Serum (SRM)

Protocol on Solana, built by FTX

Basics

• Based in: USA
• Founded in: 5-2020
• Mainnet release:
• From Crypto Briefing (27-7-2020):

"FTX is building a DEX, Serum, on the Solana blockchain with the help of partners like Kyber Network and Multicoin Capital. Serum is cross-chain comptaible, giving it access to liquidity on DeFi dApps on Ethereum. The DEX will run on a central limit orderbook, but will still operate in a trustless manner."

• Anthony Sassano named (16-10-2020) it a 'not-actually-decentralized exchange'

History

• From their blog (18-11-2021):

"The first ever proposal for Project Serum was a Google Doc describing a protocol for archiving website screenshots on Ethereum."

Audits & Exploits

• Serum does not offer a bug bounty program (22-3-2022).
• Their Github says the code is unaudited and subject to change (7-2021).
• Scored 53% on DeFi Safety (22-3-2022):

"Serum DEX is unaudited. There are some tests evident within the Serum DEX monorepo, but they are definitely not complete. There is no evidence of a Serum Formal Verification in any of their documentation or GitHub repositories."

Governance

Admin Keys

• From Unchained (14-11-2022):

"An alleged hack on bankrupt crypto exchange FTX on Friday raised fears that the upgrade authority for Serum may have also been compromised. The upgrade authority refers to an account responsible for signing transactions with the ability to change on-chain code.

“The serum program update key was not controlled by the SRM DAO, but by a private key connected to FTX,” tweeted pseudonymous developer Mango Max on Saturday. Serum was launched by FTX, Alameda Research and the Solana Foundation in 2020 and has since grown into a vital part of Solana’s DeFi ecosystem.

“And it’s truly, fully trustless,” tweeted Bankman-Fried at the time.

While these claims of being fully trustless are now called into question, abandoning Serum as a liquidity source entirely doesn’t appear option for Solana-based DeFi. Solana founder Anatoly Yakovenko said that developers have opted to fork the program because several protocols depend on it for liquidity and liquidations. Leading the effort was Mango Max, who said that developers had deployed “a verified build of the same version” on Sunday.

The upgrade authority and fee revenue are now being managed by a multi-sig wallet controlled by a team of trusted developers, Mango Max said,

Projects like Jupiter Exchange, Open Serum, Solape, Switchboard and Mango Markets are currently working on integrating the fork."

• From DeFi Safety (22-3-2022):

"Serum's governance info can easily be found. Serum mentions that their smart contracts are upgradeable throughout their documentation. Indeed, we can see that the Serum V3 Program is upgradeable via the BPFLoaderUpgradeable. Ownership implicitly lies within their MultiSig. No smart contract change capabilities are identified within the Serum documentation. There is no pause control or any similar functions documented in the Serum documentation. There is a single mention of a timelock within Serum's governance documentation. However, this does not detail any concrete software information or capabilities. The timelock is of an unspecified length."

DAO

• The website mentions on-chain method details will be released soon (31-8-2021). However some is already mentioned. All with the terms 'may' and 'can'. So it is not 100% clear yet.

"A node may propose a rules change:

1. Doing so costs 50,000 SRM, which is deducted from the Node’s overall asset pool.
2. If the rules change passes, the 50,000 SRM is returned; otherwise, it is burned.
3. A vote requires more than 60% of the world’s total staked SRM voting in favor to pass. (This parameter may be further changed via a proposal within bounds).

Voting on proposed changes to Serum:

1. Proposed changes can include fee changes:
2. In a voting-stake node, each staker votes independently, and the majority vote of the node determines its behavior.
3. In a delegated-stake node, each node’s leader chooses how they vote.
4. Whenever submissions are requested from a node (e.g. to help resolve a cross-chain swap dispute), any staker may propose a response to the node.
5. A delegated-stake node’s leader chooses which response to submit, and a voting-stake node has a vote among their stakers to decide what to submit."

Token

Launch

• From Messari (31-8-2021):

"Project Serum hosted two simultaneous initial exchange offerings (IEOs) for the SRM token on Aug. 7, 2020. The two exchanges (FTX and BitMax) exchange sold 3 million SRM at a price of roughly $0.11/token (or $660,000 in total). KYC was required for both IEOs, and a cap of 1,800 participants was set between both exchanges.

Prior to the IEOs, pre-sales were held for 400 MegaSerum (equivalent to 400 million SRM, or ~4% of the total supply), raising a total of roughly ~$20m. all pre-sales are locked up over the next 1-7 years from the time of the sale."

Token allocation

• From TheTie (25-5-2021):

1. "Ecosystem Incentive Fund: 27%
2. Partner and Collaborator Fund: 27%
3. Project Contributors: 22%
4. Team and Advisors: 20%
5. Locked Seed and Auction Purchasers: 4%

Approximately 10% of SRM tokens were released at launch, most going towards ecosystem incentives. The other 90% of all SRM tokens are locked up long-term for 7 years, with none unlocking in the first year."

Utility

• From The Defiant (27-9-2020):

"Staked by validators and held by users for trading discounts. 100% of Serum’s trading fees are used to buy and burn SRM off the open market, while node operators stand to earn rewards by processing transactions."

• From TheTie (25-5-2021):

"Holders of the token benefit from up to 50% off all fees on Serum, the ability to participate in buy and burns for 100% of net fees, and specialized on-chain governance. SRM can be staked on a node, with each node requiring a minimum of 10,000,000 SRM and at least one MSRM (1M SRM). This operation helps decentralize the network and offer support in transaction settlement validation."

• From Messari (15-6-2021):

"Staking SRM allows you to gain access to lower fees and staking rewards, as 20% of the transaction fees generated by Serum are distributed to SRM stakers every week. One can earn MSRM by stacking one million SRM."

