In the wake of SBF and the FTX scandal, Solona DeFi has been rocketing! Taking the place of Alameda controlled DeFi projects is a new crop of platforms that are quickly earning market share in the invigorated Solana ecosystem. Amoung them, the Drift perp DEX is positioned to be one of the brightest shinning stars, with features similar to GMX and a possible airdrop looming in the near future.
About Drift
Drift is a swiss-army knife of a DEX allowing users to do Perpertual Swaps, Spot and Margin Trading, Lending & Borrowing, and Yield Farming. It's just the type of product Solana needs as DeFi users prep for a bullrun.
Improving DEX Trading Effeciency
Drift was created to improve the decentralized trading experience for users that are acustom to what they get on centralized exchanges (CEXs) like Coinbase, Binance, Kucoin and MEXC.
Most centralized exchanges work using an order-book mechanism, but this method doesn't work so well on-chain. Historically, onchain orderbooks have suffered from slow order fills, low liquidity, and high spreads. To achieve higher capital effeciency most DEXs have adopted an Automated Market Maker (AMM) style of execution.
Drift's hybrid liquidity model of DLP, and cross-margin borrowing and lending is an innovative approach that allows the platform to bring the beloved infrastructure of CEXs on-chain, so that Solana is able to give its target audience a familiar experience when trading.
Source: DeFillama
Earlier this week it was reported that with the surge of DeFi on Solana trading volume on the chain exceeded that of Ethereum L2s. If Drift is successful in acquiring high volume, liquidity and active users, it could turn into the GMX of Solana and lead the blockchain to a similar experience as had by Arbitrum.
Drifts Solution for Victory
Drift's suite of trading features are powered by its cross-margined risk engine. As such, every deposited token provides margin for perpetual swaps and is automatically eligible for yield from borrowers.
It's worth noting that, on Drift, borrowed assets are always over-collateralized.
Drift Liquidity
The Drift hybrid liquidity system is made up of Just-inTime(JIT) Auctin Liquidity, Limit Orderbook liquidity, and AMM Liquidity. Here's the purpose that each method fullfills:
- Just-in-Time (JIT) Auction Liquidity: provided by market makers prior to each transaction;
- Limit Orderbook Liquidity: provided by our decentralised orderbook (DLOB) made up of limit orders placed by takers that can be filled by makers; and
- AMM Liquidity: provided by Drift's AMM if no makers step in to provide liquidity.
How Drift's DLP Liquidity Works
Drift also utilizes a DLP liquidity provider (LP) system, similar to GMX v2's GM liquidity mechanism.
When a user provides liquidity to a specific perpetual market, they act as a counterparty to Drift traders in that market.
Due to this counterparty-risk, LPs earn a portion of the trading fees. When new trades are filled in the market LPs are providing liquidity for, their position is automatically rebalanced.
The protocol's orderbook and liquidation features are powered by a "Keeper" network of validator-like operators. Here is how the Drift docs describe Keepers:
Keepers are agents and market-makers incentivized to provide the best order of execution to traders on Drift.
Conclusion
One other cool things to checkout on Drift that I'll leave you with is the leaderboard. Where GMX utilizes third parties to show leaderboards Drift does so in-house. Whatsmore, it's beautiful. Not only is there a traditional leaderboard style view, but by clicking on a wallet you can see that user's active trades in real-time. This gives copy traders an experience that feels like they're watching directly over the shoulder of the platforms most successful users. Noice.
That's pretty much concludes our research on Drift. Of course, if you want to learn more I suggest diving into the docs yourself.