Raydium is a popular solution-focused platform that offers cryptocurrency and crypto users the advantage of an automated market maker.
The platform leverages the Solana network to offer instant swaps to users and projects and provides on-chain liquidity and yield.
In this article, we will explain everything you need to know about the platform and how it works.
What is Raydium Swap?
Raydium is an automated market maker, DeFi exchange, and token launcher hosted on the Solana blockchain.
It aims to solve decentralization problems such as expensive gas fees, eliminating unnecessary orders, and creating liquidity fragmentation.
Using the Solana network, the platform provides high-speed, low-cost transactions, increasing the order book of the decentralized exchange Serum, to provide improved liquidity, intensify returns, and provide fast token swaps for users.
Until this time, the platform has concluded many partnership deals to provide the best trading experience for users, including its main deal with Bonsai, the smart financial assistant based on decentralization within the cryptocurrency and crypto market.
Raydium Platform Team
Raydium was released in February 2021 by an anonymous team of founders who used pseudonyms such as adding the ray syllable to anonymous names such as:
- AlphaRay: General Manager of Business Development, Operations, and Raydium/RAY Cryptocurrency Production.
- XRay: CTO and Development Team Manager.
- GammaRay: Head of Corporate Marketing and Communications.
- StingRay: An expert developer who manages the project’s on-chain order book.
- RayZor: A smart and professional developer of contracts to ensure the safety of capital in the platform.
The team consists of different experiences in marketing, trading, blockchain development, algorithms, and mathematics, in addition to more specializations.
How does the Raydium platform work?
The scalability built into the Solana network allows it to match user requests with automated algorithms and processes better than its competitors.
The system has decentralization that is distinctively balanced with efficiency. Let’s find out how it works.
Automated market maker function for crypto trading
The Raydium platform provides on-chain liquidity and access to the order book, making it easier for users and liquidity pools to access order flow and liquidity in the Serum system.
Instead of using specialized market makers, anyone can provide liquidity to pools backed by shares of the assets represented in the pool.
For example, to become a liquidity provider for the SOL/USDC pair, you must participate in a pre-determined percentage of SOL and USDC.
In addition, the platform uses the mathematical function K = Y*X to ensure a balanced ratio of assets in liquidity pools and provide unlimited liquidity to users.
Y indicates the value of asset A. While X represents the value of asset B, let K remain constant.
The platform has an anonymity feature, where two tokens can interact without sharing information such as prices and value.
The platform uses this feature in proportion to the Fibonacci sequence (a sequence in which the term equals the sum of the previous two terms) intending to give up to twenty orders at different prices with a low spread of 20 points per second.
Raydium platform ecosystem
As we explained, the platform is hosted on the Solana network.
It also provides the option to farm cryptocurrencies and improve the best token-earning strategy.
Double payouts can be earned using its built-in pools through its official partnership with other Solana platforms.
There is a range of products provided by the Raydium platform as follows:
Crypto yield farming
Liquidity providers deposit tokens into a pool and are then automatically issued LP tokens that depict their stake in the pool.
This process allows platform users to explore crypto farming opportunities that help increase their yields.
They can farm, lend, or borrow the RAY token and receive many rewards.
To participate, the correct percentage of digital assets must be deposited into the liquidity pool on the platform’s automated protocol.
Upon validation of the transaction, the protocol sends LP tokens, and then the user can lend or share the token with a different lending protocol.
Then earn additional rewards and manage profits and increases by taking advantage of the scalability and interoperability within the Raydium Protocol.
Another advantage of crypto farming over the platform protocol is the ability for liquidity providers to use their LP tokens to create two tokens at the same time by depositing or lending in one pool.
These combined pools provide two ways to earn profit through farming on the Raydium platform.
Accelerator
The accelerator concept was invented by the platform to foster growth within the Solana network, according to the website.
It includes a platform release for Solana’s latest projects to create capital and liquidity.
The accelerator consists of pools that enable users to deposit funds into the project’s tokens.
Each group has requirements that must be followed to join and participate in crowdfunding platforms.
Certain tokens can also be staked for a specific time, and once conditions are met, token providers can use the deposited tokens to purchase the project’s native currency.
What’s different about the Raydium platform?
This project is the largest automated market maker project on the Solana network, as it offers some features that distinguish it from its competitors, such as price swaps that monitor the liquidity pool in the Serum order book so that users get the best prices that suit them. An example of this is:
1. Trading and exchange
Using the Serum ledger makes the Raydium platform more centralized so the platform provides users with a robust trading experience like on regular centralized exchanges.
It brings this experience to decentralized exchanges by integrating order books, charts, and limit orders found in other decentralized exchanges.
With central exchange features, the platform is still a bit restricted compared to other centralized cryptocurrency trading platforms.
No option includes displaying market deals or stopping losses, unlike other exchanges that allow setting orders for trades.
But Raydium provides a Raydium Swap option through which SPL tokens can be exchanged for other chains within the platform.
2. Add liquidity
The platform provides income earning by providing liquidity to its liquidity pool.
The list of available complexes can be found on Raydium’s website.
The platform exploits liquidity from its warehouses, and the Serum Book can be accessed and shared by all its users, which automatically increases liquidity and reduces slippage for traders.
