We’re incredibly excited to introduce Jump Crypto, a project six years in the making at Jump Trading Group. Public blockchains have unlocked new and incredible modes of resource coordination by enabling trust between mutually distrusting parties. They enable communities to truly be stakeholders. While we at Jump often fashion ourselves as quiet builders, in this new community driven world we’ve recognized the need and value of building in the open and being a strong voice in the public discourse. Here's a little taste of what we’re about, where we’re headed, and how we got here.
Jump’s History and Evolution
Jump Trading Group is a firm that has grown from its roots in the pits at the CME to a research-driven quantitative trading firm with over 1,000 employees globally and is one of the largest traders by volume across traditional asset classes.
Markets have evolved rapidly over the years, from the open outcry pits to the machine learning driven high speed trading environment that's prevalent today. Through these seismic shifts in market structure, Jump has evolved the very core of its identity to play natively at every new iteration of market structure.
When the markets go electronic, it's not enough to just 'do software'. You need to build an engineering organization of the highest caliber that enables you differentiate and be nimble. Suddenly, we were a software firm.
When the markets get increasingly more intelligent, and breakthroughs in data engineering capacity lead to a whole new playing field of predictive modelling, it's not enough to have a 'quant department'. You need to build an identity and an environment that allows quantitatively minded folks to belong and thrive. You need to give them the authority to take the reins. Suddenly, you're a research institution.
Jump’s story is a story of antifragility; an organization that has only gotten stronger with paradigm shifts that wipe out most of the competitive field. Each new iteration leads to a compounding of skills and, to borrow a page from Hamilton Helmer, the development of 'process power' as an organizational muscle. The process in this instance is the ability to evolve with changing markets and technology in a continuous and organic fashion.
With the rise of open protocols and a new wave of financial infrastructure, Jump is undergoing its next evolution. The rise in prominence of DeFi paved the way for Jump to bring to bear two decades of trading expertise and engineering chops to the crypto landscape and led us down the rabbithole of magic internet money.
Without further ado, Jump Crypto.
The Jump Crypto Story
Our crypto effort originated as an intern project at Jump’s research lab at the University of Illinois. Over the past six years, the effort has evolved dramatically, but we've largely stayed true to the spirit of agility, open mindedness, and rapid iteration we had back at the lab.
The first pillar of our business, simply put, is being a sophisticated, active participant in the crypto markets. Owing to both its nascency and uniquely global nature, market structure in crypto is riddled with nuances and idiosyncrasies at every level of the stack. Complex trading systems tend to magnify these little nuances, and this becomes increasingly more apparent at the scale that's germane to Jump's trading philosophy. The primary focus of our early effort was to build a robust platform that enabled substantial and graceful participation in these idiosyncratic markets. Paired with serious trading intelligence, it has enabled us to be a leading market participant through the growth of the space.
The crypto effort was born with a dual mandate, however, and the second pillar revolves around our very simple thesis on the space - that it's likely to grow significantly in myriad and unpredictable ways over a sufficiently long time horizon.
As one of the few global firms in the space with robust technology, capital, and innovative spirit, we have often been approached to be a catalyst to nascent platforms and projects. These platforms and projects often lacked the liquidity and opportunity set to incentivize organic early participation but had very interesting long-term potential. This generally meant considering engagement as partners rather than just as participants and assessing upside over much longer time horizons than a typical trading decision. While not entirely natural for a trading group, we've been able to use our thesis as a guiding light in evaluating these opportunities. It has given us a chance to join forces with several incredible communities and to build alignment with the space.
Being a partner is a very meaningful thing in and of itself and is something we take seriously. While being engaged in a specialized capacity with some of the most exciting projects in the space, we've found ourselves repeatedly asking how we could do more. The resounding answer has become a battle cry for our team: to build. To build the plumbing and the railroads, and to build communities. The rhythm of that chant has driven us deeper into the ecosystems we're involved in and unearth the trove of system design and engineering problems that lie between us and the promised land.
Here are some of the things we've been spinning on; expect to see much much more.
