Can Serum (SRM) make money from Decentralized Exchanges?

Serum (SRM) is both a cryptocurrency, and a decentralized exchange (DEX). Serum itself is a DEX they built on the Solana (SOL) blockchain.

The hope for Serum is to lower trading costs by using a blockchain DEX. For example, the developers claim Serum can lower trading fees by 60%. Serum tries to reduce expenses by giving 80% of fees to Serum Token (SRM) buy and burns.

The other 20% of the DEX fees to SRM stakers to pay them to maintain the blockchain. The stakers are people who help maintain the Serum network by building blocks. You could also describe them as miners.

They made Serum fast by building it on the scalable Solana blockchain. Serum claims Solana can process 65,000 transactions per second (TPS). On 30 August 2021, Solana Beach estimates the Solana blockchain was processing 333 to 2,778 TPS.

How Fast is Serum?

In comparison, the Blockchain Council estimates Ethereum (ETH) could process 20 transactions per second with a five-minute transaction time in April 2021. Similarly, Bitcoin (BTC) was processing seven TPS with a transaction time of 10 minutes.  

That means a Bitcoin DEX could crash if tries to process over seven TPS at once. Similarly, an Ethereum DEX could crash if it tries to process over 20 TPS at once.

Moreover, trades are impossible on Bitcoin and Ethereum because it takes several minutes to process a transaction. On 27 August 2021, it was taking Solana about three minutes to process a transaction Solana Beach estimates. I base this estimate on the instruction time.

Hence, Serum could theoretically process several hundred transactions at once without crashing. However, I suspect Serum (SRM) is not capable of instant trades.

The Serum DEX

Some Serum advantages could include fully on-chain order books and entirely limit based orders. They claim Serum gives traders and speculators the ability to choose price, size, and trade direction.

Serum could lower transaction costs by working on Solana (SOL). Serum claims Solana offers a $0.00001 transaction cost.

One advantage to Serum (SRM) is that you can build decentralized exchanges and games in its ecosystem. Some Serum products include Cope (COPE), which evaluates trader performance, the DeFi Land game which simulates decentralized finance, Foresight Markets a Prediciton Market, the Aurory proposed gaming platform, the Jet Protocol for borrowing and lending, Mango Markets leverage trading, The Maps.me Mapping application, the Media Network content delivery network, Mercurial Finance, Oxygen (OXY), Zeta Markets, the OpenEra game, the Pyth Network, Raydium (RAY), and Solarise Finance (SLRS).

Thus a wide variety of applications already use Serum (SRM) to build dexes. Thus, Serum offers a product for which there is a market in the real world, unlike some blockhain projects.

What Value Does Serum Have?

Mr. Market thinks Serum (SRM) has some value. CoinMarketCap estimates Serum was the 11th most trending cryptocurrency on 28 August 2021.

In contrast, Serum was CoinMarketCap’s 141st most valuable cryptocurrency on the same day. CoinMarketCap gave Serum a Coin Price of $8.67, a Market Cap of $433.64 million, a Fully Diluted Market Cap of $87.015 million, and a 24 Hour Market Volume of $874.087 million on 30 August 2021. They base those numbers on a Circulating Supply 50 billion SRM, a Maximum Supply of 10 billion SRM, and a Total Supply of 161 million SRM.

I think those numbers are justified because there appear to be many products running on Serum. More importantly, Serum is selling a money making product for which there is a demand DEXs.

If you are seeking a DeFi cryptocurrency that could make money in the real world. I think Serum (SRM) is worth examining. I think this cryptocurrency and its decentralized exchanges could make money.