Defi by the numbers
The DeFi market capitalization from October 1st to October 17th, 2023, reveals a period of relative stability in the sector. The total market cap, encompassing all DeFi coins, maintained a consistent level of approximately $2.5 trillion throughout the timeframe. This stability suggests a mature market phase, with investors potentially adopting a wait-and-see approach. Notably, a subtle upward trend emerged towards the end of the period, particularly on October 14-15. While this movement does not indicate a definitive shift in market sentiment, it warrants attention as a potential precursor to increased investor interest or positive market dynamics.
Covered this week:
Raydium - the hybrid Dex on Solana
Raydium: Pioneering Dex Solutions in Defi
What is Raydium?
Raydium is a groundbreaking automated market maker (AMM) built on the Solana blockchain, offering lightning-fast trades, permissionless pool creation, and innovative yield-earning features. As the first hybrid AMM, Raydium pioneered the concept of sharing idle pool liquidity with central limit order books, setting it apart from traditional AMM DEXs and DeFi protocols that were limited to their own liquidity pools.
Leveraging Solana's efficiency, Raydium provides several key advantages, including significantly faster transactions and lower gas fees compared to Ethereum-based platforms. The protocol allows any user or project to create concentrated liquidity pools (CLMM) or constant product pools (CPMM) for any asset, fostering a truly permissionless environment. Additionally, Raydium enables users and projects to add token incentives to any pair or pool, enhancing yield opportunities for liquidity providers and contributing to a more dynamic and rewarding ecosystem.
What makes Raydium a hybrid
Raydium's innovative hybrid automated market maker model represents a significant advancement in crypto. By integrating with OpenBook's central limit order book, Raydium combines the strengths of traditional AMMs with the depth and efficiency of order book-based trading. This dual liquidity approach allows users to access a more comprehensive pool of liquidity, potentially leading to improved price discovery and tighter spreads. The platform's Best Price Swaps feature intelligently routes trades through either Raydium's liquidity pools or OpenBook's order book, ensuring optimal pricing and execution for users.
A key differentiator of Raydium's hybrid model is its bi-directional liquidity-sharing mechanism. Unlike conventional AMMs that are limited to their own liquidity pools, Raydium's pools can both contribute to and access the order flow and liquidity of the entire OpenBook ecosystem. This integration provides users with flexible trading options, allowing them to interact directly with Raydium's pools or trade against the centralized order book. Here is what can be done on Raydium:
Swap: Swapping tokens on Raydium is streamlined and efficient. By leveraging its integration with the Serum central limit order book, Raydium allows users to exchange tokens directly through its liquidity pools without the need for intermediaries. This setup not only enhances liquidity but also ensures optimal pricing, as the platform automatically routes trades to achieve the best rates.
Provide liquidity as a LP: There are two types of ways to be a liquidity provider on Raydium. Provide Concentrated Liquidity - users choose a trading pair and specify a price range for their liquidity provision. This range determines where their assets will be concentrated, potentially earning higher fees when the market price is within this range. After setting the desired amount of tokens to contribute, users can review the transaction details and confirm. The second way is Constant Product liquidity provision, also known as standard liquidity, users follow a similar initial process of connecting their wallet and accessing the "Liquidity" section. However, they select "Standard" pools instead. Users then choose a trading pair and input the amounts of both tokens they wish to provide. Unlike Concentrated Liquidity, standard pools distribute liquidity across the entire price range, offering more consistent but potentially lower returns. After reviewing the transaction details, users confirm the addition of liquidity and they receive LP tokens representing their share of the pool, which can be staked in farms for additional rewards or redeemed later to withdraw liquidity.
Create a Pool: There are two types of pools on Raydium. The first is by creating a Concentrated Liquidity Market Maker (CLMM) pool and farm. Users need to navigate to the "Liquidity" section on Raydium's platform and select "Create Pool" under the CLMM option. They must then choose the token pair for the pool, set the fee tier, and define the price range for concentrated liquidity. After specifying the initial liquidity amounts, users confirm the transaction to create the pool. To set up a farm for the newly created pool, users go to the "Farms" section, click on "Create Farm," and input the necessary details such as rewards, duration, and start time. This process allows liquidity providers to earn rewards in addition to trading fees.
