This article aims to answer: Is it possible for Serum to grow into a multi-trillion dollar ecosystem with billion users?

The answer should start from two aspects:

Among the weeds, it is inevitable to lose your way. Everything has advantages and disadvantages, the important thing is not to be able to list them one by one, or to prove how knowledgeable and knowledgeable you are, but to evaluate and weigh these advantages and disadvantages.

Whether decentralized finance (DeFi) can develop into an industry trend is still doubtful, and I can't answer this question. Perhaps none of DeFi can become the mainstream of society.

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To some this question may seem silly, but to others DeFi itself is the silly one. This part aims to answer questions for the second group of people.

I was one of these people too. A year ago, I was still very skeptical about DeFi. If you asked me what I really thought at the time, I would rate it as "slow, expensive, buggy, underpowered".

But a few little things changed my mind. Before talking about how DeFi overcomes its own disadvantages, let’s talk about the original question, why should we bother about DeFi?

For some, decentralization plus censorship resistance may be enough. But I don't think so, at least not enough for our goal of being bigger and stronger. Visa, NYSE, Apple, and Nissan may write some empty promises for these values, but at the end of the day, DeFi’s massive audience expansion lies in showing the world the value of on-chain Architecture can make their products better, not worse.

In my opinion, the key is "composability".

A group of people built Uniswap, a standard (AMM-based) decentralized exchange platform. Another group built Aave, a standard decentralized lending protocol.

Now you want to build a decentralized trading platform that can realize embedded margin trading, what should you do? Do you want to build your own infrastructure such as risk engine, liquidation engine, DEX, etc.?

It does not need!

Let's say Bob has some USDC and he wants to go 2x long ETH. So, you can create a front-end (GUI) with just one click to:

(If you want the process to be easier, you can use flash loans to cut a few of these steps.)

The point is: projects on the chain are all public, permissionless, and written in the same language, so we can splice them together to build something new, and achieve the effect that one plus one is greater than two.

We only need to create a front-end that can realize the above 5 steps with one click, and successfully build a decentralized exchange with margin trading function.

If you want to provide loans for leveraged transactions and obtain corresponding yields, you only need to splicing the loan/loan agreement to DEX. Alpha Homora does just that.

You can use the Binance lending function and Coinbase order book function to try to achieve the same appeal, but the effect may not be good. You may encounter various problems such as interest rate limits, borrowing limits, withdrawal limits, withdrawal delays, etc., and there may be liquidation risks in the middle.

But in DeFi, all this can be achieved.

Another example comes from Serum. We assume that you want to create a fast and affordable decentralized exchange DEX on the Solana public chain.

You can learn to use Rust, build an on-chain transaction matching engine, test it, find market makers, create GUIs, etc...

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Bonfida front-end GUI interface

So, why should large-scale projects be built on Serum?

Because assuming that you are Robinhood, a well-known American brokerage firm, and you need to provide high liquidity for your user transactions, then you will not need to personally contact, negotiate, compare, handle settlements, communicate quotations, etc. with proprietary trading companies. All you have to do is to build a front-end DEX GUI for a decentralized exchange, and you can achieve what you want in 10 minutes.

If you want to create a token and get it successfully listed, you can hire R&D people to develop the token, business development people to communicate with Binance, FTX, and Coinbase about listing on exchanges, etc. Or you can directly create tokens and add DEX trading pairs or AMM pools. Place an order on the market, and your token will be available for trading in ten minutes.

Composability means that all DeFi-based applications can be combined with each other, and new products can be integrated into the system immediately. It seems that each project has been equipped with a financial ecosystem with complete services at the beginning of its inception.

However, the above does not prove that DeFi must continue to grow and develop.

But if DeFi does well enough, it can show huge advantages, and it can attract and eventually convince most companies to put their business on the chain.

You can imagine how grand DeFi will be with one billion users. And this is our goal.

How much will DeFi be worth at that time?

It's hard for us to answer now. What we describe below does not really estimate its value. We can only talk about which value it can achieve in theory.

We can make a rough estimate for now.

1) If these giants unite NYSE+ARCA+CME+ICE+... to achieve decentralization and charge 0.0025% (0.25 bps) for each transaction, what effect will it have?

• In this way, the daily trading volume is about 10 trillion US dollars. If the fee of 0.25bps reduces the transaction volume by 75%, and then 20% of the total amount is transferred to the decentralized platform, the final daily transaction volume will be around 500 billion US dollars.

• That would bring in $3 billion in annual revenue, and the valuation would be around $100 billion.

2) What impact will DeFi have on social media?

Social media will enable:

• API Open Access

• Freely create front-end GUI, client, etc.

• open search

• Publish across communities

• resist censorship

If the public chain taking Solana as an example can maintain a handling fee of 0.00002 USD and the throughput is sufficient, then

For Twitter:

• Average daily cost of $10,000

• Valuation at $30 billion

For Facebook:

• Average daily cost of $100,000

• Valuation at $800 billion

It will be difficult to upload pictures to the chain, and may need to use IPFS or other technologies. In theory, we might be able to transfer 30% of social media, and that part would be worth $300 billion.

3) What impact will DeFi have on structured products?

• Most structured products are easy to chain.

• BlackRock alone is valued at $100 billion.

• So the total value of this part can reach 500 billion US dollars.

4) How will DiFi affect credit cards?

• VISA's TPS (the number of things that can be processed per second) is about 2,000 to 50,000, and the scalable blockchain can also reach this TPS, and its valuation is about 500 billion US dollars.

• In this way, there will be a credit card company worth 1 trillion on the entire chain.

...and that's just the beginning.

