27 July 2020

FTX to launch a decentralized exchange on Solana

Crypto exchange FTX has announced plans to launch a decentralized exchange (DEX), called Serum, built on the Solana blockchain within the next few weeks. FTX CEO Sam Bankman-Fried and crew selected Solana over Ethereum because it’s reportedly more scalable and cost-efficient than its counterpart. But the team intends to integrate a cross-chain gateway between Serum and the Ethereum network that will provide an entry point for current DeFi users to start trading on Serum.

Serum also introduces two new tokens: a discount and staking token with limited governance capabilities called Serum (SRM) and a similar second token that allows for even steeper trading discounts dubbed MegaSerum (MSRM). One MSRM is equal to 1 million SRM stacked together. Of the 10 billion SRM supply, the Serum team and contributors kept 43% and sold 3% in a private sale that has raised ~$7 million to date. The remaining tokens will be split evenly between a collaborator fund and ecosystem incentives fund.

While FTX spearheaded the announcement, Serum is a product of the collaboration between FTX and Alameda Research and various external partners that operate under the Serum Foundation. These partners include Multicoin Capital, Kyber Network, CoinGecko, Gauntlet Network, TomoChain, and advisors Robert Leshner and Calvin Liu of Compound.

Why it matters: - The announcement provides a significant boost to the Solana network, which also bagged the Kin cryptocurrency project back in May. It could also reignite interest in base layer platforms outside of Bitcoin and Ethereum, especially if Ethereum’s rising fees ward off potential users. While Solana's native token, SOL, has gained ~14% in the last 24 hours, prospective investors should note that well over 90% of the supply remains locked and should vest at the end of the year. - The push for Ethereum compatibility is an important one. Ethereum houses the majority of on-chain activity, and applications building on alternative layer-1s would do well to plug into its existing user base to bootstrap liquidity. It’s a clear sign that the path to success, if not build on Ethereum, may require bridging to it. In this case, Solana is acting more as an Ethereum sidechain than a true base layer.

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