Crypto Community Working To Save Serum Business 1144474196

The Race To Save Sam Bankman-Fried’s Other Crypto Exchange

Decentralized exchanges differ from their centralized counterparts (such as FTX, Binance, Coinbase, and others) in a few important ways. In particular, instead of relying on an intermediary to match buyers with sellers, DEXs allow users to transact on a peer-to-peer basis – and oversee their own funds.

This arrangement is one example of what is known as decentralized finance, or DeFi, an initiative to develop a range of financial services on top of blockchain technology. In a Twitter thread published in July 2020 that now reads like a grim prophecy, Bankman-Fried described DeFi as “full of potential” because it does not involve “trust on trust.”

Community members see FTX’s collapse as a key moment for DeFi, which they say is a solution to the problems that have haunted the crypto sector in recent years, following the collapse of large centralized organizations such as crypto lender Celsius and hedge fund Three Arrows Capital.

According to Hayden Adams, founder of UniSwap, the world’s largest DEX, this is “a great learning moment for the industry.” Although the DEX model suffers from a steeper learning curve for new users, he says, it eliminates the need to store coins with an exchange, which gave FTX the opportunity to funnel client funds to its sister company, Alameda Research, in the first place. .

Andrew Trudel, a contributor to Kwenta, another DEX, says clients can never be completely sure what is happening to their assets within a centralized exchange. But with a DEX, “how funds are used is fully transparent” because everything is hosted on a public blockchain, he argues. Both Trudel and Adams predict that traffic to decentralized exchanges will eventually exceed traditional exchanges for these reasons.

With FTX in ruins and the integrity of powerful, centralized crypto companies being called into question, DeFi is having a moment. But now that Open Book is underway, the volunteers face a series of dilemmas. The initial goal was to prevent the collapse of Serum from spilling over into the wider Solana ecosystem, but the group must now account for the ongoing management of the DEX, which is a different proposition entirely.

Among the first questions being discussed is what to do with SRM, the token created by FTX for Serum, $2.2 billion of which is listed on the company’s balance sheet. The token, which offers holders a discount on trading fees, is still supported by Open Book at the time of writing.

Some of the Open Book volunteers, including Long, would rather see the back of FTX, period. Long says supporting SRM provides no real benefit to Open Book users and only serves to put money in the pockets of FTX because the value of SRM is effectively tied to the revenue generated by the exchange.

The governance structure of the new DEX has also raised eyebrows. In a wire published on November 18, the Open Book volunteers explained that “upgrade authority” is now held by a small consortium of “trusted figures” from the Solana development community. Although the new model successfully eliminates FTX, traders asks whether one overly centralized model has simply been replaced by another. The group of volunteers has yet to come up with an answer to this question.

Related Posts