distributed among all LP token holders. With each trade, the deterministic price algorithm adjusts the price of the tokens. This mechanism is known as Automated Market Making.

Projects:

Some of the leading DeFi DEXes are:

Derivatives:

Derivatives are contracts with their values based on something else. By definition,

"The derivative itself is a contract between two or more parties, and the derivative derives its price from fluctuations in the underlying asset” - Investopedia.

To understand derivatives completely, let’s consider an example:

When the price of wheat increases, the price of bread will increase, similarly when the price of wheat decreases, the price of bread will decrease. Now, a wheat seller will have an advantage when the price of wheat increases whereas a bread seller will be at a disadvantage. The opposite is true when the price of wheat decreases. Suppose, the wheat seller estimated that the price of wheat will decrease, and the bread seller estimated that the price of wheat will increase in the future. So they enter into a contract that regardless of the price of wheat in the future, for a specified period, they will make the trade at a certain fixed price. This is derivative in finance.

Now you must be thinking that if these people wouldn’t have signed the contract, one of them would have earned more. It’s true, however, both the parties saw risk and minimized it.

In DeFi, derivatives are the same as in CeFi.

The prices of cryptocurrencies are volatile, hence derivatives make great use in DeFi.

Synthetic Assets:

The values of assets fluctuate in both CeFi and DeFi, If you think about today’s financial markets, there are things you can buy or sell in one area or country. Let’s take gold or shares as an example, the local legal infrastructure makes it hard or impossible to buy them. Synthetic assets make it possible, let’s say these shares or gold is represented by an ERC, you can buy that from anywhere through the internet. You don’t need to have a safe or a brokerage account.

Projects:

Some of the leading projects working on Decentralized Finance derivatives are:

Payments:

In finance, payments refer to the transferring of assets or services in return for assets or services. In other words, payments are just transactions.

Transactions are plausibly the foundation of the blockchain, more specifically peer-to-peer transactions or payments. The idea behind DeFi payments is to facilitate the unbanked and underbanked population as well as institutions. Decentralized Finance payments are secure and direct.

Projects:

Some of the leading DeFi payment protocols are:

Stable Coins:

Stablecoins are cryptocurrencies that provide stability to the prices of cryptocurrencies. As you know the price of cryptocurrencies is volatile. Collateral is deposited in the smart contracts and then a portion of the value of those deposited collateral is paid out as a newly minted stablecoin. Of course, these can be traded like any other cryptocurrency. This collateral can be a commodity, a fiat asset, or some other cryptocurrency.

Projects:

Some projects that are based on stablecoins are:

Insurance:

Decentralized Finance categories also cover Insurance. Insurance is a safety net. The company provides compensation or reimbursement for specified loss, fraud, or accidents. DeFi is still emerging and may contain faults or bugs or is even prone to hack attacks, many examples of exploitation occurred this very year. The assurance that in such a case, you will be compensated was much needed. People are still hesitant to invest large amounts in DeFi projects, with insurance projects coming forward, DeFi will have the opportunity to grow further.

Projects:

Some of the leading DeFi insurance projects are:

Index Funds:

Indexing, in finance, is the statistical change in market or stocks. Consider it a basket of stocks measured together, for example, the FTSE 100 index represents 100 major companies listed on the London stock exchange. The rise or fall of stock’s rate of the companies listed on this index has the same effect on the index. Indices can be country-based, or they could be the exchange-based they are listed on, then there are regional indices. Index funds are funds that track a market’s index. This market can be a market of stock, bonds, currencies, commodities, or other assets.

In simple terms index funds are buying shares with funds. In DeFi, it is the same. Then a market expert invests this money or funds to buy cryptocurrencies, you don’t have to keep track of risks, calculate returns. An index fund does all of this for you. But DeFi Index funds are more suitable for long runs. Index funds give the advantage of simplified investing without having to worry about maintaining a portfolio.

Projects:

Some of the leading DeFi lending projects are:

Conclusion:

CeFi came into existence much earlier than DeFi, so while Decentralized Finance categories are similar to Centralized Finance, it is still emerging. DeFi is one of the greatest uses of blockchain and in the near future we will get to see more applications of DeFi.

DeFi projects are dominating the blockchain markets, a total of $9.06B USD are locked in DeFi projects as of 18th September 2020. Uniswap dominates the market by holding 15.52% of the market.

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