Kinji Steimetz, Messari Corporate Research Analyst; Translation: Jinse 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 the token's current FDV being approximately $30 million.
In our view, the market misunderstands Symmio, perceiving it as 'another on-chain perpetual protocol.' In reality, Symmio introduces a new DeFi primitive for on-chain bilateral counterparty agreements—a unique design that enables perpetual trading on general L1.
Let's dive deeper:
There is a continuous influx of funds into order books and AMM (automated market maker)-based perpetual contract exchanges on L1 and L2. However, we believe that due to technical limitations, these models are inherently unfeasible and unlikely to become long-term winners.
On-chain order books on general L1 face the following issues:
Gas cost issues: The high fees required for setting/canceling orders harm the profitability of market makers, leading to wider spreads for users.
Order cancellation priority issues: General L1 cannot prioritize the order cancellations of market makers, increasing the risk of adverse selection.
These restrictions increase the costs and risks for market makers, ultimately harming user interests.
AMM limitations:
Due to the 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 unbalanced, for instance, through excessive longing, if the price trend moves against it, the liquidity pool faces losses.
To rebalance and manage the risks of liquidity providers (LPs), the protocol adjusts fees or funding rates. This means the protocol must charge higher fees to traders to prevent further imbalance and incentivize counter-trading, gradually restoring equilibrium.
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 intention-based system like Symmio. Symmio relies on solvers (primarily market makers) as counterparty for user trades, thus eliminating the protocol's need for passive LP risk management and the gas payment requirements when creating and canceling limit orders.
Other benefits:
Symmio offers many additional benefits through its intention-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 pairs, while dYdX supports 142 pairs and Hyperliquid supports 139 pairs.
A new primitive:
We believe that classifying the protocol merely as a perpetual exchange is unfair and overlooks its potential as a groundbreaking new DeFi primitive. The broader impact of the protocol lies in its ability to create a market for decentralized over-the-counter trading, realizing a truly peer-to-peer ecosystem that goes far beyond the realm of perpetual trading.
DeFi now has a platform dedicated to peer-to-peer counterparty discovery experiments. Symmio opens a door to entirely new DeFi use cases by providing the infrastructure for simplified decentralized protocol creation.
But is this really a brand new product? How should we view protocols like CoW Swap or Across that also pair users and solvers?
Symmio adopts a different approach: it does not optimize trading paths but facilitates bilateral agreements with isolated risks.
This unlocks previously unfeasible use cases, such as decentralized over-the-counter trading markets, synthetic assets, and customized agreements. This is different from other intention-based platforms that lack counterparty agreements and focus solely on trading path competition.
Symmio has the potential to surpass existing AMM-based perpetual exchanges, raising on-chain perpetual market share to around 5%. Additionally, it can serve as a platform for new use cases, such as providing leverage for any meme coin or facilitating synthetic asset trading with deep liquidity. If this potential is realized, it could lead to a 10x growth opportunity, with Symmio's FDV increasing to approximately $800 million.