About fees; The platform charges a 0.25% fee on all trades and swaps and a 0.22% return on the liquidity pool to be used to incentivize liquidity providers.
Likewise, 0.03% goes back to the staking pool that rewards those who stake RAY tokens.
3. Raydium Swap
The Serum merger helps Raydium swaps, unlike its competitors like Uniswap, allowing swapping from multiple SPL tokens to others.
SPL tokens (Solana-based cryptocurrencies) can be exchanged on the Raydium platform.
But if you are interested in the Ethereum network you can use the Serum Chain function and convert ERC-20 tokens into SPL tokens through the wallet service on the Solana network.
What also distinguishes the platform from its competitors is the way it manages slippage.
When it occurs on other platforms, the tolerance is low and this ultimately leads to the swap being canceled.
So the Raydium platform reduces user costs with its feature called worst-case price, which calculates the maximum amount of slippage that the user tolerates.
Then you delete the rest, which automatically reduces gas costs and trading fees from the trader.
4. Crypto farming in the Raydium platform
Raydium farms allow liquidity providers to generate RAY tokens from LP tokens at a trading fee specific to the liquidity pool.
Raydium crypto farming is similar to other DeFi platforms where users can earn tokens to provide liquidity in addition to trading fees.
Those who farm coins within the platform receive a RAY token, and those who farm in Fusion pools can earn project tokens.
Thus, the platform’s goal of allowing users to earn more assets through the tokens they have is achieved.
Raydium platform Advantages
– Low fees and fast transactions
The Raydium platform solves common problems that plague Ethereum transactions such as high fees and network congestion that lead to slow transactions.
So the protocol takes advantage of the amount of transaction calculations per second on the Solana network and other features to offer users fast transactions at a low cost.
– Improved liquidity
The Raydium platform provides enhanced liquidity through access to the Serum order book which distinguishes this protocol from other protocols that rely solely on their liquidity pools.
The Raydium platform connects to liquidity pools available in Serum’s central order book for quick access to the protocol.
– Advantages of CEX over DEX
The protocol bridges the centralization and decentralization of the platform by displaying trading charts and specific orders for users to control their funds.
They can also get enhanced swapping allowing them to exchange two tokens by using the swap feature.
Serum’s decentralized exchange also allows access to more professional tools such as limit orders.
Raydium platform disadvantages
– Weaknesses
One of the most prominent weaknesses is that the identity of the platform team is not visible to users, which increases the risks that users may be exposed to when depositing their money and they think that the owners of the platform can steal the money and they will not be able to track them.
– Non-permanent loss
Some risks occur when providing liquidity to the Raydium Protocol, such as non-permanent loss, which is obtaining an unbalanced ratio of tokens depending on how users trade them.
This represents the difference between keeping assets in the smart contract and the wallet.
If the value of the tokens decreases, the user may lose, and this ultimately leads to the loss of the token that he stored.
– Security attacks
The protocol uses the SPL wallet to access it, which exposes users to further attacks as attackers target large amounts of funds, especially if they are in a pool.
RAY token
Raydium (RAY)
RAY is the native token of the Raydium Network that is hosted in compliance with Solana Network standards and its tokens and complies with the ERC-20 token on the Ethereum network.
The RAY token offers many uses such as earning protocol and storage fees and receiving token launch allocations.
It is also used in protocol governance where owners can vote on proposals to update the ecosystem and earn the token by providing liquidity to pools known as Raydium farms.
A maximum of 555 million tokens can be minted with approximately 119 million tokens in circulation.
The platform has about $229 million in total closed value.
Most of the tokens go to farming cryptocurrencies and improving the overall performance of the network. The token allocation also includes:
Customize the RAY token
- Mining reserve: 34% of the total token supply with approximately 188 million tokens.
- Partnership and platform ecosystem: 30% for partnership programs with approximately 166 million tokens.
- Team: The founding team obtained a 20% stake with approximately 111 million of the token.
- Liquidity: 8% for liquidity of approximately 44 million tokens.
- Community Funding: The initial offering of the token represents 6% with approximately 33 million of the token.
- Advisors: They get a 2% cut of about 11 million of the token.
Distribution of tokens
The token was issued via liquid mining platforms in February 2021 for an initial amount of 555 million RAY.
So that the founders benefit from 22%, then 22% is used so that the remaining 78% of the tokens are used as rewards and as airdrops (drop the token and get it for free).
RAY Staking
The Raydium platform protocol verifies individual assets meaning token holders can stake their tokens as token staking provides an easy way to earn more tokens with a 25% annual yield.
To participate in the staking program, the user only has to deposit tokens and then earn interest.
The tokens will not be locked but can be withdrawn at any time, and in addition to the annual interest, it is possible to participate in new subsequent programs implemented on the protocol.
How to buy RAY crypto token?
The token is available on all centralized crypto exchanges such as Binance, Kraken, and Coinbase.
You just need to register on the platform and explore some non-custodial wallets like Trust Wallet and MetaMask.
What is the future of Raydium?
Raydium is one of the largest advanced decentralized platforms on the Solana network and is expected to have an impact on the DeFi space in addition to some of its various features.
The decentralized finance market is witnessing rapid movement, so to be successful in this market, you must carefully search for the appropriate platform.
