Solana's "Suffering Moments": How to rebuild the DeFi ecosystem after encountering the Serum crisis?
Original title: "Life After FTX: How Solana DeFi Is Starting Over—Without SBF’s Serum》
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Original Author: Stacy Elliott, Decrypt
Original compilation: Qianwen, ChainCatcher
The downfall of SBF wiped out $32 billion cryptocurrency exchange FTX — and dealt a blow to the development of decentralized finance on the blockchain it backed, Solana.
Serum was co-founded in August 2020 by the Solana Foundation, FTX, Alameda Research and others. It is a core decentralized exchange and liquidity provider for the emerging Solana DeFi ecosystem. Its order book is critical to Solana’s DeFi, integrating with nearly all of the largest DeFi projects on the web, such as Jupiter and Raydium.
But its private key is stored in FTX - which sounds bad.
After FTX’s apparent hack on Nov. 11, the same day the company filed for bankruptcy, DeFi projects on Solana urgently severed ties with Serum, fearing that the private keys used to update their programs were similarly hacked. destroyed. Solana DeFi emergency "off" switch.
Since then, Solana developers, investors, and other stakeholders have been scrambling to reopen it to advance a fork of Serum — essentially a copy of the code that has nothing to do with Bankman-Fried or FTX.LlamaSerum's successor is OpenBook. OpenBook joined DeFi last week
Anatoly Yakovenko, co-founder of Solana, told Decrypt, "The community transition from Serum to OpenBook is very noteworthy. This time, the community mobilized quickly and made a decision in favor of the community to redeploy Serum in the open so that it can continue to grow securely." .It can be said that Openbook is a great demonstration of decentralized action.”
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Serum promises to make DeFi transactions faster and cheaper-at that time, the Ethereum network had not yet been merged, and the POW model was adopted, and the handling fees were prohibitively high. transparent".
In the DeFi financial community, it has become a common saying that decentralization solves the problems of centralized giants such as FTX. Its proponents believe that DeFi will not place the fate of the entire protocol in the hands of one person.
But it does.
“Serum’s program update keys are not controlled by SRM DAO, but by private keys linked to FTX,” the pseudonymous developer Mango Max wrote on Twitter on Nov. 12, saying he had spoken to FTX’s new boss. Get in touch with CEO John Ray. "Now no one can tell who took control of this key, updated the Serum program, and deployed malicious code."
Serum's private key leak was bad enough. To make matters worse, it is appalling that a centralized exchange, not the Serum community, unilaterally obtained the private keys. It’s as if the Ethereum DeFi community found out that Coinbase controls the private keys of Maker or Uniswap.
Over the past month, DeFi trading volume on Solana has dropped below $20 million, a 75% drop, according to DeFi Llama. But there is still $293 million in total value locked in DeFi on the network, and developers, like former Coinbase engineer Mert Mumtaz, are trying to rally people to keep the ecosystem alive.
"Solana DeFi is taking a hit, but it's going to grow stronger than ever," he tweeted on Monday afternoon. The developer offers a free subscription.
But this pro bono help has its limits, and OpenBook still needs a sustainable way to compensate developers for working on the project.
One of Serum’s unique features is its utility token, SRM, where token holders receive a 50% discount on transaction fees and participate in governance. Now, court documents from FTX’s bankruptcy proceedings reveal that the company that helped create Serum has $5.4 billion worth of SRM tokens in its treasury. The tokens held by FTX, which represent 97% of the token supply, will almost certainly be liquidated to satisfy creditors.
The community decided without hesitation to remove SRM from OpenBook's system. “The goal of OpenBook is to break away from the SRM,” Soju, head of business development at Solend, Solana’s lending business, wrote on the project’s Discord last week.
Soju hosted the project’s community call on Monday morning, during which there was plenty of debate about whether OpenBook would need a token. Several people on the phone asked aloud if they could rely on funding from the Solana Foundation to keep developers working on the project.
