Drift Protocol SRM Grant Proposal

Proposal:

The introduction of a $SRM trading rewards program totalling $500K USD (the Grant), run by the Drift Protocol team for spot trading on Drift v2 via Serum’s order books over a two month period (October - November 2022).

Aim:

The aim of this grant is to bring significantly increased spot order flow to Serum, providing additional revenue avenues to both Serum and Drift, and to incentivise a competitive Spot market on Drift.

Overview:

Drift Protocol is the fastest growing perpetuals DEX on Solana, having traded over $10bn in volume, with $100mn average daily volumes over a six month period. Drift has >15,000 active traders generating >$10mn in annualised revenues.

Drift v1 is a decentralised perpetual futures exchange on Solana powered by a dynamic AMM (DAMM). Drift v2, launching in September 2022, will be a fully featured DEX with a hybrid auction-AMM-orderbook liquidity model.

Drift will be launching a suite of new products in addition to perpetual futures, including:

  • Spot Markets (with potential Serum integration)
  • Cross Collateral
  • Borrow/Lend

Integration

Drift plans to select Serum’s on-chain central limit order-book to exclusively power its v2 spot markets and to provide its users with deep on-chain liquidity.

Drift v2 is launching with a novel Just-in-Time (JIT) liquidity mechanism. All taker orders submitted on the platform (spot and perps) will be routed through a 5 second speed bump where market makers can selectively choose to fill taker orders at a better price (think RFQ but with a twist).

All spot orders will first route through Drift’s JIT network, and then be completed on Serum. Serum will be the final liquidity provider for all spot orders.

With this JIT-orderbook hybrid implementation, large on-chain trades can be executed on Drift with low slippage and minimal price impact. This has previously been a significant challenge to execute on-chain.

Drift predicts a large amount of volume will be routed through Serum. Drift v1 traded over $10b in cumulative volume in under six months and generated $5mn in fees. With this integration, Drift is able to share the same success with Serum for our v2.

Trading Rewards

The Grant will be used to incentivise trading volume on spot volume filled on Serum’s orderbook. This incentive program will last for two months.

The available pairs at launch will be:

  • SOL/USDC
  • BTC/USDC
  • ETH/USDC
  • SRM/USDC

More pairs will be added post launch. For reference, Drift v1 had 15 markets.

Incentive Rebate Structure:

All taker orders directed to Serum will earn 30% of their trading fees in $SRM tokens. With Serum’s default 4bps fee (3.2bps to Serum, 0.8bps to Drift) the total 4bps fee for the taker will be discounted to 2.8bps via $SRM rewards.

This would position Drift’s spot market as the cheapest place to trade on all DEXs; and would help boost taker fees for Serum.

We look forward to gathering the community’s thoughts on this one. Please feel free to reach out if you have any questions.

1 Like

support from me, but can you commit to providing some ongoing commentary of analysis should this grant go through?

something like Mango so the DAO can SEE what it gets for its Serums. if you get me.

Hey MLP! We’d be happy to do this. We’ll have our own public analytics dashboard that will show the spot and perps volume. As part of this; we can include a sub page that shows the amount of volume that has been routed through to Serum so that users can directly see the benefits for Serum