Drift Protocol - A Decentralised Exchange

03 Mar 2024 Discover

Drift Protocol is a decentralised exchange, open-sourced and built on the Solana blockchain. If you want a trustless crypto exchange, then this is a DeFi app you want to check out.

Plus, you might want to use more to earn reward points, which might earn you future airdrops.

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So, what’s Drift all about?

Well, it’s a decentralized exchange (DEX) that’s all about low fees, minimal price impact, and smooth trading experiences.

And it’s got a few cool features up its sleeve:

  • Spot Trading: Ever heard of Spot Margin Trading? It’s essentially trading assets you own without having to fully pay for them upfront. Think of it like buying now, paying later.
  • Perpetuals Trading: Now, Perpetual Futures might sound fancy, but they’re basically futures contracts that don’t have an expiration date. So, you can trade without worrying about contracts expiring.
  • Borrow & Lend: This feature lets you borrow assets or lend out your own. It’s like putting your idle assets to work or getting that extra boost you need for a trade.
  • Passive Liquidity Provision: Drift’s got something called Backstop AMM Liquidity (BAL). It’s like having a safety net of liquidity to keep things flowing smoothly.

Now, onto the problem Drift aims to solve. You see, on-chain exchanges face some challenges due to the limitations of blockchains—things like speed and capacity. Trying to move traditional exchange systems onto the blockchain just doesn’t work well.

Here’s where Drift shines

They’ve built an exchange that’s efficient, encourages market makers to participate, and keeps liquidity flowing. So, what are these liquidity mechanisms?

  • Just-in-Time (JIT) Auction Liquidity: Before each transaction, market makers can bid to fill orders quickly, providing liquidity just when it’s needed.
  • Constant Liquidity: Drift’s virtual AMM ensures there’s always liquidity available, even if market conditions change.
  • Limit Orderbook Liquidity: Users can place limit orders, which are then sorted into an orderbook and filled when conditions are met.

The core value of Drift? Decentralization. Everything—from deposits to trades—is done on-chain, transparently and securely. Sure, there are some risks, like blockchain limitations and transaction fees, but the benefits—like anonymity and trustlessness—make it worth it.

We have witness how centralized exchange (like FTX) cannot be trusted.

So, if you’re into trading and want a smoother, more transparent experience, Drift Protocol might just be your new best friend.

Use my referral link to get 15% off your trading fees.