Drift (DRIFT): A Solana-Based DEX for Perpetual Futures

One of the key benefits of blockchain technology is its ability to offer unique investment opportunities. Drift hopes to explore this potential by creating an exciting new decentralized exchange (DEX). This project aims to incorporate a variety of useful features, like backstop AMM liquidity and perpetual futures. Can Drift distinguish itself from other exchanges and launch its system just in time to attract new users? This guide will help you learn all about the intriguing design of the Drift ecosystem.

Key Takeaways:

• Drift is a decentralized exchange that offers features like spot trading, market makers and perpetual swaps. 

• Drift is a DEX on Solana, and is entirely open source.

• Looking to trade Drift tokens? Bybit now offers both the DRIFT/USDT Spot trading pair and DRIFTUSDT Perpetual contracts. To celebrate this listing, Bybit is holding two exclusive events where you can earn a share of the 700,000 DRIFT prize pool.

What Is Drift?

Drift, a decentralized exchange that offers features like spot trading, market makers and perpetual swaps, is an entirely open-source DEX on Solana.

What Is Drift v2?

Drift v2 is a branch of Drift that aims to incorporate even more cutting-edge features. It enhances trading efficiency by prioritizing liquidity providers and robust security measures. A community effort, Drift v2 aims to incorporate user feedback into the Drift ecosystem.

History of Drift 

Drift was founded by Cindy Leow and David Lu. Leow has a background in investment banking, while Lu’s is in venture capital. Their interest in investing encouraged them to take note of the crypto space, and they realized there was a need for better exchanges. Working alongside a team of crypto enthusiasts on Solana, Lu and Leow worked to incorporate many high-end investment features into their DEX on Solana. 

In 2021, Drift was officially launched, and Drift v2 followed one year later. Since its launch, Drift has achieved notable landmarks, such as achieving over $10 billion worth of cumulative trading volume in a six-month period. 

What Does Drift Aim to Achieve?

Drift's primary aim is to create a better exchange for investors. Its design allows people to trade crypto while also taking advantage of a variety of helpful features. When creating the Drift system, its team focused on capital efficiency and asset protection. They want their users to be able to invest in ways that maximize their assets without causing high-risk behaviors. In the long run, Drift hopes to provide the best trader experience possible, which includes more accurate payouts, faster orders and more favorable prices than other exchanges.

How Does Drift Work?

Drift exists as a set of smart contracts on the Solana blockchain. Solana executes transactions and stores data for Drift, while smart contracts help to govern trades. Through mechanisms like just-in-time auctions and backstop AMM liquidity, an entire complex system of buying and trading is created. Drift handles every aspect of crypto trading, from providing liquidity for the market to determining the order of trades. To help users access all these great features, Drift uses TypeScript and Python code to create a seamless app for traders to interact with.

Drift’s Features 

Drift enhances trading efficiency by offering a lot of exciting features to active traders.

Spot Trading

Spot trading is the classic way to manage crypto trades. Users directly purchase or sell an asset, and receive immediate delivery into their wallet. To improve trading efficiency, Drift includes leveraged trading, whereby traders can borrow from liquidity traders to obtain larger funds. Drift Spot trading also features trading bots for users who want to use automated trading.

Perpetual Futures Trading

Perpetual futures are contracts in which users agree to buy or sell cryptos at a certain price in the future, without an expiration date. Thus, Drift's perpetual futures trading lets users hold positions indefinitely instead of having them expire. Perpetual futures trading provides a lot of options to profit, no matter how the market moves. The right contract can help you profit if a crypto's price falls, or you can choose one that further boosts your profit if prices increase. 

Swap

Perpetual swaps allow users to buy and sell perpetual futures. By enabling perpetual futures trading, Drift gives active traders even more flexibility. These perpetual swaps also include leveraged trading options, so you can borrow liquidity in order to invest in a larger swap than you could otherwise afford.

Lend/Borrow

With Drift, you can borrow crypto funds for your own users, or you can loan crypto to earn passive income. Drift's risk management system automatically determines risk and assigns interest rates. To facilitate lending, Drift has introduced robust security measures that require users to submit collateral if they want to borrow funds.

Insurance Fund Staking

Drift's insurance fund is another example of how it’s introduced robust security measures into its system. The insurance fund is meant to guarantee the exchange will remain solvent even if there are bankruptcies. It’s backed by users staking USDC tokens in order to receive fees. 

In addition to earning extra money, participants can rest assured that they're helping to create a safety net for potential losses that users incur while performing leveraged trades. 

Market Maker Vaults

Drift’s Market Maker Vaults are all about improving trading proficiency. Liquidity providers can choose to temporarily submit tokens to Drift. These pools of tokens ensure that whenever a user places an order on the exchange, Drift can fulfill it. Drift pairs the market makers with trading bots that help to create the most efficient possible transactions. 

The dynamic automated market maker seeks to get the right tokens to the right users in as few transactions as possible, so it can avoid slippage and excess fees. Participating in the Market Maker Vaults also allows passive liquidity providers to earn fees, so it's a way of profiting without permanently giving up possession of one's crypto.