These are very rough estimates - nothing to be taken seriously. This is not the value of the blockchain, they are only the value of companies and/or DAOs that can theoretically be on the chain.

However, it can be clearly seen through calculations that theoretically, the total value of companies on the chain can reach 1 trillion US dollars, and they are compatible with each other.

Of course, it does not mean that this vision will definitely happen, just that it is possible to realize it.

DeFi can fail, especially if DeFi is known for fraud and failure rather than its strongest product.

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DeFi could potentially have billions of users on-chain, worth trillions of dollars. So what kind of blockchain can realize this grand vision?

1) Able to process tens of thousands of transactions and hundreds of thousands of orders per second

2) Capable of handling 10 billion social media interactions per day, which is approximately 100,000 per second

3) The transaction fee is less than USD 0.001

4) Keep pace with the times

• As global technology continues to advance, the throughput of the blockchain must also grow accordingly.

5) Ability to handle all requests within human reaction time

• For most products, when we click a button, the expected response time is about 0.1 second. If there is a delay of about 1 second, it will make people feel very crashed.

6) Product mix

• If products cannot be combined, many companies will lose a lot of added value. That is to say, every industry will most likely hope to become a composable shard.

7) Ability to decentralize and remain open

So basically the blockchain needs to evolve to have the following characteristics:

1) 1 million TPS processing capacity

• 200,000 times per shard per industry

2) USD 0.001 processing fee

• If the handling fee is too high, the cost of sending orders, publishing updates, etc. will be too high.

3) Growth in sync with Moore's Law

• Specifically, expanding overall computing power by paralleling Moore's Law.

4) Decentralization and openness

5) 100ms block time

Which existing blockchains can meet the above requirements?

almost none.

At this stage, 200,000 transactions per second in a single shard would overwhelm all blockchains.

Even more worrisome, almost all blockchains fall short of these requirements, even in the long-term. Most blockchains, even the fastest ones, have no plans to focus on further increasing throughput. Instead, they are still sitting back and enjoying the aura that they can currently maintain the needs of 100,000 users in the DeFi ecosystem at a low price.

The current processing capacity of ETH is only 15TPS, and even ETH2.0 does not plan to upgrade the processing capacity to 200,000 TPS in a single shard with atomic composability.

The faster chain can generally handle up to 1000TPS, and the fastest speed is about 50,000TPS.

Therefore, the only blockchain that can truly realize the grand ambition of DeFi is the blockchain that is currently capable of processing tens of thousands of TPS and has already planned to upgrade the blockchain in the future.

In other words, it must be the fastest chain currently, and it will continue to improve its computing power as the number of components increases exponentially.

Solona meets the above conditions. At present, it can handle 50,000 TPS, expands synchronously according to Moore's Law, and has formulated detailed plans to plan how to optimize different parts of the system in the next few years to achieve an exponential increase in the amount of computing. Solana’s fees are also cheap.

Solana's block time is currently around 400 milliseconds, but it can be compressed to around 150 milliseconds through processing.

The core element is that Solana has set goals early in its establishment and will invest a lot of resources in future upgrades. The core team and ecosystem participants shoulder this mission when they join the team, and will continue to cooperate to help expand and upgrade.

It would be both a surprise and a disappointment if Solona fails to meet these requirements.

Besides it, which other blockchains can meet the requirements?

Serum platform

What DeFi needs to become bigger and stronger is a suitable blockchain. But just having a blockchain is not enough: a blockchain is just a proposal for how a group of people should come to consensus if they were to join the chain.

If DeFi wants to expand, it needs users to choose this blockchain. And there are very, very many users.

As long as DeFi reaches 10 million users, the rest will move forward on its own: For companies that are figuring out how to get on-chain, DeFi may become a default, obvious option.

But how should we get such a huge user base? First, we need a very different type of consensus: in a sense, it is equivalent to a Schelling point (a Schelling point, the natural selection tendency of people in game theory without communication), that is, if anyone wants To create DeFi, this consensus model will be referred to.

Ethereum has this capability. But no other chain currently does that.

But Serum shows a way to go. At present, it has the most powerful DEX on the whole chain in the world, and this ecosystem is growing rapidly. And, behind the scenes, there are apps with hundreds of millions of users trying to use Serum. The construction of the entire large system has already begun.

Not only that, Serum also has a complete support system: they promise to integrate development technical support, products, liquidity, and foundations. The coalition of groups built on Serum is huge.

That doesn't mean Serum will necessarily succeed.

But it does mean Serum has what it takes to succeed.

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Wormhole

Where did Serum come from?

The first proposal for the Serum project was a Google document describing a protocol for archiving screenshots of websites on Ethereum.

It gradually evolves over time until it accumulates to quantitative change.

But its most basic properties have never changed:

1. Serum will be completed within two months.

2. The value of Serum will always be just a cool decentralized application.

There is a decisive fork in the road of evolution:

1. Improve on the original basis

2. create a new chain

If you choose the first path, Serum should have been built long ago, and you can fully participate in the boom period of the DeFi fire. At the same time, you should have issued tokens with complete functions for sale, and have reached the peak of development.

And choose the second path, Serum may develop into a platform with billions of users. But it will take months to complete the first generation of products, years to build a huge ecosystem, and decades to realize its ultimate vision, all under the premise that Serum can successfully gain traction from the beginning.

The Serum project has chosen a road that has rarely been involved, so the fundamental driving force and vision of its birth are consistent with this article: do your best to realize the grandest and most ambitious vision of DeFi.

We've come a long way since Serum was founded. (But after thinking about it, it was only three months.) The road ahead is still long and dangerous, and even every two steps forward will lead to a step backward. But I guess that's what it's like to have great ambitions.