What is Serum (SRM)? A complete explanation!

When you want to buy crypto, you can choose between a central exchange (CEX) and decentralized exchange (DEX)† There are many different types of the latter. This is because each blockchain needs its own DEX, and it is not difficult to develop a DEX. In fact, you could just duplicate another DEX.

But building a DEX that works well and is often used is much more difficult. Alameda Research and FTX exchange give it a try Serum† This is a decentralized exchange running on Solana (SOL) blockchain. You can also buy tokens here that run on other blockchains.

In this article, we explain what Serum (SRM) is, who founded it, how DEX works, and what the main advantages and disadvantages are.

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What is Serum (SRM)?

Serum (SRM) is a decentralized exchange running on the Solana blockchain† However, it is also possible to trade tokens from other blockchains on Serum. Serum is interoperable. This means that the protocol can work between different blockchains, which is quite unique. We often see that only tokens running on the same blockchain as DEX can be traded on DEX.

Another unique feature of Serum is that it uses one decentralized order book† Most other DEXs use an Automated Market Maker (AMM). An AMM is an automated algorithm that determines the prices of tokens, but which also lets sellers and buyers exchange their tokens between liquidity pools and the user’s wallet address. An order book is usually used only by central exchanges.

Serum is also interoperable. This means that it can work with other blockchains, which allows users to also trade tokens from eg Ethereum or Polkadot on Serum.† This greatly contributes to the further development of DeFi because it is a problem that many applications and protocols encounter.

The exchange also has its own native token, called SRM. You can use this token for different things. For example, it is possible to pay transaction costs with SRM tokens, giving you one 60% discount receive at the expense. You can also use the SRM token to bet or use it for control functions.

Who developed the serum?

Alameda Research and FTX exchanges are behind the development of Serum† Both companies have several years of experience in the crypto and blockchain market and decided to launch Serum on Solana in 2020. They chose this blockchain because it is much faster than competitors like Ethereum, but also because of its low transaction costs. In addition, Solana is interoperable with many other blockchains.

How does serum work?

Serum is designed to make transactions fast and cheap. According to the team behind Serum, users should experience the benefits of both CEXs and DEXs. So the best of both worlds is gathered in Serum.

Serum runs on Solana

Serum is built on a smart contract that runs within Solana’s blockchain. It is thus a decentralized application (dApp), like many other projects running on Solana

Solana is a blockchain known for its high speed. Blockchain can process up to 50,000 transactions per second (TPS). Users often pay less than 1 euro cent to complete a transaction! According to many people, Solana is one of Ethereum’s biggest competitors.

Because Solana can process transactions quickly and cheaply, Serum users will also be able to take advantage of this high degree of scalability. Serum competitors, such as Uniswap (UNI), do not have this advantage† For example, Uniswap runs on Ethereum, which has many issues with its scalability. Users here sometimes pay hundreds of dollars in transaction fees and have to wait ten minutes for their transaction to be processed successfully.

Decentralized order book

Instead of an SMP, Serum uses a decentralized order book. In an order book, buy and sell orders are placed on a list. This is based on the price. There is usually a central body that ensures that this is done in the right way. This is much harder to implement when done on a decentralized network. Therefore, other DEXs use an AMM.

At an SMP, users exchange their tokens between liquidity pools. The AMM first determines the price of the trading pair, after which the token exchange can take place. As a user, you have some input in that case. For example, you have to settle for the fixed price and you can not use special order types.

Serum developers have ensured that a protocol automatically links buy and sell orders together† This makes it possible to choose an order yourself, which also makes it possible to offer cryptocurrencies at a self-determined price. Or you can buy cryptocurrencies by choosing a price.

As a user, you have much more control over the buying and selling of your cryptocurrencies. This is one of the biggest benefits of the decentralized order book that Serum uses.

Not sure what an order book is yet? The video below explains more about how an order book on crypto exchanges works. You can watch this video to learn more about this topic.

Swap tokens between different blockchains

Serum has a built-in mechanism that allows you to exchange tokens between other blockchains† It does not matter which blockchain tokens are running on. Still, as you may know, you can not just swap tokens between different blockchains. So how does Serum do it?

Let’s say you sell a Solana token on Serum for an Ethereum token. When you want to exchange your Solana token, you first send it to a smart contract on Solana. The other user sends his token to a smart contract on Ethereum. Both tokens serve as security. Subsequently, the collateral is released on both blockchains, after which the exchange is completed successfully.

