Raydium SRM Grant Proposal

Hi all, AlphaRay from Raydium here.

Serum has been at the core of Raydium’s AMM since inception. As traders and market makers, our objective has always been to build an AMM that avoids the pitfall of siloed liquidity pools, instead driving ecosystem-wide liquidity by integrating with a true on-chain order book. Serum has, and will continue to be, integral to Raydium in this regard.

As an AMM with full Serum orderbook integration, Raydium leverages liquidity from pools to place limit orders and market make on Serum’s orderbooks. The swap feature also checks for the best price between Serum and Raydium then executes whichever route gives the user more tokens, contributing to taker volume when executing through Serum.

Up until now, Raydium has focused on providing highly productive liquidity to Serum that is close to the mid-price and more likely to drive trading volume. Over the past month, Raydium has placed approximately $69,000,000 of liquidity to Serum order books within a 10% depth at any given time with about $15,000,000 being within a 2% depth. This approach has been sufficient to cement Raydium as the largest market maker on Serum for several months now, with Raydium accounting for between 40-60% of maker volume on most days.

Our proposal for this grant is 4,500,000 SRM of the 5,000,000 SRM tokens available. With these additional resources, Raydium would target to grow TVL on Serum to approximately $500m over the period of the grant under the assumption that productive liquidity and volume maintain key importance but understand that overall TVL is also beneficial for the optics of a protocol in the current environment. If the community decides that overall TVL carries even more weight, this number could be increased to approximately $1b relatively quickly.

Along with providing liquidity and driving volume, some additional reasons for this proposal are listed below:

  • User growth: Raydium has grown a significant user base with approximately 800k unique active monthly users. With more users trading on Raydium, Serum sees increased volume from both swaps that fill through Serum, and from users who trade on Raydium’s Serum DEX GUI page.
  • Trading pairs and markets: Raydium currently has almost 200 pairs, each of which represents a liquidity pool with an integrated Serum market. A huge portion of these Serum markets were created by community users through Raydium, with Raydium’s AMM as the primary or only dedicated market maker.
  • Ecosystem & project adoption: By helping to launch IDOs and Fusion pools (bootstrapped liquidity mining for projects), Raydium has created and is market making for a significant number of projects in the Solana ecosystem. As a result, many projects that would have previously been content with a standard AMM pool now seek out Raydium as a solution to both launch and drive liquidity on Serum.
  • Increased site exposure: Raydium.io currently sits at about 4,000 on Alexa website traffic rankings which is higher than Sushi, offers its Serum DEX GUI for users, and is the default GUI linked to on projectserum.com.
  • Marketing & awareness: With a sizable community and a team of partners and agencies that drive marketing around the globe, Raydium has and will continue to promote Serum as being at the core of its competitive advantages moving forward.

Raydium has a demonstrated ability to grow TVL, trading volumes and its user base, while creating a halo effect that benefits Serum and the entire ecosystem.

This SRM grant will enable Raydium to further drive forward and improve metrics on all of the points above while also allowing for the launch of a wide-reaching liquidity mining program to drive liquidity and volume on key pairs:

  • Rotating SRM liquidity mining: A two-week rotating liquidity mining schedule will be implemented. With 4.5m SRM, we expect to be able to support emissions on approximately 10-12 pairs. Raydium is happy to share a list of planned pairs with the Serum team for confirmation prior to the start of emissions. It may be beneficial for some pairs to remain while others rotate every two weeks. As an initial plan, a draft list of pools for the first rotation is below:
    • SRM/USDC - Current TVL: 1.3m
    • SRM/SOL - Current TVL: 4.4m
    • RAY/USDC - Current TVL: 88.6m
    • BTC/SRM - Current TVL: 0.2m
    • BTC/USDC - Current TVL: 63m
    • BTC/SOL - No current pool
    • renBTC/USDC - Current TVL: 0.9m
    • ETH/USDC - Current TVL: 14.4m
    • ETH/SOL - Current TVL: 1.9m
    • whETH/SOL - No current pool
    • whETH/USDC - No current pool

Note on estimated APY: While an APY of 10%-20% is a reasonable target, actual APY is primarily dependent on the amount of liquidity users are willing to provide.

In our time working together, Raydium has not requested any grants from Serum; however the team has worked relentlessly to build liquidity on both platforms in new and creative methods. This grant would be an ideal way for our communities to solidify our partnership, continue the great work we’ve been doing, and further drive the ecosystem forward together.


How much of the total Raydium volume is sent to Serum CLOB? Do you have the data to put a % on it?

