Cryptocurrency traders were excited last August when digital token serum (SRM) prices rose ten-fold on the first day of trading after it was listed on Binance, the world’s largest cryptocurrency exchange by volume.
Another 10-fold increase since then has triggered a new wave of speculation among analysts of the digital market about the future of the token – apparently linked to the growing popularity of the connected decentralized exchange serum, which is based on the Solana blockchain and advocated by Sam Bankman-Fried of the FTX Crypto Exchange and the trading firm Alameda Research.
Prices for the SRM token rose to an all-time high of $ 11.13 on Tuesday, according to data firm Messari. Market capitalization is now around $ 500 million, well below the $ 22 billion for the UNI token from leading decentralized exchange Uniswap, but still enough to turn heads. At the time of going to press, SRM changed hands at around $ 9.27.
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Some analysts have attributed the recent success of the Serum project and the Solana blockchain to their collaboration with Bankman-Fried, who recently made headlines for his $ 135 million deal to house the Miami Heat basketball team’s home arena after the FTX swap to name. According to a blog post last July, FTX and Alameda support Serum and choose Solana as their basic blockchain.
“Traders may have seen names related to Alameda research as safe havens,” said Mira Christanto, research analyst at Messari, during the crypto market sell-off last week.
Bankman-Fried, who serves as the CEO of FTX, told CoinDesk in a LinkedIn chat that he wasn’t sure why the serum was up the most this week, but he said it was “likely” after Solana’s SOL token who have increased by 24. Fold for a market value of between $ 12 billion and $ 22 billion this year, depending on how it’s calculated.
The story goes on
Earlier this month, Alameda Research introduced investors to a $ 2 million fundraising round for Step Finance, a trading dashboard that emerged from a Solana-focused hackathon. The Solana Foundation, which supports the development of the Solana blockchain, received $ 40 million in new funding in March.
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An important issue with Serum is that it provides a user experience that is similar to that of traders on major centralized cryptocurrency exchanges. This could make the project more attractive to traders looking for transactions that are faster and cheaper, but also easier to use compared to other decentralized exchanges, such as PancakeSwap in the Binance Smart Chain blockchain supported by Binance.
PancakeSwap has been criticized for copying Uniswap, which is on the Ethereum blockchain.
“Serum is very different from Ethereum-based DEXs in that it created a central limit order book (CLOB), as you would normally see on centralized exchanges,” said Christanto. “This is not possible with Ethereum or Binance Smart Chain, where automated market makers (AMMs) are more popular.”
A central limit order book is possible with Solana partly due to its high scalability, which supports 50,000 transactions per second (tps). With Binance Smart Chain, the maximum is 300 tps. It’s 18 tps on Ethereum.
“Solana is not as fast as centralized exchanges like FTX, but it is the first decentralized exchange that can provide a CLOB,” said Christanto.
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Danny Kim, head of sales at crypto prime dealer SFOX, said the recent price hikes in the serum could also be due to the excitement over Step Finance, which is offering an annual percentage (APR) of up to 3,500% on deposits of its STEP tokens. All of Step Finance’s asset pools, liquidities and swaps are routed through Serum, according to the Step Finance website.
As Solana Labs co-founder Anatoly Yakovenko wrote in a post on Medium, if the first phase of decentralized funding – DeFi 1.0, so to speak – was geared towards innovation in the money markets, including lending and borrowing, then DeFi 2.0 would be powered by Serum Bring “High Speed Trading and Derivatives”.
“Solana has become a protocol for traders, with a number of projects focused on what traders and investors in DeFi need,” said Kim of SFOX. “Fast, secure and scalable.”
Automated market makers “are growing in popularity with Ethereum, primarily because they make it easy for return- and risk-sensitive asset owners to provide liquidity to the market,” Yakovenko wrote. “However, this does not mean that AMMs are the optimal mechanism for providing liquidity. AMMs are obviously absent in many dimensions. Above all, capital efficiency. “
It remains to be seen whether Serum will eventually pose a real threat to popular DEXs on Ethereum and BSC. Data from CoinGecko shows that serum has a daily trading volume of around $ 52 million, while the 24-hour trading volume at Uniswap in Ethereum was more than $ 1.3 billion at press time, according to Dune Analytics.