Messari: What is the appropriate valuation for Symmio?

Kinji Steimetz, Enterprise Research Analyst at Messari; Translated by: Jinse Finance xiaozou

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

Symmio recently issued the SYMM token through a TGE, which currently has an FDV of approximately $30 million.

In our view, the market has misunderstood Symmio and viewed it as "another on-chain perpetual protocol." In fact, Symmio introduces a new DeFi primitive for on-chain bilateral counterparty agreements - a unique design that enables perpetual transactions on a general-purpose L1.

Let’s take a deeper look:

There is a constant flow of money into order books and AMM-based perpetual contract exchanges on L1 and L2. However, we believe that these models are inherently unviable and unlikely to be long-term winners due to technical limitations.

On-chain order books on general-purpose L1are subject to the following issues:

• GasCost Issues: High fees required to set/cancel orders hurt MMs’ profitability, leading to wider spreads for users.

• Order Cancellation Priority Issues: General-purpose L1s cannot prioritize MMs’ order cancellations, increasing adverse selection risk.

These limitations increase costs and risks for MMs, ultimately hurting users.

AMMLimitations:

Due to its reliance on passive liquidity, perpetual trading based on AMM is difficult to achieve sustainability. The liquidity pool acts as a counterparty and requires long and short positions to be balanced to avoid market risk. Once there is an imbalance, such as excessive long positions, the capital pool will face losses if the price moves in the opposite direction.

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

The ideal solution requires market makers to manage risk while giving them priority to cancel trades and minimizing costs. This can be achieved by creating a specific application chain, such as Hyperliquid, which gives priority to market makers, or by using an intent-based system, such as Symmio. Symmio relies on solvers (mainly market makers) as user counterparties, eliminating the need for passive LP risk management in the protocol and the need for gas payments when creating and canceling limit orders.

Other benefits:

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

A New Primitive:

We believe that it is unfair for the protocol to be categorized as just a perpetual exchange, which 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 OTC trading, enabling a true peer-to-peer ecosystem that goes far beyond perpetual trading.

For the first time, DeFi has a platform dedicated to experimenting with peer-to-peer counterparty discovery. Symmio opens the door to entirely new DeFi use cases by providing infrastructure that simplifies the creation of decentralized protocols.

But is this really a new product that has never been before? What about protocols like CoW Swap or Across that also pair users with solvers?

Symmio takes a different approach: instead of optimizing trade routing, it facilitates bilateral agreements with siloed risk.

This unlocks previously unfeasible use cases like decentralized OTC markets, synthetic assets, and custom protocols. This is unlike other platforms that lack counterparty agreements and focus solely on trade routing competition.

Symmio has the potential to surpass existing AMM-based perpetual exchanges and increase on-chain perpetual market share to around 5%. In addition, it can also 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 becomes a reality, it will bring a 10x growth opportunity and Symmio's FDV will grow to approximately $800 million.