What is Drift Coin? A Comprehensive Guide to Drift Protocol

Source: BTCHaber Original Title: What is Drift coin? Original Link: https://www.btchaber.com/drift-coin-nedir/ Drift coin is the cryptocurrency of Drift Protocol. Drift Protocol is a decentralized exchange built on the Solana blockchain (DEX). In other words, it is a platform where you can directly buy and sell cryptocurrencies from your own crypto wallet and borrow or lend assets.

How Drift Works

On Drift, users trade directly through their own wallets. This ensures that control over their assets remains entirely with them. All transactions on the platform are recorded instantly on the chain. Thanks to the Hybrid Liquidity Mechanism, transactions are not executed from a single source.

The hybrid structure uses Just-in-Time (JIT) auctions for instant transactions, a decentralized limit order book (DLOB), and a backup Automated Market Maker (AMM). This approach aims to achieve deep liquidity even during volatile periods.

Founder of Drift

Drift was founded in 2021 by Cindy Leow. Currently, entrepreneur Arthur Hayes is also among the partners.

How Does Drift Work?

Drift manages risk control through a cross-collateralization structure. All transactions are stored in a centralized vault called the Global Collateral Vault. This ensures smooth borrowing, lending, and trading operations.

Assets are weighted according to their volatility. For example, USDC can be used at a one-to-one ratio, while more volatile assets like Solana can have collateral values adjusted to provide only 80% of their value. Users can also use subaccounts to isolate various transactions from each other.

The protocol relies on decentralized agents and external data to operate healthily. Keeper bots perform essential tasks such as matching orders, triggering stop-losses, and liquidating unhealthy accounts.

The platform uses external price feeds to determine fair market prices. The importance of these feeds lies in the fact that liquidations and funding rates are not based solely on the current trading price on the exchange. Instead, they are triggered according to oracle prices. This is a process adopted to protect the system from price manipulation.

Uses of Drift Coin

The primary use cases of Drift coin are based on the transactions it facilitates on the platform. With its perpetual futures feature, users can speculate on whether the price of an asset will rise or fall without time restrictions. The maximum leverage offered by Drift for these transactions is 101x.

With spot trading, users can buy and sell directly. Additionally, leverage of up to 5x is available for these trades. Through borrowing and lending features, users can deposit assets to earn returns or borrow against their existing assets as collateral. Lastly, the prediction markets feature allows users to make forecasts about real-world events.