Because you can also exchange tokens from other blockchains, you can go to Serum for all your trades. Normally you will need a different DEX for each blockchain. It is no longer necessary when using Serum. So it provides more convenience and takes less time.

Serum .’s SRM token

Serum has its own native token: SRM. You can use this token for different things, and therefore fills an important function in Serum DEX.

  • Transaction costs† When you make a transaction on Serum DEX, you can pay it with SRM. In that case, you get a 60% discount on the transaction costs to be paid. It can therefore be an advantage to use SRM tokens.
  • control† Once you have the SRM token, you can participate in decisions about the future of Serum. You are part of the organization and you can vote on the decisions that need to be made, but you can also make a proposal to the community. Serum is therefore a DEX for and by users!
  • Speculation† Like any other cryptocurrency, you can also use the SRM token for speculation. By trading SRM, you can generate profits and returns on your assets. This is of course risky, because the price of SRM can also fall.

A total maximum supply of 10 billion SRM tokens has been established† During the pre-sale, 4% of the maximum bid was sold (400 million tokens). The team then carefully considered the remaining distribution of tokens. Tokenomics of Serum (SRM) looks like this:

  • 20% – for the team and the advisors;
  • 22% – for project staff;
  • 27% – for ecosystem incentive funds;
  • 27% – to a partner and collaboration fund.

What can Serum be used for?

Serum can be used to trade tokens. To buy or sell cryptocurrencies, go to the Serum website. You must first link your external wallet here. It is important that you attach the right wallet so that you can store the purchased cryptocurrencies.

After making a token swap, you will find your tokens directly in the associated wallet. You can then leave it here, use it for another swap or send it to another wallet.

Pros and cons of serum

Now that you’ve read what Serum is and how it works, you may have an idea of ​​the key benefits of this project. To briefly summarize what Serum is, we will discuss the most important Serum pros and cons enumerate for you.

Advantage

  • The decentralized order book provides more control† Unlike most other DEXs, Serum uses a decentralized order book. This gives users more control over the orders they execute. This way, they can set prices themselves and choose orders they want to fulfill.
  • Swap tokens between different blockchains† Although Serum runs on Solana’s blockchain, you can also buy tokens here that run on other blockchains. Think of ERC20 tokens running on Ethereum, or BEP-2 tokens running on Binance Smart Chain.
  • Process transactions quickly and cheaply† You can process transactions quickly and cheaply on Solana blockchain. Since Serum runs on Solana, you can take advantage of this scalability. You have almost immediately made a swap on Serum, and in many cases you pay virtually no transaction costs.
  • Discount on transaction costs† When you pay your transaction costs with the SRM token, you get a 60% discount on the transaction costs. This encourages many users to make use of the SRM token, which can positively promote liquidity and price.

Disadvantages

  • Serum runs on a smart contract† Something can always go wrong with a smart contract because they are fully automatic. In that case, an error cannot be corrected manually and you may lose tokens.
  • Risk of losing effort† When buying cryptocurrency, you always risk losing money. At a DEX you can buy several exotic cryptocurrencies. The chance of you buying a scamcoin is many times greater here than on a central exchange. On a central exchange, cryptocurrencies are first checked before users can trade them.

Would you like to see the information about Serum that you read in this article, summarized in a video? In that case, the video below is recommended.

Conclusion

Serum is a decentralized crypto exchange running on the Solana blockchain† You can buy various crypto tokens here. These do not necessarily run on Solana, as Solana also offers support for other blockchains, such as Ethereum and Polkadot.

Instead of an AMM, Serum uses a decentralized order book† Normally, order books are used only by central exchanges. The team behind Serum has therefore found a way to still be able to use an order book on a decentralized network.

If you believe in the functioning and successful future of Serum, you can buy the SRM cryptocurrency. This is Serum’s original cryptocurrency. Always do your own research before making a purchase decision. This way, you can base your choice on research and learn from possible mistakes you make.

After reading this article you will hopefully know more about some serum is and how it works† Want to know more about what Serum is, SRM cryptocurrency or other projects after reading this article? Then ask your questions in our AllesAboutCrypto Facebook group and our experts will answer all your questions.

Do you have other crypto-related questions? The easiest way is to look up your question in our FAQ. You can also google your question + “AllesOverCrypto”. You will then quickly come to one of our other articles dealing with that topic so you can quickly learn more about that topic.

Headline photo of Serum


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