The fall of FTX took the industry by surprise and cost the market as much as $260 billion in value. Beyond that, FTX cost its partner Binance a huge loss and even rendered Solana’s DEX protocol, Serum, defunct. Almost a year later, the cryptocurrency market has not fully recovered, but the Solana DeFi community has certainly moved on with a community-led hard fork known as OpenBook. In this article, we discuss the new platform, how it works, its features, and what distinguishes it from its predecessor, Serum.

What is OpenBook?

OpenBook is a decentralized exchange platform serving as the new home for trestles trading on the Solana blockchain. Deployed as a hard fork of the now defunct Serum project, OpenBook is essentially Serum but without ties to its former founders, FTX and Alameda research. The code, order model, and underlying user interface remain the same, although since deployment, the platform has undergone developments and upgrades.

OpenBook, like Serum, is an innovative project incorporating the central limit order book, a staple centralized exchange order book, to provide an open-source decentralized exchange for Solana users.

History of OpenBook

In the last few months of 2022, the crypto industry took a major hit from a scam that rocked one of the largest cryptocurrency exchanges, FTX. The FTX scam had ripple effects, such as bankrupting the platform, major trading losses, and volatility in the crypto market. The FTX scam uncovered other issues, such as a security breach. In response, the industry started to raise questions about projects linked to the exchange.

Serum, launched jointly by FTX, Solana Foundation, and Alameda Research, took the biggest hit and was rendered defunct. The FTX collapse revealed that FTX had control over Serum’s private keys, meaning the DeFi platform wasn’t decentralized. Many of its partners, Jupiter, a DEX aggregator, and Raydium, started to move away from the project and pooling support for an ecosystem fork. The result of this fork is OpenBook, another DEX platform built on the Solana platform.

How Does OpenBook Work?

When the average defi user hears DEX, they think first of AMMs (Automated Market Makers), smart contract tools that determine the prices of tokens on a decentralized exchange. Solana’s new DEX adopts the central limit order book or CLOB model, which is mostly associated with centralized exchanges. The CLOB model is a decentralized on-chain order book that executes orders directly through smart contracts while also giving users the choice to customize pricing and order sizing. OpenBook uses the CLOB model and a matching engine to guarantee liquidity and provide time-accurate order matches.

For executing a trade on the OpenBook dex, a user needs to link an SPL (Solana Program Library) wallet to the platform, and they need enough tokens to cover transaction fees. Once these conditions are fulfilled, the trade cycle can start, and it looks something like this:

• Step 1 (Placing order): The user places the order by specifying the trading pair, price size, and order type in the designated order form.
• Step 2 (Matching order): The order is moved to the request queue, where the status is considered pending until it is matched with a corresponding order and moved to the event queue.
• Step 3 (Consuming events): The matched order is now a trade, marked as an event in the event queue. The transaction, though, is not complete until it is processed and each user’s open orders account balances are updated.

Main Features of OpenBook

OpenBook has many elements that work together to bring the best experience to its users. Some of those features include:

User Interface

For the seamless execution of trades, OpenBook integrates a couple of user interfaces. First, the platform utilizes Raydium’s AMM together with its CLOB model to provide liquidity provision and lower slippage, the best of both models. Additionally, Solape, a Jupiter-based Solana swap, provides user interface for swapping assets on the OpenBook platform. Finally, the DEX aggregator, Prism, provides a simple user experience to rival centralized exchanges on the OpenBook platform. All these features provide the ease of centralized exchanges while ensuring the self-custody of funds for OpenBook users.

High-Performance Trading

OpenBook is built on Solana, one of the fastest networks in the industry, with a transaction processing speed of 65,000 transactions per second. Similarly, Solana has one of the lowest transaction fees when compared to networks like Bitcoin and Ethereum (PoW version). These features of the home chain for OpenBook translate to the dex, allowing it to offer high transaction speeds and low gas fees for all users.

Community Governance

The purpose of the DeFi community on Solana is to create a host of community-led projects that meet the financial needs of Solana users without the need for a centralized intermediary. Since the collapse of FTX and Serum’s private keys being compromised, the Solana DeFi community has taken a larger step towards complete decentralization and community engagement with OpenBook. OpenBook is entirely decentralized and governed by the community of users. All decisions concerning the platform are made communally through a democratic voting process.

OpenBook vs. Serum

The most common description of OpenBook is that it is a DEX, just like Serum, but without the ties to FTX. In truth, the technology supporting the OpenBook platform is very similar to the original Serum protocol. However, OpenBook establishes itself with a few features. First, OpenBook is a completely community-led project. Following the FTX fiasco and the discovery that FTX held Serum’s private keys, the Solana DeFi community cut all ties with FTX to deploy OpenBook. The platform and all decisions concerning it are made by the community, thus guaranteeing its status as a decentralized project.

Finally, security on OpenBook takes a different turn. While Serum stored its private keys with FTX, OpenBook and its operations are entirely on-chain, ensuring transparency of its operations as well as security with the help of blockchain technology.

News on OpenBook

OpenBook has met several milestones despite the project being deployed in November 2022, less than a year ago. Currently, the platform records a daily trading volume of over $4 million and a total value locked of $3.1 million. Also, in April, the project announced its V2 prototype, an update to the OpenBook protocol inspired by the Mango V4 perpetual order book. The development aims to better functionality with new features, more intuitive code, and client libraries. So far, a testnet, devnet, and mainnet version have been deployed. More information can be found on the GitHub documentation page.

Conclusion

The collapse of FTX had a significant impact on the Solana DeFi market, but the community has responded by building new projects and creating new solutions. OpenBook is an example of the resilience of the Solana DeFi community. Though the project is still in its early stages, it has the potential to surpass even the heights the Serum protocol reached with innovative upgrades.