• From the website (31-8-2021):

1. Up to 60% off fees
2. 80% of DEX fees go to SRM buy & burns
3. 20% of DEX fees go to SRM stakers

Token Details

• Has SRM and MSRM tokens. More on MSRM can be read below under "Staking".

Coin Distribution

• A cap of 1800 participants was set for the inital 2 IEOs. The supply as of now, has 90,021% are in 1 wallet. Then the next holder has 7.938%. Then one wallet 1.337% and below that each holder has less than 0.38%.

Tech

• Whitepaper can be found here (7-2020).
• Code can be viewed here. From DeFi Safety (22-3-2022):

"With 174 commits and 13 branches, Serum's GitHub repository might be the cure that Solana developers need."

Implementations

• Built on: Solana

How it works

• From TheTie (25-5-2021):

"DEX running an innovative on-chain central limit order book (CLOB) on the Solana blockchain. Serum is different from other DEXs that use an Automated Market Maker (AMM) model, as Serum uses automated on-chain limit order books, allowing traders to submit orders with directions, prices, and sizes, giving them complete control over their trading. These order books aren’t centrally controlled, they are fully programmatic as they automatically match orders between third party users through the use of smart contracts. Protocols with any trading-related features can benefit greatly by sending their bids and offers to the Serum DEX’s CLOB. The market structure of a CLOB based DEX allows for larger trades than an AMM, without increasing risk of slippage. Liquidity to be concentrated in the most efficient way and adjusted in real-time. These order books serve as the core pricing source for Serum."

Fees

• From the website (31-8-2021):

"Node staking has governance over the use of fees in Serum and nodes may alter rules around the usage at any time.

For each payment, the leader will receive 15% of the node’s total reward, with the other 85% being split proportionally.

Each node will receive a base of 2% APY per year on its holdings and will receive another 0% - 13% per year based on performance of its duties."

Staking

• From the website (31-8-2021):

"Each node contains at least 1 MSRM. You can stake towards any node. Staking is instant. Unstaking takes a week. If a node does not have any MSRM, then it becomes inactive and does not generate any rewards.

Some actions may require nodes to post collateral. Doing so will risk losing that collateral if the node misbehaves."

• From Messari (31-8-2021):

"MSRM can be created when users lock up 1,000,000 SRM together. The supply of MSRM is capped at 1,000 MSRM (or 10% of total SRM)."

Validator Stats

• As of (31-8-2021), the Serum website mentions 24 nodes. The node requirements are similar to that of Solana (very high):

"Having enough to run a full Solana validator will be more than sufficient (in terms of compute and bandwidth) for a Serum node.

Having enough to run a Solana validator with decent uptime (that does not need to be a block producer) will be helpful."

Interoperability

• From CoinBureau (9-10-2020):

"The Serum DEX uses smart contracts with built-in economic incentives to allow users to swap assets across different blockchains. This is done by requiring both parties involved in the swap to put down some amount of collateral to execute a swap.

If the other party involved in the swap does not receive their funds in a timely manner, they are able to dispute the swap with the smart contract by submitting a snapshot of the transaction request which was stored on the Solana blockchain. If the dispute is valid, they earn the stake from the sender. If it is invalid, the sender receives part of the stake from the receiver."

Oracle Method

• From DeFi Safety (22-3-2022):

"Serum documents an idea of an on-chain oracle in the "Project Ideas" section of their documentation. However, it is not clear as to whether the protocol itself uses an oracle. Serum does not document the front-running mitigation strategies of their orderbook. Serum does not document its flash loan attack/liquidity manipulation mitigation strategies. Since their staking module is deprecated, it is safe to say that Serum does not require such measures."

Compliance

• From TheTie (25-5-2021):

"Anyone in the world can open an account instantly on Serum DEX, with no KYC and no withdrawal limits."

Their Other Projects

Swap

• Swap, a decentralized AMM (27-10-2020):

"Swap on Serum will airdrop Serum’s native SRM token to liquidity providers for a month to bootstrap participation."

• Has been deprecated, funnily enough, this boosted the SRM price substantially (25-5-2021).

Roadmap

• Can be found [Insert link here].
• From TheTie (25-5-2021):

"Phase Three (In Progress)

1. Borrow/Lending
2. Yield
3. More Cross-Chain Bridges
4. Projects Building on Serum
5. AMMs
6. Margin Trading/Contracts
7. Tokens and Exchanges Natively Supporting SPL
8. Volume and TVL Growth"

Usage

• From its blog (25-8-2021):

"Project Serum has surpassed $6.19B in trading volume since inception. This week, 50K SRM was burned and 12K SRM was dropped onto stakers — This is $449k worth at current prices!"

Projects that use or built on it

• Atrix Protocol; "Atrix is an Automated Market Maker (AMM) built on Solana that composes directly with Serum’s orderbook to allow for permissionless liquidity pools and farm creation." (25-8-2021)
• Raydium; it provides(24-2-2021) liquidity on Serum orderbooks.

Competition

• CEXs and DEXs

Pros and Cons

Cons

• Was built by FTX, so during the 2022 November crash, it got affected by the fall out.

Team, Funding, Partners

Team

• Serum has many public contributors that are presented in the "Contributors" page of their GitHub.
• FTX and Alameda Research, led by Sam Bankman-Fried, created the Serum Foundation and launched Serum.

• From Crypto Briefing (27-7-2020):

"FTX is building a DEX, Serum, on the Solana blockchain with the help of partners like Kyber Network and Multicoin Capital."

Funding

• According to this twitter thread (7-9-2020):

"Binance backs Band, FTX (aka SBF Alameda, the new sushi controller), and Serum (via 3commas Cap)."

Partners 

• Its Foundation is partners with Aleph (7-2020).

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