Serum Swipes at Ethereum DeFi With Solana-powered 'Swap'

By Alexander Behrens

DeFi users have a new option for swapping between crypto tokens, if they’re willing to take the leap away from Ethereum onto the Solana blockchain.

Swap, a new decentralized exchange market, launched today on Serum, a DeFi platform developed to run on the Solana blockchain. Serum was developed by FTX exchange CEO Sam Bankman-Fried and uses the Solana blockchain to achieve faster transaction speeds and lower transaction costs compared to blockchains like Ethereum, which currently hosts the vast majority of DeFi protocols. 

To jumpstart the DEX, Swap will give liquidity providers additional rewards in the form of airdropped Serum tokens distributed through November 25. Serum tokens are used to pay transaction fees on exchanges powered by Serum infrastructure. 

The launch is part of Solana’s ongoing DeFi play. Earlier this month, it shipped Wormhole, a Solana-to-Ethereum bridge, in a bid to get DeFi projects to take advantage of its nascent blockchain. Last week, it became the third blockchain to add the USDC stablecoin, which its co-founder, Anatoly Yakovenko, sees as “the lifeblood of the DeFi ecosystem.”

That move put Solana, Serum, and USDC issuer Circle’s business interests in alignment.

DeFi, short for decentralized finance, uses automated code known as smart contracts to issue loans, provide interest on deposits, or do other bank-like functions—without the bank. Instead, DeFi applications leverage the computing power of decentralized blockchain networks, with the vast majority running on the Ethereum blockchain. 

Serum’s Swap is one of the first DeFi apps to launch on a different blockchain, in this case Solana. Solana, currently in beta testing before the full mainnet launch, offers block times of under one second, meaning it can process and settle thousands of transactions per second. 

Such throughput should help keep transaction fees low to compete with record-setting fees on Ethereum in recent months. The Ethereum blockchain can process about 15 transactions per second, driving up the cost of using DeFi applications when many users are submitting transactions at once.

Serum, launched in July, provides infrastructure decentralized exchanges, and has added several dollar-pegged stablecoins to allow DeFi transactions to be denominated in the familiar US currency, including Tether and USDC. Where previous decentralized exchanges have used on-chain order books to match buy and sell orders, Swap is the first automated market-maker (AMM) released on Serum, similar to Uniswap on Ethereum.

AMMs facilitate swaps using deposits from liquidity providers, who are in turn rewarded with trading fees for putting up their crypto tokens to make trades possible. Instead of an order book, trades are matched automatically using pooled liquidity and require no dedicated accounts or identity checks, as is required at most centralized exchanges.

The addition of AMMs to Serum helps show the platform is as versatile as Ethereum and offers several advantages in cost and speed that may take years to match. If fees start to spike again as interest in DeFi continues to grow, it could lead to rapid growth for the nascent Swap exchange on Serum.

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