- Terra governance proposals - There is a lot of cool, complex economic machinery behind some of the most exciting and successful projects in the DeFi landscape. Terra's stability mechanism is a great example of this. It requires solving for a number of crucial market parameters in a highly dimensional space to balance the safety and elasticity of the platform. Our data engineering pipelines and battle experience in the markets have uniquely enabled us to analyze these complex systems and meaningfully contribute to the discussion.
- Solana vesting contract grant - A large part of the success of open finance has been the ability for builders to leverage the efforts of those building alongside them. While Solana's dev ecosystem is still young, it's quickly maturing, and we hope that lego blocks such as the vesting contract can help builders focus on the unique elements they aim to bring to the world. The Bonfida team did an excellent job on this bounty and went above and beyond to deliver a nice clean UI. The product has been audited and is available for builders to use here.
- Guardian in the Wormhole network - Wormhole is a decentralized network that powers cross-chain communication among high value blockchains. Secure cross chain message passing amongst chains that can't efficiently run light clients of each other is a gaping hole in the ecosystem. We're incredibly excited by the pragmatic and effective approach Wormhole has taken to tackle this problem and are proud to be one of the guardians helping secure the network. More on the Wormhole below.
- Serum - The Central Limit Order Book has emerged through the evolution of financial markets as the medium via which market interest amongst a broad set of participants is coordinated for a number of reasons -
- Openness - allows for multi-lateral coordination of market interest
- Transparency - allows market participants to see the full extent of publicly expressed interest in the asset
- Expressiveness - Allows for expression of fine-tuned and bespoke views
Serum is an exchange with orderbooks hosted on the Solana blockchain. Leveraging the trust of the chain here allows for a lot of magic. In the traditional finance world, there's a massive web of intermediaries behind the scenes that ultimately settle the executions on the exchange orderbooks in an attempt to solve the trust problem. The fact that Serum can export that function to Solana and just build an orderbook application on top is simply awesome. Composability is often used to describe the interactions of various applications on chain or the re-use of various sub-components. What's often lost in the discussion is that the default brick in every blockchain application is composing with is the trust of the base layer. And that's incredibly powerful.
This network of open order books allows for access and thus consolidation of interest globally unlike never possible before. Anyone can spin an order book up and begin to bring together liquidity for any asset. And it's fast. We're only scratching the surface of innovation that's possible via blockchain rails, but you can bet that efficient transfer of every kind of value is going to be a large part of the story. And as an active market participant and liquidity provider on the platform, we're betting Serum plays a role.
- Certus One acquisition - We recently brought the exceptionally talented Certus One team onboard. Their arrival has supercharged our efforts to grow the communities we're involved in and we're very excited to continue building alongside them. Here are a few of the things they bring, with much more to follow.
- Deep security at every level of the Proof of Stake and custody stacks. The team has made impressive strides with their Mongon operating system and the SignOS distributed key management solution they are building on top.
- Focus on validator quality and building in the open. Public, uncensored discussion on validator and network quality is critical in this early stage in the growth of Proof of Stake systems. Discourse involving the right, transparently tracked metrics at every level of the stack, is likely to save the industry a lot of pain in the future. Certus has been one of the loudest and strongest voices in this space and we hope to support them in being a guiding light to strong and secure decentralization.
- Lido Validator. They are a strong supporter of the Lido network as one of the select validators behind the staked Eth project. Staked PoS assets have a sizeable role to play in the composable DeFi future and Lido is a frontrunner in the space.
- Pyth Network - The oracle problem has long been one of the white whales of the space. The blockchain lends us the ability to trustlessly execute arbitrary pieces of logic on the state of the ledger. One of the big gating problems to leveraging this capacity for a broad suite of applications has been the inability to have off-chain (or so called real-world) information trustlessly included in this state.
