The mysterious high-frequency trading giant founded Jump Crypto, what exactly are they trying to do?

Written by: Kanav Kariya, Head of Jump Crypto
Compiled by: Perry Wang, Chain News

We are very excited to introduce Jump Crypto, a project developed by Jump Trading Group over the past six years. Public blockchains open up a new and incredible resource coordination model by building trust among parties that do not trust each other. Public chains truly make the community stakeholders. While we at Jump often pride ourselves on being quiet builders, we have recognized the necessity and value of building in public in this community-driven new world, and we need to be a strong voice in the public discourse.

We hope to use this article to tell everyone what we are doing, our direction of development, and how we got to where we are today.

The History and Evolution of Jump

Jump Trading Group is a trading firm that started from the CME trading pool and has grown into a research-driven quantitative trading company with over 1,000 employees globally, and is one of the largest traders by volume in traditional asset classes.

Over the years, the market has rapidly evolved from open outcry to today’s popular machine learning-driven high-frequency trading environment. Through these significant changes in market structure, Jump has continuously evolved its core, naturally finding its place in each new iteration of market structure.

In the era of market electronicization, simply "doing software" is not enough; it requires building a top-notch engineering organization to stand out among competitors and remain agile.
Suddenly, we became a software company.

As the market became increasingly intelligent, breakthroughs in data engineering capabilities brought about a new competitive environment for predictive modeling. Having just a "quantitative trading department" is not enough; it is necessary to create an identity and environment where "quantitative-minded" individuals can find a sense of belonging and thrive, empowering them to take the helm.

Suddenly, Jump became a research institution.

The story of Jump is a story of antifragility; an institution that becomes stronger with each paradigm shift, while such paradigm shifts eliminate most competitive fields. Each new iteration leads to a compounding of skills, borrowing a quote from Hamilton Helmer, a professor of business strategy at Stanford University and author of "Seven Basic Principles of Business Strategy": "Process capability" as the muscle of an enterprise is continuously growing. This process refers to the ability to develop in a continuous and organic manner as markets and technologies change.

With the rise of open protocols and the growth of a new wave of financial infrastructure, Jump is undergoing a new evolution. The rise of DeFi has paved the way for Jump to bring two decades of trading expertise and engineering technology into the crypto space, attracting us to explore the magical rabbit hole of internet currencies.
Without further ado, Jump Crypto is here.

The Development History of Jump Crypto

Our exploration into crypto originated from an internship project at the Jump Research Lab at the University of Illinois. Over the past six years, this work has undergone tremendous changes, but we have largely remained true to the agile, open-mindedness, and spirit of rapid iteration found in the lab environment.

In short, the first pillar of our crypto business is to become a mature and active participant in the crypto market. Due to the nascent nature of crypto and its unique global implications, the market structure of crypto is filled with nuances and characteristics at every level of the stack. Complex trading systems often amplify these nuances, and scaling further magnifies them, making the relevance to Jump's trading philosophy increasingly apparent.

The main focus of our early work was to build a robust platform that enables users to participate in these unique markets in large and elegant ways. Coupled with serious trading intelligence, as the crypto space continues to evolve, this market will allow us to be leading market participants.

However, the birth of our crypto work has a dual mission, with the second pillar being our very straightforward argument about the crypto space—over a sufficiently long time frame, it is likely to achieve significant growth in countless and unpredictable ways.

As one of the few global companies in the financial sector with strong technology, capital, and an innovative spirit, we are often seen as a catalyst for emerging platforms and projects. These platforms and projects often lack the liquidity and opportunities to incentivize early organic participation but possess considerable long-term potential.

This often means that your participation is seen as a partnership rather than just participation, requiring a longer time frame to assess asset upside potential, considering a time horizon far beyond typical trading decisions. While this is not very natural for a trading firm, we have been able to leverage our papers as a guiding light for evaluating these opportunities. It has allowed us to partner with several outstanding communities and align with the crypto space.

Becoming a partner is itself a very meaningful endeavor, and we take it very seriously.

