Kinji Steimetz, Messari Corporate Research Analyst; Translated by Golden Finance Xiaozou

This article summarizes the key points of my recently published Messari research report on Symmio.

Symmio recently issued the SYMM token through TGE, with a current FDV of approximately $30 million.

In our view, the market misunderstands Symmio, seeing it as 'just another on-chain perpetual protocol.' In fact, Symmio introduces a new DeFi primitive for on-chain bilateral trading counterparties—a unique design that enables perpetual trading on a general L1.

Let's dive deeper:

There is a continuous inflow of funds into order books and AMM-based perpetual contract exchanges on L1 and L2. However, we believe that these models are inherently unfeasible due to technical limitations and are unlikely to become long-term winners.

The on-chain order book on a general L1 faces the following issues:

  • Gas cost issues: The high fees required to set up/cancel orders harm the profitability of market makers, leading to wider spreads for users.

  • Order cancellation priority issue: General L1 cannot prioritize the cancellation of orders for market makers, increasing the risk of adverse selection.

These limitations increase the costs and risks for market makers, ultimately harming user interests.

AMM limitations:

Due to reliance on passive liquidity, AMM-based perpetual trading struggles to achieve sustainability. Liquidity pools act as counterparties, requiring long and short positions to remain balanced to avoid market risk. Once imbalanced, such as being overly long, if the price movement goes against it, the liquidity pool faces potential losses.

To rebalance and manage the risks of LPs (liquidity providers), the protocol adjusts fees or funding rates. This means the protocol must charge traders higher fees to prevent further imbalances and incentivize reverse trades to gradually restore balance.

The ideal solution needs to manage risks for market makers while giving them priority for canceling trades and minimizing costs. This can be achieved by creating a specific application chain like Hyperliquid, which prioritizes market makers, or by using an intent-based system like Symmio. Symmio relies on solvers (mainly market makers) as user trading counterparties, thus eliminating the protocol's need for passive LP risk management and the gas payment requirement when creating and canceling limit orders.

Other benefits:

Symmio offers many additional benefits through its intent-based system, including deeper liquidity, stable funding rates, and access to more assets. By aggregating liquidity from on-chain and off-chain markets, it supports 336 trading pairs, compared to 142 on dYdX and 139 on Hyperliquid.

A new primitive:

We believe it is unfair to categorize the protocol merely as another perpetual exchange, as this overlooks its potential as a groundbreaking new DeFi primitive. The broader impact of this protocol lies in its ability to create a market for decentralized over-the-counter trading, achieving a truly peer-to-peer ecosystem that far exceeds the realm of perpetual trading.

DeFi has finally gained a platform dedicated to peer-to-peer counterparty discovery experiments. Symmio opens the door to entirely new DeFi use cases by providing the infrastructure for simplified decentralized protocol creation.

But is this really a completely new product? How should we view protocols like CoW Swap or Across, which similarly match users with solvers?

Symmio takes a different approach: it does not optimize trading paths, but facilitates bilateral agreements with isolated risks.

This unlocks previously unviable use cases, such as decentralized over-the-counter trading markets, synthetic assets, and custom protocols. This contrasts with other intent platforms that lack trading counterparty protocols and focus solely on trading path competition.

Symmio has the potential to surpass existing AMM-based perpetual exchanges, raising the on-chain perpetual market share to around 5%. Additionally, it can serve as a new use case platform, providing leverage for any meme coin or facilitating the trading of synthetic assets with deep liquidity. If this potential is realized, it could lead to a tenfold growth opportunity, with Symmio's FDV rising to approximately $800 million.