Decentralized Finance (DeFi) was just a buzzword two years ago. However, it has now grown to become an ecosystem that sets new standards for financial autonomy and trust. With DeFi, commoners can access some of the tools that were in the past a preserve of traditional big banks, trading firms, venture funds, and corporations without compromising autonomy.
However, there is a problem with the typical legacy blockchains build on Ethereum that makes it hard for people to enjoy DeFi. Typically, they face the following challenges:
- DeFi transactions can be expensive. Blockchain is meant to eliminate intermediaries and reduce transaction fees. However, gas fees on Ethereum are rising, and people are going back to traditional modes of transaction.
- Market fragmentation. The automated market makers (AMMs) built on Ethereum are creating fragmented liquidity. There is no central book order which makes AMMs compete for liquidity.
- The features are limited. Ethereum decentralized exchanges are finding it hard to implement some of the features that are considered standard on centralized exchanges due to high gas fees and slow speeds.
When was the vision born?
The DeFi summer of 2020 was a turning point in this field as Serum created a decentralized exchange with an on-chain order book. The new order book was created on Solana, known for low transaction fees and high speed.
This created the perfect opportunity for solving some of the core challenges that DeFi faces. Raydium was born to provide an efficient and fast AMM that could supply liquidity in its own pools and leverage the existing Serum order book.
How Radium solves some of the challenges in De-Fi
Raydium seeks to provide on-chain liquidity to a central order book. Thus, all liquidity pools and Raydium users have access to the liquidity of the entire Serum ecosystem and the order book. The protocol is built on Solana, which is robust and superfast.
Faster transactions, significantly lower fees, and ecosystem-wide liquidity are essential if the people, projects, and protocols of DeFi are to evolve. We hope to see you on the other side.
The K = Y*X equation is what guides the Raydium protocol. The Fibonacci sequence determines the price of orders on the order book, and the modern system can provide liquidity for up to 20 orders at various prices with spreads that can go as low as 20bps between them.
What makes Raydium unique?
The team behind Raydium has been in the field of market-making, high-frequency trading and arbitrage, in both traditional and crypto markets, for more than two decades. The creation of the Raydium protocol commenced in the summer of 2020, and the team hopes to partner with various partners in this journey.
- Research on additional market making models and features in partnership with other protocols
- Leverage of external oracles for improved market-making
- Governance model ideation in collaboration with partners
Stay tuned for Part II