Hi all, posting a couple of proposals for the community’s consideration.
As the first fully on-chain order book, Serum represents a great innovation in the world of decentralized exchanges. Serum is currently the largest spot exchange on Solana, and provides liquidity for many projects in the ecosystem. But Serum has the potential to grow much more, and become a dominant protocol among all decentralized and centralized exchanges.
The motivation for these proposals is to address two areas that can be improved to achieve this vision:
Low liquidity ⇒ suboptimal execution ⇒ low volume
One of the advantages of an order book exchange over an automated market maker is its ability to provide efficient and fair price discovery and minimal price impact. However, these characteristics are only achieved when market makers provide sufficient liquidity and narrow spreads. Serum could benefit by bringing more market makers to the exchange to improve its execution and draw more volume to the exchange.
Aggressive emissions + limited token utility ⇒ low demand for SRM
Community members have expressed concern (see forum topic #205) about SRM tokenomics, specifically that the aggressive emissions schedule deters potential investors from buying the token. Additionally, SRM provides limited utility. Currently, the main benefit of holding SRM is reduced trading fees, which mainly incentivizes GUI providers to hold SRM so that they can pass low fees on to their users. SRM also allows holders to vote on DAO proposals, but it is unclear how much this utility encourages community engagement.
This post presents an approach to tackle both problems by applying liquidity incentives systems used by AMMs to Serum DEX, and introducing a voting-escrow token (veToken) model (pioneered by Curve finance) to Serum’s governance.
We’ve split the design into two proposals, which are related but not necessarily interdependent. These are each explained in separate forum posts, so that they can be independently discussed and voted on.
The two parts to the proposal are:
A DAO vote will be created for each of the above proposals. The purpose of these votes will be to solicit feedback and gauge community sentiment toward the proposal, in order to determine if work should begin on implementation. New DAO proposals will be opened to introduce concrete implementation changes, should the above proposals pass.