“The foundation is very keen to fund the development of OpenBook, at least for the foreseeable future. OpenBook is the core liquidity infrastructure of DeFi, but there are limits to our funding.” Ben Sparango, director of business development at Solana Labs, on the phone "Each of these grants will be assessed on a case-by-case basis. So we cannot provide unlimited funding for long periods of time," he said.
He noted that the upcoming Solana Foundation hackathon in January will focus on DeFi developments, and encouraged OpenBook to submit a request for proposals to include hackathon participants.
But grants and hackathons don’t lead to sustainable DeFi projects. As the pseudonymous developer Jimthereaper put it on the phone, "Grants don't work."
Developer Mango Max pointed out that due to Alameda’s involvement in the Serum project, DeFi projects around Solana have always been suspicious. “When you have a large stakeholder like Alameda in the ecosystem, some people think ‘it’s none of my business here’. In terms of liquidity, a lot of traders are wary of using Solana because they think ‘it’s not my thing’. Like trading on FTX.’ At the same time, there are people who are wary of launching an order book because that’s Alameda’s territory.” members to make an effort."
In some ways, the Solana DeFi ecosystem always seemed crowded, with Bankman-Fried’s Serum being a core piece of the infrastructure, and Alameda Research relying heavily on yield farming — providing liquidity to automated market makers in exchange for token rewards . The former FTX CEO is known to be so enamored of the strategy that he infamously described yield farming as a "box" on Bloomberg's Odd Lots podcast, saying investors put money into DeFi protocols and take profits out .
This claim has drawn a lot of criticism for sounding like a Ponzi scheme. A Ponzi scheme is a scam that lures new investors, paying profits out of their own money to early investors as long as the promoters can keep the scam going.
But now, the original Serum protocol has stalled. Although OpenBook still has a long way to go, it has successfully integrated with Jupiter, Raydium, and Prism since its launch, and reached $1.8 million in transaction volume in the past day.
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Solana's "Moment of Suffering"
In the third quarter, there were signs that Solana’s DeFi ecosystem was starting to mature and stabilize — even if the bear market was grim in dollar terms, wrote Messari analyst James Trautman in a recent State of Solana report.
In fact, it’s the distribution of total value locked — a DeFi metric often abbreviated to TVL — across the entire DeFi protocol that helps cushion projects and reduce the risk of total collapse.
"In TVL terms, some of the top networks touch a single app with a TVL that ranges from 50-60% of the ecosystem," Trautman wrote. In contrast, none of Solana's apps are "too big to fail," Solana’s largest DeFi protocol, Solend, only had 14% of TVL at the end of the third quarter. "
As of Wednesday, the DeFi transaction volume on Solana in the past day was $27 million, less than 2% of the transaction volume of the entire DeFi ecosystem. The data source is DeFi Llama, which records different activities on 78 blockchains.
Solana DeFi’s transaction volume hit an all-time high of $568 million on Nov. 9, the day $800 million worth of SOL tokens held by validators will be unlocked. If these tokens suddenly enter the market, it may continue to drop the price that SOL has lagged behind. To avoid catastrophe, the Solana Foundation halved the number of unlocked tokens and realigned its own supply, meaning it resubmitted a significant portion of SOL tokens to the network, preventing them from entering the market.
Earlier in the day, Solana co-founder Raj Gokal described the events leading up to this as a "torn moment" for the network.
However, the future direction of OpenBook may ultimately benefit SOL as it moves further out of FTX's shadow. There have even been calls for the SOL token to be used to distribute discounts to developers working on OpenBook. A tweet by an NFT collector under the pseudonym R 89 Capital gained some traction last week, as Solana co-founder Yakovenko, Mango Max and Helius’ Mumtaz were all involved.
Yakovenko said he was against the idea because OpenBook launched a brand new token “without pre-preparing and thinking and seeing what would happen.” Mumtaz seemed interested, but declined to comment. Mango Max said last week, and reiterated in a Monday morning conference call, that he hoped that OpenBook would not introduce tokens.
John Kramer, co-founder of Dual Finance, said in a conference call on Monday that he is worried that the introduction of tokens is inevitable. The Solana DeFi community has forked Serum and launched OpenBook. Events create some guidelines.
