“I think the promise of a more decentralized, dynamic financial system is what ultimately inspired us at a core level…Our thinking was, ‘let’s take two of the most innovative, capital efficient ways to trade assets and bring them together via one platform’…”
Welcome to Serum Stories #3
Talk of Serum goes hand in hand with talk of liquidity. The Serum DEX turned heads when it announced to the world the benefits of its completely on-chain order book and matching engine. This design choice doesn’t symbolize an inherent conflict with the AMM model. In fact, Serum enables new AMM models that bring the best of both worlds.
This week, we’re joined by Daniel and Shardul from Cyclos, a new AMM solution bringing concentrated liquidity to Solana with the help of Serum. The Cyclos team shared with us their vision, and for Cyclos, their founding story and Hackathon tales, and their heartfelt message for the Serum and Solana community.
What’s up Next
1. — What is Cyclos
2. — The founding story
3. — The reason for building in DeFi
4. — Smart liquidity?
5. — Product vision
6. — What makes it all worth it!
1. For those who are not already in the know, what is your 30 second elevator pitch for Cyclos? What’s your usual introduction to new investors or players?
Cyclos is a concentrated liquidity market maker platform built on Solana. On Cyclos, liquidity providers bind their assets to price ranges of their own choosing via Cyclos’ frontend interface. These individual price ranges are then aggregated and correspondingly placed onto Serum’s order books. Liquidity is evenly distributed between ticks falling within the price range of the LP position. Trades are then executed against the combined liquidity of all individual curves. Profits are earned from the bid-ask spread and maker rebates.
2. Some might consider Cyclos new to the scene. You first appeared on Twitter in May and caught serious attention when you were awarded 1st place by Kin Ecosystem in their Solana Hackathon track as well as securing a winning spot in the India track! Congratulations!
What’s the story behind your team and founding? What was it like competing in the Solana Season Hackathon?
Thanks! For a bit of context, Cyclos itself is a new project, but our involvement in crypto extends back to 2017. Regardless, the Solana Hackathon was a fantastic way to jump into the ecosystem as project founders. We managed to connect with so many helpful individuals and institutions alike who’ve offered tremendous support for the project, and so we’re extremely grateful for the recognition we received as a result of our participation in that process. Furthermore, we’re just really proud to be a part of what we consider to be an extremely innovative wave of Solana projects that are bringing much needed, fresh talent, and thought leadership to the space.
As for the way our team came together, we are very much a product of the current times. Shardul and I actually met online, and after some time corresponding, realized not only did we have a great product to build, but our combined expertise in our respective fields was extremely complimentary. We decided the Hackathon was a great way to launch Cyclos into the public sphere, and decided to go all in.
3. So you mentioned you have all been building in Web3 for a while now! What specifically inspired you to want to build in DeFi?
I think the promise of a more decentralized, dynamic financial system is what ultimately inspired us at a core level. It might sound cliché but it’s why we are here. With the emergence of DAO-based financial networks, we are witnessing the emergence of a new model for organizing and growing wealth. We are super keen to be a part of that journey and make our own mark on its evolution.
When it comes specifically to Cyclos, there were a number of factors involved. I think both of our backgrounds afforded us the luxury of both a high level perspective of the DeFi sphere, while simultaneously allowing us to dive into specific products and solutions we found particularly useful for solving existing problems in the market. This is how we ultimately landed on the idea of building a concentrated liquidity market maker for order books. Our thinking was, “let’s take two of the most innovative, capital efficient ways to trade assets and bring them together via one platform.”
4. There’s been an ongoing debate about Automated Market Makers and the opportunities and challenges they present for decentralised finance. You mentioned that Cyclos seeks to solve some of the challenges by bringing what you call ‘Smart’ liquidity to the AMM space on Solana.
For the readers who aren’t familiar with new developments in DeFi, how would you explain what it means to have ‘Smart’ Liquidity in Defi and how does Cyclos tackle this issue specifically?
Very good question. Because of throughput issues on ETH, the evolution of central limit order book solutions didn’t get proper attention until more recently. We are very strong in our conviction that CLOBs are fundamentally more efficient they are able to match all bids and offers according to order price and time priority, compared to algorithmic (x * y = k) based AMMs. While Serum has addressed the throughput problem which beset previous attempts at order book-based trading, liquidity nonetheless remains an issue. This is where Cyclos fits into the picture. Other AMMs providing liquidity to Serum are still following the same 0 to infinity liquidity curve model when placing orders onto the books. Our vision is to, instead, give LPs a means and incentive to distribute depth where it’s needed on the order book. Cyclos effectively incentivizes LPs to place their assets strategically to maximize that yield, which in turn provides traders much more depth.
We use the word “smart” to describe liquidity on Cyclos, as we harness the power of game theory to distribute depth across the price curve. Liquidity providers are choosing the price ranges where they want to deploy their capital, meaning the intelligence of the market is reflected along each asset’s price depth. As prices fluctuate, traders reposition that capital accordingly. To us, letting LPs position their capital on the books where it’s needed is “smart”.
5. You mentioned you will be focused on both ecosystem composability and your own frontend user experience. What are your plans for the product and how do you see it evolving with the industry?
We plan to integrate interfaces with our partner projects so that users can benefit from our liquidity without leaving our partner projects’ products. Our overarching partnership strategy is all about finding ways we can leverage our solution to the benefit of other platforms, and as a result, increase our overall volume.
6. Would you like to share some of your positive or most favourite experiences so far as builders? What would you say makes it all ‘worth it’?
The tremendous support we have received despite the uncertainty of the market has been an incredibly positive experience. We feel blessed to have such strong backers and supporters.
While we are out to build a killer product regardless of the circumstances, there is something special about having so many talented people contribute value to the project that makes the end result much bigger than the team itself.
We hope you enjoyed the interview!
We would love to continue having these kinds of conversations with all the incredible teams building on Serum and sharing them with you. Just let us know who you want to read about next!