While honing specific expertise in collaboration with some of the most exciting projects in the field, we couldn't help but repeatedly ask ourselves: how can we do more? The resounding answer has become our team's battle cry: to build, to build underwater tunnels and railways, to build communities. This passionate rhythm drives us to delve deeper into the crypto ecosystem and uncover the treasure trove of systemic design and engineering issues that exist between us and the promised land.

Let’s discuss some of the things we have been doing, looking forward to seeing more in the future.

Community Work

• We participated in the Terra governance protocol—behind some of the most exciting and successful projects in the DeFi space are many cool and complex economic mechanisms. Terra's stability mechanism is a great example. It requires solving many key market parameters in high-dimensional space to balance the platform's security and resilience. Our data engineering pipelines and market battle experience enable us to analyze these complex systems and contribute meaningfully to community discussions.
• https://agora.terra.money/t/terra-on-chain-liquidity-parameters/305
• https://agora.terra.money/t/liquidity-parameters-2/1175
• Solana vesting contract grant—A significant part of the success of open finance is that builders can fully leverage the efforts of those building alongside them. Although Solana's development ecosystem is still young, it is maturing rapidly, and we hope that various building blocks like the Solana vesting contract can allow builders to focus on the unique elements they aim to bring to the world, with economic interests secured. The Bonfida team has done an outstanding job in this regard, providing a beautifully clean user interface. This product has been audited and is available for builders to use in the Solana ecosystem.
• Guardians in the Wormhole network—Wormhole is a decentralized network that powers cross-chain communication between high-value blockchains. Given that various chains cannot effectively run each other's light clients, the security of cross-chain messaging between these chains is a significant vulnerability in the ecosystem. We are very excited about Wormhole's pragmatic and effective approach to solving this issue and are proud to be one of the guardians helping to secure the network. More information about the Wormhole project will follow.
• Serum—As financial markets evolve, the central limit order book model has emerged as a medium for coordinating market interests among a wide range of participants, for many reasons—
• Openness—allowing multilateral coordination of market interests
• Transparency—allowing market participants to see all publicly expressed interest in the asset
• Expressiveness—allowing for nuanced and personalized viewpoints

Serum is an order book exchange on the Solana blockchain, where the chain's trust mechanism can bring about many magical effects. In the traditional financial world, there is a vast network of intermediaries behind the scenes that ultimately resolves the execution of exchange order books to address trust issues. The fact that Serum can export this functionality to the Solana blockchain and build order book applications on-chain is simply astonishing. Composability is often used to describe the interactions of various applications on-chain or the reuse of various subcomponents. However, one point that is often overlooked in discussions is that the default components in every blockchain application are composed of underlying trust. This is incredibly powerful.

This open order book network allows users from anywhere in the world to access it, thereby integrating interests globally, which is unprecedented. Anyone can launch an order book and quickly gather liquidity for any asset. We have only scratched the surface of the innovations that blockchain tracks may achieve, but you can be sure that the effective transfer of various values will become an important part of the crypto narrative. As active market participants and liquidity providers on the platform, we believe Serum will play an important role in this.

Building

• Acquisition of Certus One—We recently acquired the talented Certus One team. Their arrival strengthens the work of the communities we are involved in developing, and we are excited to continue building alongside them. Here are some of the things they bring, with more to come in the future.

• Each layer of the Proof of Stake (PoS) and custody stack has a high level of security. The team has made impressive progress with their Mongon operating system and the SignOS distributed key management solution they are building.

• Focus on the quality of validators and building in public. In the early stages of PoS system development, open discussions about validators and network quality that are not vetted are crucial. Discussions about correctly and transparently tracking metrics at every level of the stack may save the industry a lot of pain in the future. Certus has been one of the loudest and strongest voices in this field, and we hope to support them in becoming a strong and secure decentralized guiding light.

• Lido validators. They are staunch supporters of the Lido network and are one of the select validators behind the ETH staking project. Staked PoS assets play a significant role in the composable DeFi future, and Lido is a leader in this space.

• Pyth Network—The oracle problem has long been one of the white whales in the crypto space. Blockchains allow us to execute arbitrary logic segments trustlessly on ledger states. A significant barrier to applying this capability to a wide suite of applications is the inability to trustlessly incorporate off-chain (or so-called real-world) information into such states.