There’s a good quote that goes: “The only time you should look in your neighbor’s bowl is to make sure that they have enough”

I think a lot of philosophies at Serum and Raydium align with this quote. From the get-go we’ve always made sure to provide Serum with ample liquidity for effective trading while watching out for users to make sure that they receive the best price. Raydium started small and never eyed Serum’s volume except to make sure that we were growing alongside each other. There has always been an implicit understanding that in order to achieve our goals, we need to grow the entire ecosystem together instead of eyeing each other’s numbers.

To answer your question though, I don’t have the exact figure on hand but a conservative estimate would be that Raydium has brought over 5 billion in maker volume and an additional 5 billion in taker volume to Serum since inception. Raydium’s total volume tracker only tracks maker volume so I’d say at least 25% of swaps on Raydium go to Serum.

But looking at it that way wouldn’t align with the philosophies of both our projects. Instead, we should look at how much Raydium has done to help Serum, and how much it can continue to do. On many of Serum’s (and Raydium’s) biggest days, Raydium accounted for over 60% of both maker and taker volume on Serum. We’ve also brought millions of new users into the ecosystem for both projects and helped hundreds of projects get trading and familiarized on Serum.


Relative pleb speaking here:

But measuring total Raydium volume sent to the Serum CLOB diverges from what the core goal of this proposal should achieve - incentivizing liquidity placed closer to the mid-price or within a 2% spread, and routing taker volume to the book. As JumpCrypto eluded to in the Liquidity Mining Program thread (posted below for reference), any protocol can stack liquidity on the far side of the book and boost TVL, but this is a vanity metric and does little for Serum’s core revenue-generating model, ie: earning fees on trades and boosting trading volume. Sure, TVL looks good on paper but where liquidity is placed will ultimately cement Serum’s role as “the best place to do business” on Solana. To achieve this, I think Serum needs active liquidity, tighter spreads, and more users interacting with the CLOB.

I think Serum having a closer relationship with Raydium could achieve this. As mentioned, Raydium could increase Serum’s TVL by 100s of millions in a handful of orders - just placed on the far reaches of the book. But the real thing that’s going on here is aligning incentives for the two protocols and cementing their relationship for the future. Raydium differentiated itself as an AMM and chose to build on Solana because of its composability with Serum. Serum’s team has worked with them hand in hand throughout this process - an almost symbiotic relationship. I swap through Raydium’s AMM because of its best price aggregation between its own pools and the order book. I think Serum grant should be based on metrics that help Serum exceed - more than just TVL - and I believe that the grant will put pressure on Raydium to make/take at the CLOB’s midprice more aggressively, thereby tightening the spread. Tighter spreads mean users get better prices from Serum when swapping through their AMM - better prices mean more trades - more trades mean tighter spreads… the crux here is that it’s reliant on having an active user base and as many trading pairs as possible. Does giving out rewards for a dozen pools change a protocol’s overall strategy so that all 200 of their pools do the same thing? Giving out mining rewards to a new project, while the intention is there, just means more users (or whales) farming rewards there - it doesn’t mean people will actually be trading through it.

Jump’s post for reference:
{{{{As we work to boost TVL, we might as well focus on making it as productive as possible:

  • We should ensure that a reasonable portion of the partner protocol’s liquidity is close to the prevailing market price so that it can interact with takers and promote trading volume. For example, imagine a new unhelpful protocol which allows people to deposit USDC and then bids SOL/USDC on Serum at 0.01. That liquidity will never trade and will get a ‘free’ 10% SRM emission. That is an obviously extreme example but, in general, different protocols will be more or less aggressive about posting liquidity near the inside best bid/offer, and we should have a way to reward the ones that are more aggressive.

  • There should also be an incentive for protocols to route taker volume to Serum. That won’t boost TVL but it will promote more organic liquidity as part of the virtuous cycle between takers and makers.

  • Both of the above issues could be addressed by including a simultaneous incentive for volume. We would suggest emissions of 50% of the above TVL incentives (1.5M-3M SRM) to accomplish this.


so lets go with 25%.

Do you think the Serum Foundation should treat Raydium at 25%, the same way say Atrix/Some other project is 100% to CLOB? Perhaps, if the Raydium volume sent down the pipe is 4x Atrix/Some other project. but even takng that into account, which path in the long long term helps make the CLOB the place to be? I would argue incentivizing 100% to clob projects, and incentivzing projects that provide tight relevant liqudity.