Super Stake SOL

Since Drift is built on Solana, it has some extra perks for users who hold SOL tokens. The super stake SOL system lets people lock Solana tokens to earn rewards from both the Solana blockchain and Drift. Super stake SOL users can earn up to 11.45% APR from their funds.

Fuel

Fuel is an upcoming feature from Drift that will offer users more ways to earn on Drift. Little is known about it yet, but it will be a reward system that ties into the airdrops for DRIFT tokens. 

Drift Draw

Drift Draw is a way to add a little excitement to all of Drift's trading efficiency services. Users can earn prizes through a random weekly draw. Tickets for the draw are based on each trader's cumulative trading volume. The more you trade on Drift, the more chances you have of winning a prize. Prizes for Drift Draw range from 50 USDC to 50,000 USDC.

BAL

Backstop AMM Liquidity, or BAL for short, is an additional market-making feature available on Drift. BAL lets users pick which market to provide liquidity for, and then automatically manages positions for traders. This provides the potential for passive liquidity providers to earn additional interest from their funds.

Drift Road Map

Since 2021, Drift has launched two working versions of its exchange and designed a lot of intriguing features, such as trading perpetual swaps and the previously mentioned dynamic automated market maker. 

In 2024, the Drift team is taking a step back from technological details and focusing on the big picture. They hope to launch their decentralized autonomous organization (DAO) in 2024 and create a user-led governance system. This new launch will help to move Drift toward being a fully decentralized organization that’s led entirely by its community.

DRIFT Tokenomics

DRIFT is the governance token for the Drift DAO. It gives Drift token holders the ability to vote on fees and protocols. DRIFT will have a total/max supply of 1 billion tokens, which are going to be gradually released over five years. The token distribution plan is fairly straightforward, with 43% reserved for ecosystem development and trading rewards. Another 25% will be reserved for future protocol development, and 22% will be given to strategic participants. The remaining 10% of tokens will be given directly to Drift’s active traders in airdrops.

DRIFT Price Prediction

The DRIFT token's value has remained fairly stable since its release in mid-May 2024. Initially, the token’s price dropped from around $0.68 to $0.20, but since the first volatile day of trading, DRIFT prices have been on a slow yet steady rise. Throughout the end of May 2024, DRIFT has mostly been sitting in the $0.50 to $0.60 range. Its current price is $0.4331 (as of May 30, 2024). 

Some crypto enthusiasts predict a price of up to $2 for DRIFT within 2024. Crypto price data analysts aren't quite as optimistic, but they still predict a decent amount of growth for DRIFT. According to CoinMarketCap, market demand has resulted in a bullish market outlook for most Drift token holders, and DigitalCoinPrice reports that DRIFT is likely to reach $1.01 in 2024 and $2.12 by 2027.

Where to Buy DRIFT

Looking to trade Drift tokens? Bybit now offers both the DRIFT/USDT Spot trading pair and DRIFTUSDT Perpetual contracts. To get started, you’ll first need to create a Bybit account, then fund it with cryptocurrency, and navigate to the DRIFT/USDT Spot trading page or DRIFTUSDT Perpetual contracts trading page. 

To celebrate this listing, Bybit is holding two exclusive events where you can earn a share of the 700,000 DRIFT prize pool.

The first event, Token Splash, will award 40 DRIFT each to the first 10,000 new users who complete the following steps between May 15, 2024, 10AM UTC and May 30, 2024, 9AM UTC:

1. Sign up for a Bybit account and complete Identity Verification.

2. Accumulate a deposit volume of at least 200 DRIFT, or deposit at least 100 USDT and use your Bybit account to trade 100 USDT worth of DRIFT via your first trade with Bybit.

In addition, through May 30, 2024, 9AM UTC, simply trade at least 1,000 USDT worth of DRIFT on Spot to earn a share from the 200,000 DRIFT prize pool. The more you trade, the larger your share of the prize pool. Rewards will be capped at 2,000 DRIFT per user.

The second event, DRIFT x Referral Boost, is being held through May 30, 2024, 9AM UTC. Invite your friends to 1) sign up for a Bybit account with your referral code and 2) complete both steps above for new users in the first event. Both you and your qualified referee will receive 10 DRIFT for every successful referral. Note: A total of up to 100,000 DRIFT will be distributed on a first-come, first-served basis.

Is DRIFT a Good Investment?

The DRIFT token is certainly one of the hot tokens of May 2024. Not only is it backed by a highly reputable DEX, but it also has many enthusiastic fans and is experiencing high market demand at the moment. Since people are so interested in Drift's insurance fund, crypto market and other features, its governance token is likely to perform well. 

However, keep in mind that crypto investments feature inherent volatility, and Drift has many competitors. If someone manages to do a better job of providing competitive pricing and trade efficiency, investors may lose interest in DRIFT. Therefore, it's essential to avoid overinvesting in the token and to research market conditions carefully before purchasing.

Closing Thoughts

As a cryptocurrency exchange, Drift faces considerable competition. However, its ability to trade perpetual swaps, offer competitive pricing and provide robust security measures helps it stand out from the crowd. Drift's community of dedicated users have also helped spark considerable market demand for DRIFT governance tokens, which may lead to big things for this project in the future.

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