As DeFi becomes the primary category of on-chain applications, the most valuable off-chain data contained in blockchain states is real-time financial data. It is worth taking a moment to talk about "real-time."

The oracle data utilized by DeFi applications is often used to determine the effective price at which risk is transferred among various participants. Typically, liquidity providers and protocol stakers are on the side of transferring risk. If there is a price delay, opportunistic market participants can gain information earlier than these stakers and exploit the latter for some benefit. So far, classic oracle models have attempted a "wisdom of the crowd" approach.

However, in a world where new on-chain trades are executed every 400 milliseconds, the opportunity for a large number of people to widely access current market prices and reliably distribute them to the blockchain p2p network within that time frame is very limited.
So, who really has access and capability?

1. The most active market participants and liquidity providers—these participants are actually trading (possibly many times) within that time frame. These traders may also trade in many related venues for the asset, allowing them to effectively integrate information and notice the nuances of market structure.
2. Exchanges and other execution venues—the exchanges that match trades are often the source of much price discovery. They are the first to know the prices at which market participants are willing to trade, and thus can obviously publish real-time price information. They also typically have very sophisticated data reporting infrastructures that can quickly and reliably disseminate this information to the P2P network.

An important distinction between these two types of participants and third-party price publishers is that they are actually facilitating or directly executing trades at a given price, rather than reporting prices queried from external sources. This means that their economic interests are at stake, which is a key part of network security. In third-party oracle models, the sources of queried and reported prices have no vested interest and no incentive to publish accurate prices to the network. This is another significant gap filled by first-party data publishers.

Jump fully belongs to the first category (first-party data publishers). In addition to contributing data, we also actively contribute to the codebase and are committed to solving many interesting research questions in platform design.

An increasing number of financial giants have also committed to joining the network as first-party data publishers. Other well-known financial institutions joining the trading community include GTS, Virtu Financial, Chicago Trading Company, Akuna, Cumberland, XR Trading, Hudson River Trading, Susquehanna, and Jane Street. Additionally, several exchanges, such as BSX/MIAX, LMAX, and IEX, have announced their participation.

Moreover, as a crypto-native project, the Pyth Network also receives price data from renowned crypto firms such as Genesis, FTX, CMS, CoinShares, and Bitso. This initial list already includes a significant portion of trading volume across many asset classes, and we are excited to see the list grow so rapidly.

Solana is the preferred underlying public chain for the Pyth Network due to its well-known advantages in trading capacity and latency. However, Pyth Network prices are intended to be distributed to more blockchains through the Wormhole network. For example, developers building applications on Ethereum and Terra will be able to leverage these prices in their application logic. The Pyth Network aims to grow the pie and aligns perfectly with Jump's vision and mission to be a powerful positive force in the field, driving it toward maturity.

• Wormhole—This crypto ecosystem has evolved to include multiple heterogeneous high-value chains, and we believe that diverse computing environments will continue to evolve and retain value. However, there is a significant "interoperability" gap, as these chains have not been able to communicate with each other so far.

Each blockchain world generates interesting states, with environments uniquely facilitating those states. For example, the Terra blockchain natively generates UST—a decentralized stablecoin, Solana's computing power can generate Pyth quotes, and Ethereum's strong community generates NFTs and governance votes for major protocols, etc. The composability between different parts of these states has the potential to unlock enormous innovation opportunities. Wormhole employs a very simple, fast, and practical approach to achieve fully generic communication across heterogeneous chains.

The Certus team built the first version of the Wormhole project in an incredibly fast and effective manner. Now, a community of Wormhole guardians is coming together to launch a more generic and conveniently scalable Wormhole network. The vision of this project perfectly aligns with our mission to help create strong pipelines and infrastructure, and we are excited to continue contributing to it.

In a world where finding reliable Rust engineers is less likely than winning the lottery, Jump's rich talent in systems engineering and quantitative technology has given our crypto work a solid head start. But Jump Crypto is still in a very nascent early stage. We are traders, builders, and community members, and these communities are excited about the industry's development and actively pushing the industry forward. For all the stay-hungry smart people—if you want to build decentralized tracks with some of the smartest people in this field, please reach out to us.

It's time to build!

Source link: jumpcrypto.com