Relative size/volume of each project
Long term alignments of each project relative to Serum

I am not disagreeing with your points, Raydium is a beast and has been good for Solana/Serum/Itself, but the point is doing the best thing for the CLOB. I truly believe the AMM model to be redundant if the CLOB is operating with enough liquidity,

I’d say it isnt redundant considering $17 billion of volume went through the AMM because it was cheaper than Serum. Even at 1bps cost reduction, this has saved users $1.7 million. There’s no reason to discount our contributed volume/users/tokens just because not all the volume went to Serum. If anything, points should be added to Raydium since we’re actually prominently displaying the Serum logo, Serum DEX page and advertising the DEX to users.

you missed me saying IF it seems in that final sentence. you also missed the question " Do you think the Serum Foundation should treat Raydium at 25%, the same way say Atrix/Some other project is 100% to CLOB? ". what do you think?

My answer was that every dollar of volume we’ve contributed should be counted at least equally as it generates the same amount of fees for Serum as volume from any other source.

Raydium operates a competing source of liquidity though. Raydium controls the proportion of its liquidity that it sends to Serum, and I’m under the impression that it has been walking that down over time. So it IS appropriate to count its dollars of liquidity differently.

It’s not unreasonable for Serum to prefer partners who don’t compete with its core offering, and to juice the allocation for their liquidity. Admittedly, that might be because those partners simply haven’t built out the infrastructure to compete. @kaiba can you give us any promises on your intentions with respect to building competitor AMM pools, say in the next year? Conversely, @AlphaRay, can you give us any assurances on the % of liquidity that would be sent to Serum under your proposal?


I can promise that Atrix will continue to provide all of its liquidity to Serum for the next year, and beyond. We have no plans to build any internal pools and don’t believe in fragmented liquidity when a solution like Serum exists on Solana.

We outlined our vision for liquidity on Serum and the role of AMMs in our proposal for Atrix, which should help clarify our intentions - Atrix SRM Grant Proposal

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Not really sure what gives you the impression we’ve ever reduced the amount of liquidity sent to Serum. Raydium has always been diligent in providing more than ample efficient liquidity to Serum while not wasting resources sending orders to the far ends of the orderbook. As JumpCypto pointed out, this is the liquidity that matters and should be counted for.
Raydium can definitely assure you that it has never reduced the percentage of liquidity sent to Serum and that it has no plans to do this. In fact, the amount of liquidity Raydium sends to the orderbook would only increase from this point if Serum deems that it is not a waste of resources and would help the ecosystem.

Hey guys,

We’ve received a number of questions about the amount of liquidity that Raydium sends to Serum, and much of the debate has centered around a protocol that delivers all of its liquidity to Serum vs. posting a percentage of total. However, as @adrian @JumpCrypto and @nkosi have all pointed out, the fact remains that it is extremely important for liquidity on the orderbooks to be effective in order to drive trading volume and value for Serum.

Up until now, we’ve discussed productive liquidity and the value of it in concept only. While due to several users asking for more information, we did some additional research on the Serum orderbook to see how effective Raydium’s AMM actually is, how it compares to others, and what that actually looks like.

After a quick look, we noticed that Atrix is currently placing 3 orders on each side of the orderbook for SOL-USDC. The first order at 0.5% from mid, second at ~10% from mid and the last one at about 1000x the mid price. The last 2 orders are generally unlikely to ever get hit and we feel that this type of market making is ineffective and not in the spirit of helping the Serum Foundation with their goals. Conversely, Raydium currently posts 7 orders on each side of the mid within a 2% depth on SOL-USDC, with the first order 0.3% from the mid. Atrix is a new protocol and we give them the benefit of the doubt that the market making will improve. However, we felt that it is important to put this forward as a clear example, rather than just a simple ‘what if’ concept, of where a lot of TVL can end up sitting on the orderbook.

As avid supporters of Serum, we also believe that grants should be distributed effectively and in the areas where they deliver the most value. We have gone into detail in this post to show that TVL is far from a standalone metric, and can be very deceptive when taken out of context. We hope this helps to clarify some of the pitfalls of this topic and look forward to continue building alongside the Serum community to create a healthier trading environment for everyone.

Orders from Atrix SOL-USDC pool:


I’ll add some context to Atrix’s order placement. To start, Atrix adds orders at the ends of the book according to x*y=k (constant product) to support TVL on Serum, as Serum’s success is Atrix’s success. Of course, instead of placing these tail-end orders, Atrix could place a couple more orders closer to the center of the book, facilitating slightly more volume. However, we think it’s OK to sacrifice a small amount of center liquidity for a large amount (80%+ of Atrix) TVL being allocated to Serum from Atrix’s TVL due to tail-end orders. This also isn’t any manipulation we are doing to the constant product equation, it’s placed according to the exact math. If it were the case that this liquidity shouldn’t be counted towards TVL, then Uniswap V2 or Sushiswap would have 10x less TVL than they claim.