To create an OpenBook AMM pool on Raydium, users first need to obtain an OpenBook market ID by creating a market on OpenBook with appropriate parameters such as minimum order size and tick size. Once the market is created, users can go to Raydium's liquidity page and click the "Create Pool" button. They then input the OpenBook market ID, set the starting price for the base token, specify the initial liquidity for both tokens, and set a start time for the pool. After confirming these details, users need to approve two separate transactions in their wallet to initialize the pool, create the AMM account and ID, and add the initial liquidity. Once completed, the new liquidity pool will be immediately tradable on Raydium's swap interface.
Staking Raydium Tokens: To stake tokens on Raydium enter the amount of RAY tokens you wish to stake and confirm the transaction. Once completed, you'll see your staked balance and can monitor your pending rewards in the dashboard. There's no lock-up period, so you can unstake at any time by clicking the minus sign next to your staked balance and specifying the amount you want to withdraw. Staking on Raydium is a straightforward way to earn passive income on your RAY tokens, with rewards automatically accumulating in the "Pending Rewards" section, which you can harvest separately or withdraw along with your staked tokens when unstaking.
How does Raydium's hybrid model impact liquidity provider earnings
Raydium's hybrid model significantly enhances liquidity provider earnings through its innovative approach. By combining AMM pools with OpenBook's order book, providers can tap into dual revenue streams, benefiting from both traditional pool fees and order book trading activity. This model also offers increased capital efficiency through concentrated liquidity positions, allowing providers to potentially earn higher fees within specific price ranges.
The hybrid structure provides flexibility, deeper overall liquidity, and optimized trade routing, which can lead to increased trading volume and fee generation. Additionally, the model helps mitigate impermanent loss risk through customizable price ranges and offers additional yield opportunities through farming programs. Overall, Raydium's approach aims to maximize earnings potential for liquidity providers while giving them greater control over their positions and risk exposure.
What makes Solana's blockchain advantageous for Raydium
Solana's blockchain provides Raydium with significant advantages, including high throughput of up to 65,000 transactions per second, extremely low transaction costs, and excellent scalability. The Proof of History consensus mechanism enhances network speed and efficiency, while seamless integration with other Solana-based projects creates a cohesive DeFi ecosystem. These features collectively allow Raydium to deliver fast, low-cost trades and deep liquidity, addressing common DeFi issues like network congestion and high fees. As a result, Raydium stands out as an efficient and user-friendly platform in the decentralized finance space, offering an improved user experience compared to DEXs on other blockchains.
Raydium tokenomics
The native $RAY token plays a crucial role in Raydium's ecosystem, serving as a foundation for further development and partnerships.
555 million RAY hard cap
The total RAY mining reserve consists of 34% of all tokens or 188.7m RAY
12% of trading fees are used to buy back RAY
RAY Solana SPL address: 4k3Dyjzvzp8eMZWUXbBCjEvwSkkk59S5iCNLY3QrkX6R
Team and seed (25.9% of total) were fully locked for the first 12 months after TGE and unlocked linearly each day over months 13 - 36. Vesting concluded on February 21, 2024.
The chart below shows $Ray price spans from November 2023 to October 2024. The price started around $0.25 in November 2023 and saw its first significant surge in December 2023 to approximately $1.75. In March 2024, the price reached its highest peak at about $2.75, followed by another notable peak in July 2024 at around $2.50. Throughout the period, the price has experienced considerable volatility, with support levels generally maintaining above $1.50 after December 2023. The most recent trend shows the price hovering around $2.00-$2.20 in October 2024, demonstrating an overall positive growth trajectory from its starting point, representing roughly an 800% increase over the charted period.
Conclusion & Key takeaways
Raydium is a pioneering hybrid automated market maker (AMM) built on the Solana blockchain, offering a unique combination of AMM pools and central limit order book integration. This innovative approach allows for faster transactions, lower fees, and increased liquidity compared to traditional DEXs. By leveraging Solana's high-performance infrastructure, Raydium addresses common DeFi issues while providing enhanced opportunities for liquidity providers and traders alike. The platform's permissionless nature, bi-directional liquidity sharing, and optimized trade routing contribute to a more efficient and user-friendly DeFi experience.
Key takeaways:
• First hybrid AMM combining liquidity pools with central order book
• Bi-directional liquidity sharing with OpenBook ecosystem
• Enhanced earnings potential for liquidity providers
• Improved price discovery and tighter spreads
• Mitigates impermanent loss risk through customizable price ranges
• Seamless integration with other Solana-based projects
This newsletter is for informational and educational purposes only. The content provided does not constitute financial, investment, or trading advice. We do not recommend any specific cryptocurrency, token, or investment strategy.
