This article is translated from the latest tweet published by FTX founder and Serum consultant SBF on 2020-10-26.

Serum has launched its first AMM! 1 million SRM airdrops are waiting for you! Annual Percentage Percentage (APY) up to 600%!

this time! Finally no more vegetables!

The following is the original tweet:

non investment advice

One of the functions provided by Serum is the creation of AMMs, just like Uniswap. The only difference is that the transaction on Serum is faster and the handling fee is cheaper. Does this matter?

Of course there is!

One of the most important points is this: Suppose there is an ETH/USDC pool now, and the price of ETH has slowly dropped by 1%. Then on Serum, when the price difference is around 35bps, users can carry out arbitrage. On Ethereum, users also need to consider the expensive Gas fees, and are not sure whether they can successfully complete the transaction and realize arbitrage. This also means the risk of adverse selection.

If a user uses an arbitrage robot, when the spread on Uniswap reaches 35bps, the spread after deducting fees is actually only 5bps. If the spread stays the same and many arbitrage bots compete together, then you may only have a 25% chance of closing an arbitrage trade.

If the spread disappears and the other bot cancels the trade, then you're guaranteed to make the trade. But you may lose money because of it, and this is adverse selection.

Therefore, driven by gas costs and adverse selection, arbitrage robots can only engage in arbitrage opportunities with a price difference of 15bps-50bps. Eventually, this will lead to the convergence of the impermanent loss (IL) in this liquidity pool. But because the total amount is smaller, the arbitrage income will be less.

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Other than that, are there any other differences?

Of course - Serum has its own on-chain order book, seehttp://bonfida.com/dex. Therefore, users can provide liquidity by simulating the AMM price change curve by placing orders on the DEX order book.

This means that the AMM has some control over its impermanent loss: the user does not have to wait for a bot to view the AMM. The bot looks at the order book anyway.

So this is an enhanced version of the problem mentioned above: the user can be sure that the trade is executed at the price on the order book.

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How does this work?

First of all, DEX is on the chain. So on-chain programs can send orders on DEX. In particular, it should be pointed out that asset pools are also available! (see link below for details)

https://docs.google.com/

Therefore, users can utilize asset pools to build an AMM that can be traded on Serum DEX.

Note that this process automatically invokes Serum’s crank, on-chain order book, and trade matching engine.

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What else can users do?

Users can also use asset pools to create borrow-lending agreements (or wait for others to create them-it will be implemented soon!), and use lending agreements to obtain leveraged trading margins. Users can also place limit orders or trigger orders: it can be realized through DEX or other on-chain programs.

Users can also use the asset pool to obtain income—either airdrop the income to AMM’s liquid LP token holders, or airdrop directly to the asset pool.

Serum has launched the first AMM, please use a computer to enter the AMM homepage to experience:https://swap.projectserum.com