The Biggest Trading Firm You've Never Heard of Just Bet Big on Crypto
The Biggest Trading Firm You've Never Heard of Just Bet Big on Crypto
Jump Trading Partners with FTX to Revolutionize Decentralized Trading
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Jump Trading Partners with FTX to Revolutionize Decentralized Trading
Jump Trading is one of the world’s largest, most active, and most secretive trading firms. Contrary to what their rudimentary website might lead you to believe, the Chicago-based proprietary trading firm invests billions of dollars through high-frequency algorithmic trading.
They provide liquidity and exploit arbitrage opportunities in futures, options, and even crypto markets worldwide. In fact, they provide liquidity to some of the most popular crypto-trading platforms such as Robinhood Crypto, BitMEX, and Bitfinex.
Yesterday, FTX, the fastest growing crypto exchange, announced a partnership with Jump Trading for an up-and-coming project called Serum: a non-custodial, decentralized exchange built on the Solana blockchain. Jump Trading has invested an undisclosed amount of money in Serum and, more importantly, will be providing liquidity to the DEX. FTX and Serum are offshoots of Alameda Group, one of the most renowned trading firms in crypto, headed by Sam Bankman-Freid (@SBF_Alameda).
For the uninitiated, a decentralized exchange, or DEX, is a trading platform where funds aren’t given to any central entity as you would with a centralized exchange such as Coinbase Pro. They use blockchain technology to settle trades directly between two parties. DEXs allow for true peer-to-peer trading, generally don’t have any AML/KYC requirements, and often have native tokens that are used for the governance of the platform.
DEXs are booming in popularity, and recently saw more volume in a 7-day stretch than they did for all of 2019. However, this rise in popularity is exposing problems with the way DEXs are currently built.
Most DEXs are built on Ethereum. Simply put, Ethereum in its current state can’t handle the massive volumes of transactions that are required to support even a single orderbook, let alone multiple fully functional exchanges. Thus, we’re left with a DeFi trading ecosystem where market inefficiencies run rampant and it often costs a few bucks and several minutes for trades to go through.
FTX is solving this in part by building on Solana, a newer blockchain that’s up to 10,000 times faster than Ethereum. This colossal increase in capacity allows Serum to have an order book fully stored on-chain and refreshed every 400 milliseconds, an order matching engine, and functionality for limit orders— none of which exist in any Ethereum-based DEX.
Most notably, Solana enables Serum to be cross-chain, interacting with other blockchains. This allows traders to use Serum with the tools and assets they’re already familiar with, such as a MetaMask wallet, and lowers the barrier to entry.
Like other DEXs, Serum has its own native token— SRM, which is used for on-chain governance purposes such as fees, enforcing cross-chain protocols, and even pulling levers to tweak the order matching engine for peak speed and efficiency.
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By the Numbers:
Ethereum currently handles 10-20 transactions per second (TPS). “Next-gen” blockchains such as EOS handle 100x that and offer 1000+ TPS. Solana has the capacity for 100x more than even EOS, touting tens of thousands of transactions per second. For context, a sophisticated, well-establish exchange such as the NASDAQ handles ~427 TPS. With Solana’s numbers, several fully-functional decentralized exchanges can operate at once.
FTX, launched less than 18 months ago, has quickly risen to the top of the exchange leaderboards by volume. They’re currently the #7 exchange in the world, doing $2.25B+ in volume daily, almost 3x the volume on Coinbase Pro.
What They’re Saying:
SBF recants the ideation of Serum: “Something that’s not extremely slow and expensive would be nice…an exchange with an orderbook, matching engine, and limit orders would be nice…not having to be constrained to one ecosystem would be nice…so [Serum] is a DEX on a fast blockchain, that has a plug-in to all other blockchains.”
Why this matters:
Alameda has found swift success through FTX, and they’re likely to do the same with Serum because of their expertise as traders. FTX boasts that it’s “built for traders— by traders,” and this is perhaps the greatest advantage it has over other platforms. Combine this with the decades of expertise that Jump Trading brings to the table, the added liquidity Jump provides, and the technological advantage provided by Solana, and you’ve got the recipe for a DEX like nothing we’ve seen before.
The timing of this partnership couldn’t be better. Alameda is doubling down on its consumer trading offerings and recently acquired Blockfolio for $150M, along with the crypto portfolio tracking app’s 6 million users. As we wrote last week, “This deal is at the intersection of macro tailwinds generating more consumer interest in crypto, and the rise of the retail trader using investing as entertainment. The two companies are exploiting these trends to build a new, retail-focused trading product that will integrate directly into Blockfolio’s existing app.” Now, Alameda will have a suite of products to service crypto traders: a convenient trading platform in Blockfolio’s app, FTX— a robust and centralized derivatives exchange, and Serum on the cutting-edge of decentralized trading.
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