Over the years, blockchain technology has faced a lot of setbacks that need quick attention. Now, individuals can enjoy blockchain technology and optimize its benefits. A significant response to this is the development of smart contracts. The first cryptocurrency to implement smart contracts is Ethereum (ETH), which operates on DeFi blockchain technology.
DeFi is a short form of decentralized finance. It is an exchange that allows financial transactions between parties, as we have it in the blockchain. The innovative approach DeFi brings on board is allowing ranges of simple and complex transactions. This technology involves no intermediary or a third party when running cryptocurrency with another individual. However, DeFi has major setbacks, making developers create a new digital solution such as serum.
Ethereum challenges began with the high transaction fee resulting from its blockchain mining mechanism – Proof of Work (PoW). The first attempt that followed the setback of ETH is the creation of Ethereum 2.0. However, Eth2 took a long development process, leading to the emergence of several smart contracts. Today, we have smart contracts such as Serum, Polkadot, and Cardano.
This article brings you the basic information on serum. You would discover what serum is, its creation history, how it works, and all you should know about Serum tokens. Look out for Serum’s added technology advantage, as you read till the end.
What is Serum?
The serum is a novel project that solves the underlying weaknesses associated with DeFi. Serum solves many DeFi shortcomings by providing fully functional decentralized exchanges. Decentralized exchanges allow investors to carry out financial activities such as buying, selling, or holding coins. Hence, serum serves as a medium of exchange for Ethereum.
The serum is a pure DeFi, enabling wrapped coins, stable coins, new financial products, and order books. Many smart contracts only focus on developing new ideas but serum balances novelty and a user-friendly interface. Serum involves a clean protocol, making it the first smart contract with trustless cross-chain trading built on the Solana blockchain. The project aims to allow transactions at a friendly fee at maximum speed. Hence, users are less worried about high gas fees and slow performance.
The Serum project is designed by a team of experts with established and trusted partners. These partners include Sino Global Capital, Lemniscap, AKG Ventures, Evernew Capital, Alameda Research, Solana, TomoChain, and many others. Hence, a significant community-based currency provides surety on sustainability and security.
The serum is made up of seven main ingredients:
- SRM – serum token, the utility token of the serum ecosystem
- Cross-chain Swaps – exchanged assets
- A whole central limit order book
- Physically settled cross-chain contracts
- FBTC – a model for creating Solana tokenization of BTC
- FUSD – decentralized ERC20 stable coin that doesn’t have a single point of failure.
- Complete Ethereum and Solana integration
How was Serum Created?
The Serum exchange was built by the Serum foundation run by Sam Bankman-Fried and Alameda Research Trading Firm.
Alameda Research Trading Firm is a significant trading operation with a strong presence in Japan, Hong Kong, and the United States. The firm has experienced individuals from top firms, such as Goggle and Facebook.
Bankman-Fried, a CEO of FTX exchange, confirmed Solana’s tokens as the blockchain for serum in a LinkedIn chat. According to him, Solana is probably responsible for the high surge of serum.
In March, Alameda research received $40 million to support exchanges development on the Solana blockchain.
The Serum project attracts traders looking forward to a cheaper, faster, and user-friendly exchange platform. Contrary to famous optimism, decentralized exchanges can be easily operated, as we have centralized platforms. This smart contract builds a central limit order book (CLOB), allowing you to customize your trade order.
Unlike most DeFi protocols that rely on third-party companies for oracle data, the serum provides a fully decentralized system, and at the same time, it is fast and easy to use.
WIth serum, you get to choose the price, size, and direction of your trade. Networks like ethereum are expensive and slow to support an order book because of some operational complexity. Moreover, serum running on the Solana blockchain makes it possible to process 65k transactions per second at block times of 400ms and $0.00001 per transaction costs. This is far cheaper than DeFi, which is slow and expensive.
SRM is the native utility token of the Serum Exchange. It is burned to run smart activities on the Solana blockchain. SRM serves as the validating node of the Serum blockchain. Each node would receive SRM as a staking reward.
Some of the Serum partners give out a portion of their SRM to holders to spur SRM adoption.
SRM has a total supply of 10 billion. The initial distribution of SRM tokens is as follows;
- 20% to Team and Advisors
- 22% to Project Contributors
- 4% to Locked Seed and Auction Purchasers
- 27% to Partner and Collaborator Fund
- 27% to Ecosystem Incentive Fund
How does Serum Work?
Serum project implements more secured cross-chain swaps. Instead of depending on arbitrators to confirm the authenticity of every transaction, the serum is rather independent. Since it does not use some nodes to validate transactions, it uses the smart contract.
Two parties involved send their cryptocurrency to the smart contract, while one of the parties trading other cryptocurrencies aside ETH drops collateral. This method ensures a high level of transparency. If any of the parties back out, smart contracts pay the right party the coin’s actual value. In addition, smart contracts deduct extra fees from the non-honest party to settle for the hassle. On the other hand, if none of the parties back out, a smart contract validates the transaction and returns the individual’s collateral. Therefore, the Serum project can verify the Bitcoin blockchain, simplifying cross-chain swaps.
Often, Ethereum is the base protocol in cross-chain, which uses the smart contract mechanism of the target blockchain and has a slower transaction speed. For instance, Bitcoin is a valid target blockchain since it operates with the Proof of Work (PoW) mechanism, which takes a longer time.
In all, the Serum projects permit existing DeFi users to access Serum features, creating a seamless integration between them.
More about Serum:
Serum Blog: https://projectserum.medium.com/
Serum Grants: https://projectserum.com/#/awarded-grants