Today we continue to analyze the project. This project has been growing very fast recently, with an increase of almost 10% in a month. Of course, it is also the largest DEX in the SOL ecosystem, which is Raydium (RAY). Recently, SOL has risen very sharply, and all SOL ecosystems have experienced rapid growth. All projects have performed very well. RAY's current market value has reached 350 million US dollars, and its ranking has entered 140+. We have to analyze any project that enters the top 200. Today we will take a look at it.
Introduction
Raydium is an automated market maker (AMM) and liquidity provider built on the Solana blockchain that leverages the central order book of the Serum decentralized exchange (DEX) to enable fast trading, shared liquidity, Revenue opportunities and new project launches. Note: Serum is the world’s first cryptocurrency ecosystem that operates entirely on the chain and is capable of completely trustless cross-chain transactions. Serum was founded by the Project Serum team and has reached strategic cooperation with other top crypto asset traders and experts in the DeFi field.
Raydium offers some key advantages:
Faster and Cheaper: Raydium leverages the efficiency of the Solana blockchain to achieve transaction speeds orders of magnitude faster than Ethereum and gas fees at a fraction of the cost.
Ecosystem-wide central order book: Raydium provides on-chain liquidity for a central limit order book, meaning Raydium allows access to third-party order flow and liquidity on the order book.
Trading Interface: For traders who want to view TradingView charts, place limit orders and have more control over their trades.
How does Raydium work?
The following introduces the working principle of Raydium.
Raydium is unique in that it is the first AMM protocol in the DeFi industry to utilize a central order book to match trades.
In cryptocurrency, an order book refers to a list of public buy and sell orders for a digital asset trading pair, including trade amounts and prices.
Today, the most efficient way for exchanges to match orders is to use order books to execute trades between buyers and sellers. For example, AAX combines the technology of central ordering and LSEG’s powerful matching engine to provide its users with lightning-fast trade execution.
However, despite being efficient at matching buyers and sellers, traditional forms of order books have centralized characteristics. For this reason, most DeFi solutions have replaced orders with AMM mechanisms to match orders in a decentralized manner.
To review, AMM eliminates various third parties and centralization on the platform. Instead, they require users to provide liquidity by providing token pairs in a pool at a ratio of 50%:50%. Powered by smart contracts, DeFi AMMs provide users with automated, decentralized, non-custodial and trustless transactions.
However, as mentioned earlier, the fully decentralized AMM model also has some disadvantages, such as the lack of advanced trading features, the risk of paying unnecessary fees for failed orders, and the inability of DeFi solutions to share liquidity with other platforms, etc.
Raydium attempts to provide a solution to the above problems by sacrificing a certain degree of decentralization and combining the advantages of AMM and central order matching
While leveraging Serum’s order book makes Raydium a bit more centralized than most DeFi platforms, the project’s AMM and DEX remain fully decentralized. Therefore, users can trade, invest funds in different DeFi protocols, and participate in other activities while enjoying the full advantages of Defi.
In addition, Serum's order book runs on the Solana public chain and uses smart contracts to realize automated transactions between users. To this end, on-chain order matching on Raydium provides greater transparency and traceability without the need for centralized network participants or trusted third parties to settle transactions between buyers and sellers.
Interestingly, DeFi solutions other than Raydium have not integrated (more or less) decentralized orders into AMMs due to their computationally intensive nature. For this reason, running them on a public chain like Ethereum, which has limited scalability and transaction throughput, will cause severe network congestion and lead to a poor user experience.
However, since Solana currently achieves 50,000 TPS, but can scale up to 65,000 TPS, the network can handle the heavy lifting of the order book (although it still requires a lot of optimization).
Liquidity pool
Like other AMMs, Liquidity Providers (LPs) can put tokens into the liquidity pool to collect part of the fees in exchange for facilitating transactions between users. Transaction fees for the liquidity pool on Raydium are set at 0.25%, of which 0.22% will be allocated to LPs and the remainder (0.03%) to users holding the project’s native RAY tokens.
In addition to the liquidity pools created by the project, Raydium has also introduced permissionless pools. The difference between the two is that the latter allows users to create their own pools for various SPL tokens, with customized options
Once a user creates a permissionless pool, the platform will automatically add their trading pairs to the Raydium interface, while leveraging Serum’s orders to share their liquidity with other solutions in the ecosystem.
Centralized Liquidity (CLMM) Pool:
The trading fee for each CLMM pool is set at one of four rates: 100 basis points, 25 basis points, 5 basis points, or 1 basis point. Liquidity providers earn 84% of trading fees on every exchange in the pool, while 12% of fees are allocated to RAY buybacks, with the final 4% going to the treasury.
Farm and pledge
When liquidity providers provide tokens to the liquidity pool, the AMM automatically issues them LP tokens representing their share of the capital pool. The process is the same on Radium, which opens up yield farming opportunities for users to stake their LP tokens to farm native RAY tokens and generate additional rewards.
Thanks to partnerships between Ravdium and other Solana-based projects, the platform allows liquidity providers to leverage their LP tokens to stake both tokens simultaneously by placing them in a pool.
Such a solution is called a fusion pool and can provide users with dual benefits to maximize their profits by farming on Ravdium.
In addition to this, users looking for an "easier" way to earn passive income on the platform can stake RAY while holding project tokens to receive additional rewards.
AcceleRaytor
AcceleRaytor is Raydium’s own crypto launchpad solution that allows projects to raise funds on the platform. On AcceleRaytor, Solana-based projects can capture donations from Raydium users by launching an Initial DEX (IDO). To participate, contributors must meet the requirements set forth by each project by joining a community pool open to the public. In addition to the community liquidity pool, users can also join the RAY liquidity pool to participate in IDO, and they must stake a specific number of tokens over a period of time.
After all requirements are met, contributors can use the tokens they provide in the liquidity pool to purchase tokens sold by the project.
Token economic model
The project was launched in 2021. The total number of tokens is 555,000,000. The current circulation is 249,620,464. The current circulation rate is 45%. The current token price is 1.4 US dollars, and the peak was $17.4895 (2021-08-28), so although recently It rose 10 times before returning to 10% of the high point. In terms of token distribution, 20% for the team + 30% for partners & ecosystem, so from this distribution point of view, the team’s token holding ratio is still relatively high.
Then let’s take a look at its TVL. It’s not very high at the moment, only 120 million US dollars (Defilama data). The official website shows 180 million US dollars. This data is still not very high, nor can it be considered very low, just average. The TVL at the peak of the bull market was another 2 billion US dollars, so the volume has not yet fully increased.
Then we analyze its revenue model. Currently, the official website shows that the total transaction fees are 60 billion U.S. dollars. According to the 0.25% transaction fee mentioned before, the total transaction fees are 150 million U.S. dollars, so from 21 to now, there are 3 Years, the average annual revenue is 50 million U.S. dollars. This revenue capability is still acceptable. And compared to uni, we have said many times that the market value of DEX and TVL are almost 1:1. So from this point of view, it is currently a bit overvalued, and from the perspective of market value, it should still be in an undervalued range.
Finally, let me summarize this project. It is currently the largest DEX on the SOL chain. If the rise of SOL can surpass ETH in the bull market (although I think it is highly unlikely), then this leading DEX should also rise, relying on SOL. With fast TPS, the experience of this DEX is also very good. But currently in terms of user experience (UI&UX), I think there is still a certain gap with UNI.