However, we definitely agree with @AlphaRay that Atrix could provide more liquidity closer to mid-price, and @JumpCrypto that volume matters. To that, we are working on some technical improvements to our AMM program to place more orders on the book, along with additional improvements to other types of pools. I’ll follow up with some technical details:

Currently, Atrix’s order placements/cancels are atomic within single transaction, to ensure we stay EXACTLY consistent with the constant product equation to minimize any extra divergence loss which is not due to the equation itself. Because of this atomic, single transaction restriction, there are only so many orders Atrix can fit into a single transaction, because of Solana’s current runtime limits and compute cost to place and cancel all of our Serum orders. But there is still of course some room to optimize, which we are working on. Edit: To add, non native SOL-based Atrix pools, like mSOL-USDC, have more orders and tighter orders than presented in the above screenshot.

In contrast, AFAIK, Raydium places and cancels their orders using multiple transactions, not atomically. This often leads to order placements which are not exactly equal to constant product. When there are large market moves in a small period of time, this can cause a large amount of extra divergence loss to LPs which is not due to the constant product equation. As seen below, orders at prices 162.399 and 163.087 have far less size allocated to them than the following the constant product equation exactly would suggest. As you get further from the mid-price, order sizes are supposed to strictly increase, not increase and decrease in an arbitrary manner. However, since Raydium utilizes internal pools for most of their liquidity and a large portion of swaps, any extra divergence loss due to Serum orders may not be significant to Raydium LPs.

Orders from Raydium’s SOL-USDC pool:
Screen Shot 2021-10-15 at 5.50.35 PM

These orders are actually a correct decomposition k=xy. The reason the third and fourth bid is smaller in size is due to a previous trade taking part of the fourth bid and Raydium replacing the bids infront of it to stay inline with the k=xy + profit equation so that LP providers still make the same amount for liquidity provided. It’s also an efficient way to replace orders that were picked off rather than replacing the entire book so that orders are still placed atomically and the middle of the book is well populated for others to trade against. These efficiencies are what makes Raydium a strong market maker on Serum and how it has been able to capture so much more value for its LPs.

I’m not sure if that makes sense with regard to divergence loss for LPs specifically in the case that there is a large market move and the non-exact xy=k orders get filled before Raydium can recalculate. But if there is data backing up Raydium’s greater profits for LPs specifically for Serum orders, would love to see it.

To also give an update on my previous reply, we’ve revamped Atrix’s order placement for our mSOL-USDC pool to have a much tighter spread with more orders and are working on deploying this to other pools.

Orders from Atrix’s updated mSOL-USDC pool:
Screen Shot 2021-10-16 at 3.52.40 AM

The truth is in the pudding, no? Would think this would have been a core feature for a Serum dedicated AMM, especially before applying for emissions. Maybe run the protocol for a bit, use your own emissions and try again next month? Coming off a little thirsty

Hey all ssj from solfarm here

We drive most of our leverage farming trades through serum and can tell for a fact that the only thing we care about is tight spreads and low slippage. We dont let users open a leverage farming position if the spread or slippage is too high ( >1% spread or >2% slippage ).

While Atrix provides most of its TVL on serum who is gonna hit the tail-end orders though. With the launch of aggregators like https://jup.ag/ trades will just get routed to where it gets the best price. With the above assumptions in mind even though Atrix provides a lot of TVL to Serum if its bids dont get hit and it cant generate value for LPs what reason do they have to use it over Raydium which has a higher chance of orders getting hit and there by generating more revenue through fees.

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@therealssj check out the spread I posted in my latest reply above for our mSOL-USDC pool. We can work on making this even tighter with more technical work and are very open to feedback on our order placement.

And to clarify the tail end orders once again. We can’t use the TVL in the tail end orders in the center orders if we follow xy=k exactly, or else that wouldn’t be xy=k. Uniswap V2 and Sushiswap have over 90% of their TVL that is unused in “tail-end” positions. We have some ideas about leveraged xy=k positions that could help this, but are still researching these ideas.

@rocketman I’m not sure where this is hostility coming from, since Raydium is proposing to allocate 90% of the SRM grant for their own protocol, far greater than Atrix proposed, and now Atrix is also very competitive on spread and order placement just like Raydium.

Hey, sorry about the tone. Not trying to come off hostile. Understand you all are a new protocol, just seems like most of these projects have built their relationship with Serum with a certain degree of good faith over the course of the last year or so, and mainly relying on their own emissions to do this. I’ve played around with Atrix a little bit. Would personally like to see how your protocol can dev on it’s own and build a strong user base. Looks like a lot of people here are in agreement that TVL isn’t everything, but the next biggest thing would be cross-marketing and bringing new users to Serum to drive long term growth. It’s uphill sledding for the Solana ecosystem as a whole. Established AMMs (Orca, Saber, Raydium) built a brand first.