DeFi promises to revolutionize global commerce by putting power back into the hands of individuals and enabling true open finance. However, there are some inherent weaknesses that limit DeFi's full potential.
The main weaknesses of DeFi on Ethereum are
1) Segmented Liquidity
Popular DeFi protocols create silos of unused capital, which segment liquidity.
2) Inefficient Markets
Blockchain limitations make it hard to adopt a central limit order book, forcing developers to use inefficient market types.
3) Settlement Risk
Layer 2 blockchain scaling solutions limit composability and introduce settlement risk between transactions.
Project Serum proposes a more efficient and capital-friendly solution for DeFi by combining the best aspects of permissionless and permissioned systems with familiar elements of traditional finance. All of this is made possible by Solana's fast and scalable Layer 1 blockchain. The ultimate goal is to drive the mass adoption of DeFi on a global scale, with over 1 billion users and $10 trillion in value moving on-chain at the speed and price that customers demand.
Serum is a decentralized exchange that anyone in the world can open an account on almost instantly. All you need is an internet connection and computer, and with some crypto assets you're ready to trade with anyone on the planet. Serum is a decentralized open source project that everyone can contribute to building. Project Serum is built by the Serum Foundation - the foundation is a group of experts in cryptocurrencies trading and decentralized finance.
The FTX team's choice to build serum on solana instead of ethereum is exactly why serum can perform so well. The potential for building dapps on serum is also huge.
Key building Blocks of Project Serum
Project Serum is made up of four key building
1) Serum Core
Serum Core is the first full central limit order book and matching engine that runs on blockchain. Bonfida has developed Serum Core - an asset agnostic order book built on the Solana blockchain. This powerful technology is capable of supporting advanced financial marketplaces, including derivatives and borrow lending.
2) Developer Ecosystem and Services
Developers can connect their project to Serum and make use of its expansive liquidity. Serum core offers its matching engine as a service for the ecosystem, making it easy to use for other decentralized applications. This allows developers to focus on their project while still having access to the features and benefits that Serum has to offer.
3) True Composability
The serum middleware makes it possible for different applications and users to share data and liquidity in one place. This makes it possible for trading applications to trade with each other, and access liquidity from a single source.
4) Serum DAO
A decentralized governance framework is a great way to let the ecosystem make its own decisions without having to go through a centralized authority. This can help speed up the process and make it more efficient.
Let's explore how Serum Core powers its ecosystem of decentralized applications.
Serum Core provides an asset-agnostic order book that sits at the heart of the ecosystem. Its on-chain central limit order book and matching engine are provided as a service to the Solana ecosystem.
Serum core is the powerhouse that allows applications to create and manage their own order books, or to connect with other existing order books. By outsourcing the implementation and maintenance of an order book to Serum core, any Solana program can take advantage of its ability to match buyers and sellers without having to worry about the burden that comes with it. Its design allows Serum core to process trades for multiple applications all at once, providing a fast and efficient way to keep the network moving.
Serum core makes trading easy for a wide range of use cases including the powerful Serum decentralized exchange. Anything from options futures, borrow, lending positions, or any financial and non-financial instrument can also take advantage of Serum's back-end matching engine.
Project Serum's ultimate vision is to be both user-friendly and capital efficient. To achieve this, DeFi needs many necessary primitives, one of which is central limit order books. All of this is made possible by Solana, a fast, secure, and censorship-resistant blockchain that provides the open infrastructure required for global adoption. Project Serum is built by the Serum Foundation and backed by a consortium of experts in cryptocurrency trading and decentralized finance.