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Building for the Future of DeFi: Solana and Serum
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To build the best product, you need the best infrastructure. As part of our continuing commitment toprovide the best possible trading experience for our users, we’ve performed significant evaluations as to which protocols will best support our initiative to provide an efficient, scalable, cost effective and trustless environment for our bots as we expand into the DeFi world. Over the past few months, DeFi fever has swept over the cryptocurrency space, forcing many users to face the ugly reality of trade-offs in consensus protocols. While ETH is one of the most decentralized and robust ecosystems, the massive transaction fees to interact with most smart contracts and slow transaction times makes the entire ecosystem impractical for many users. In contrast, the recent rapid growth of Binance Smart Chain (also known as BSC, essentially a direct ETH clone built by Binance) highlights that many users are willing to turn a blind eye to less decentralized systems in return for a more cost-effective and overall easier to use protocol.
Instead of compromising on decentralization to build a more usable product, we’ve decided to build our product on Solana. This decision combines the best of all protocols with limited tradeoffs. Solana is a web-scale blockchain that provides fast, secure, scalable, decentralized apps and marketplaces, with the ability to support 65,000 TPS (transactions per second) and 400ms block times.
As one of the most efficient permissionless blockchains in the world, the network has 200 physically distinct nodes supporting a throughput of more than 50,000 TPS when running with GPUs. Additionally, Solana tackles one of the biggest challenges with distributed systems: agreement in time.
Unlike Bitcoin that uses the PoW (Proof of Work) algorithm as a sort of decentralized clock for the system, Solana uses a Proof of History method. With Proof of History, you are able to create historical records that prove that an event occurred during a specific moment in time. Specifically, the algorithm is a high frequency Verifiable Delay Function, requiring a specific number of sequential steps to evaluate. Transactions or events that are evaluated will be given a unique hash and a count that can be publicly and effectively verified, which allows the network to validate when each transaction or event occurred, functioning like a cryptographic time-stamp. Within every node there is also a cryptographic clock that keeps track of the network’s time and the ordering of events, providing high throughput and more efficiency within the Solana network.
One of the biggest challenges in the DeFi world is creating the liquidity needed for a healthy trading environment. Ironically, even in the decentralized finance system a method of centralizing liquidity is crucial to have any real type of financial system that could match a centralized alternative. Although there have been several interesting solutions to the liquidity problems in crypto, the project that we’ve been most impressed with is Serum.
Project Serum is a brand new decentralized exchange (DEX) for the decentralized finance (DeFi) sphere from the same team that created FTX Exchange. Built on Solana, Serum was created to solve the centralized vulnerabilities existing in the current DeFi space in the same trustless and permissionless way that DEX traders are comfortable with. Serum is completely decentralized down to its seed protocol, running on a non-custodial exchange with cross-chain trading support and no KYC required. Additionally, despite being native to Solana, Serum is designed to be completely interoperable with Ethereum and Bitcoin, a huge advantage when pitted against Binance DEX or other DeFi DEXs like Balancer and Uniswap.
Essentially, Serum is an incredibly strong decentralized liquidity and infrastructure layer that other applications can use as a “back end”, while creating their own application and interface on top with added features. So far, several DEX’s such as Raydium, Bonfida, and Mango Markets have already shown the immense potential of Serum. With on-chain order books, Serum allows DEX’s build on top the ability to create limit trading options similar to centralized platform, something that is impossible with most current AMM’s (ie. Uniswap, Sushiwap) which only allow market orders. Additionally, the speed and cost effectiveness (transactions cost under 1 cent) make Serum a viable threat to be the premier liquidity and trading infrastructure for DeFi.
Accordingly, we’ve decided to build our new GRID bot product, GRIDex, on Serum using Solana in order to not only provide the fastest and cost-effective trading experience but to also provide the interoperable flexibility necessary in a multi-chain ecosystem. Stay tuned for our next article where we’ll go more in depth about GRIDex!