With the rise of DeFi as the predominant class of applications on chain, the most valuable off chain data to include in the state is real-time financial data. It's worth taking a minute to talk about 'real-time'. The oracle data being leveraged by DeFi applications is often used to determine the effective price at which risk is transferred amongst various participants. Quite often, the liquidity providers and protocol stakers are on one side of that risk transfer. When the price is delayed, opportunistic market participants are able to get the better of these stakeholders and extract some edge. Classic oracle models so far have attempted a 'wisdom of the crowds’ approach. In a world where a new batch of on chain transactions is executed as fast as every 400ms, there is limited opportunity for a broad class of people to have access to the prevailing market price and be able to distribute it reliably to a blockchains peer-to-peer network at that interval.
So, who actually has that access and capacity?
1. The most active market participants and liquidity providers - This class of actors has actually traded (likely a large number of times) in that time horizon. These traders are also likely trading on a large fraction of the relevant venues for the asset and are thus effectively consolidating information and accounting for market structure nuances.
2. Exchanges and other execution venues - Exchanges matching the trades are the origins of a lot of price discovery. They are the first to know the prices at which market participants are willing to trade and are therefore distinctly able to publish real time price information. They generally also have sophisticated data reporting infrastructure that folds nicely into fast and reliable dissemination of this information to the peer-to-peer network.
An important distinction that both these classes of participants have relative to third party publishers is that they are in fact either facilitating or directly transacting at the given prices as opposed to reporting prices queried from external sources. That brings in the skin in the game element that's a critical part of the security of the network. In a third-party model, the price sources queried and reported have nothing at stake and are not incentivized to have accurate prices published to the network. This is another big hole that first party data publishers fill.
Jump squarely falls into the first category described above. Besides contributing data, we're actively contributing to the codebase and working on a number of interesting research problems that lie within the design of the platform. There is an ever-growing list of financial giants that have also committed to join the network as first party data publishers. Joining Jump in the trading community are other prominent firms like GTS, Virtu Financial, Chicago Trading Company, Akuna, Cumberland, XR Trading, Hudson River Trading, Susquehanna, and Jane Street. Additionally, several exchanges have announced their participation such as BSX/MIAX, LMAX, and IEX. And, of course, as a crypto native project, the Pyth network is also receiving price data from prominent crypto firms like Genesis, FTX, CMS, CoinShares, and Bitso . This initial list already includes a large share of traded volume across a number of asset classes, and we're excited to see the roster grow so rapidly.
Solana is the base layer of choice for the Pyth network due to its well-known advantages in transaction capacity and latency. Pyth network prices, however, are intended to be distributed to the wider blockchain world via the Wormhole network. Developers building apps on Ethereum and Terra, for example, will be able to leverage these prices in their application logic. The Pyth network aims to grow the pie and is well aligned with Jump’s mission to be a strong positive force in the space and an accelerant on its journey to maturity.
- Wormhole – The crypto ecosystem has evolved to consist of several heterogenous high value chains, and it is our view that diverse compute environments will continue to evolve and hold value. There is however a big ‘interoperability’ shaped hole, as these chains have, thus far, been unable to communicate with each other.
Each blockchain world generates interesting state that is uniquely facilitated by its environment. For example, Terra’s blockchain natively generates UST - a decentralized stablecoin, Solana’s compute capacity enables generating Pyth quotes, Ethereum’s robust community generates NFTs and governance votes on major protocols, etc. Composability of these disparate pieces of state has the potential to unlock enormous opportunities for innovation. Wormhole takes an incredibly simple, fast and pragmatic approach to enabling completely generic communication across heterogenous chains.
The Certus team built the first version of the Wormhole in an incredibly quick and effective fashion. Now, a community of Wormhole guardians is teaming up to launch a more versatile and scalable Wormhole network. The vision of the project aligns perfectly with our mission to help create robust plumbing and infrastructure and we’re very excited to continue to contribute to it.
In a world where you have better odds of winning the lottery than finding a solid rust engineer, Jump's wealth of systems engineering talent and quant chops has given us a solid head start on our crypto effort. But it is still early innings in Jump Crypto. We're traders, builders, and members of the community who are excited by the growth of the industry and highly motivated to keep pushing it forward. For all the smart, hungry folks out there - if you're looking to build decentralized rails alongside some of the brightest minds in the space, reach out.
It's time to build.