Kinji Steimetz, Messari corporate research analyst; translated by Jinse Finance xiaozou
This article summarizes the key points from my recently released Messari research report on Symmio.
Symmio recently issued the SYMM token through a Token Generation Event (TGE), with the current FDV around $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 counterparty agreements—a unique design that allows for perpetual trading on general L1.
Let's dive deeper:
There is a continuous influx of funds into order books and AMM-based perpetual contract exchanges on L1 and L2. However, we believe that these models are fundamentally unviable due to technical constraints and are unlikely to become long-term winners.
On-chain order books on general L1 face the following issues:
Gas cost issues: The high costs associated with setting/canceling orders harm the profitability of market makers (MM), resulting in wider spreads for users.
Order cancellation priority issues: General L1 cannot prioritize the cancellation of MM orders, increasing adverse selection risk.
These constraints increase the costs and risks for market makers (MM), 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 imbalances occur, such as excessive long positions, if price movements go against them, the liquidity pool faces losses.
To rebalance and manage the risks of liquidity providers (LP), 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 requires market makers to manage risk while granting them priority in canceling trades and minimizing costs. This can be achieved by creating a dedicated application chain, like Hyperliquid, which prioritizes market makers, or through the use of an intent-based system like Symmio. Symmio relies on solvers (primarily market makers) as the counterparty for user trades, 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 intent-based system, including deeper liquidity, stable funding rates, and access to more assets. By aggregating on-chain and off-chain market liquidity, it supports 336 trading pairs, compared to 142 on dYdX and 139 on Hyperliquid.
A new primitive:
We believe it is unfair to classify the protocol merely as a perpetual exchange, as this 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, achieving a truly peer-to-peer ecosystem that far exceeds the scope of perpetual trading.
DeFi now has a dedicated platform for peer-to-peer counterparty discovery experiments. Symmio opens the door to entirely new DeFi use cases by providing infrastructure for simplified decentralized protocol creation.
But is this really a product that has never existed before? How should we view protocols like CoW Swap or Across, which also match users with solvers?
Symmio adopts a different approach: it does not optimize trading paths but facilitates bilateral agreements that carry isolated risks.
This unlocks previously unfeasible use cases, such as decentralized over-the-counter (OTC) markets, synthetic assets, and customized agreements. This is different from other intent-based platforms that lack counterparty agreements and focus solely on trading path competition.
Symmio has the potential to surpass existing AMM-based perpetual exchanges, increasing on-chain perpetual market share to around 5%. Additionally, it could serve as a new use case platform, such as providing leverage for any meme coin or facilitating synthetic asset trading with deep liquidity. If this potential materializes, it could result in a tenfold growth opportunity, with Symmio's FDV rising to approximately $800 million.
