How SRM Works: Understanding the Core Features of Serum's Utility Token
SRM is the utility token of Serum, a decentralized exchange (DEX) built on the Solana blockchain, which seeks to resolve issues related to speed and high transaction costs. Key to SRM’s functionality are staking and governance, both designed to create a decentralized and scalable ecosystem. Below is a breakdown of how SRM operates within this environment.
SRM's Role in Serum's DEX Model
Serum is a fully decentralized exchange, and SRM plays a critical role within this ecosystem. The Serum DEX uses an on-chain central limit order book (CLOB) that allows participants to set their own buy and sell orders. SRM helps facilitate smoother operations within this framework by enabling users to participate in the network. Rather than relying on traditional automated market makers (AMMs), Serum operates in a way that mirrors centralized exchanges. SRM works as a utility and governance token to enable these actions within the decentralized system.
Transaction Fee Reductions
One of the primary use cases for SRM is as a means to reduce transaction fees on the Serum exchange. Users who hold SRM tokens can earn deductions on their trading fees, which is a typical feature of many DEX utility tokens. To incentivize participation, the more SRM a user holds or stakes, the greater their fee reduction, incentivizing long-term token holding and active engagement on the platform.
Staking and Validator Nodes
SRM can be staked to participate in network governance while earning rewards. Serum utilizes a system of validator nodes to help secure the decentralized exchange, and SRM holders can either operate a node or delegate their stake to existing validators. Validators are integral to ensuring that transactions on Serum are secure, transparent, and efficient. Individuals who stake their SRM tokens help secure the network and, in return, are rewarded with SRM tokens as staking rewards.
Governance Voting
Besides transaction fee reduction and staking rewards, SRM also allows token holders to participate in governance decisions that shape the future of the Serum platform. SRM holders can propose and vote on changes to the protocol and architecture, making it a governance token in addition to its use as a utility token. This governance capability ensures that SRM users have a say in updates and structural changes to the Serum ecosystem.
Cross-Chain Swap Feature
SRM also supports cross-chain asset swaps due to Serum’s interoperability capabilities with other blockchains. Users can trade assets across different blockchain networks without needing centralized intermediaries. SRM helps facilitate this robust feature in a decentralized and transparent way, a benefit for users looking to manage multiple assets seamlessly across various chains.
