Drift is a decentralized trading protocol on Solana that blends perpetual futures, spot markets, borrow-lend pools, and a unified margin system with a hybrid liquidity model designed for efficient on-chain execution.
This guide explains Drift’s architecture, liquidity systems, token, security model, and trading features, with up-to-date information for 2025. To get started with Bitcoin and explore the broader digital asset ecosystem, download the Bitcoin.com Wallet.
Drift is a decentralized trading protocol built on Solana that combines perpetual futures, spot markets, borrow-lend pools, unified margining, and a hybrid liquidity system designed for low-latency, on-chain execution.
Overview
Drift is a non-custodial trading protocol on Solana that has evolved from a single-product perpetual futures exchange into a comprehensive on-chain trading environment. Launched in 2021, Drift introduced the Dynamic AMM (DAMM) as its early innovation: a pricing system that anchored liquidity around an oracle-derived midpoint rather than a constant-product curve. This allowed Drift to reduce toxic flow, protect liquidity providers, and bring institutional-grade execution closer to the on-chain environment.
Drift’s evolution accelerated with the release of Drift v2, which added an on-chain orderbook, a new liquidity mechanism called Just-in-Time (JIT) liquidity, a revamped risk engine, spot markets, and unified cross-margining across all assets. These additions turned Drift into a multi-product trading layer that supports perpetual futures, spot trading, lending and borrowing, programmatic market making, and advanced margin systems.
The protocol is built to take advantage of Solana’s architecture, including fast block times, parallel execution, and low transaction fees. Drift performs order matching and risk checks directly on-chain, preserving transparency while offering low-latency execution that approaches the feel of centralized venues.
Today Drift is one of the largest trading protocols in the Solana ecosystem, known for deep liquidity, flush execution quality, and an architecture that blends AMM liquidity, orderbook depth, and JIT liquidity into a single system. This hybrid model allows Drift to support a wide range of traders, from retail users to professional market makers participating through APIs and automated strategies.
How Drift Works
Drift’s architecture combines several distinct components into a cohesive system: DAMM liquidity, on-chain orderbooks, JIT liquidity providers, and a unified risk engine that manages cross-margin collateral across spot and perpetual markets. Together these systems enable efficient price discovery, deep liquidity, and transparent risk management.
Dynamic AMM (DAMM)
Drift’s Dynamic AMM was the protocol’s initial breakthrough. Instead of using a constant-product curve, DAMM uses oracle-pegged midpoints to center liquidity around the fair price. The AMM adjusts its virtual reserves dynamically to keep pricing aligned with market conditions.
Key characteristics of DAMM include:
Liquidity providers act as makers in a more controlled environment
Pricing is anchored to Pyth oracles to minimize divergence
LPs earn trading fees and funding payments
DAMM sits behind the orderbook to provide baseline liquidity
DAMM is now one of three liquidity sources on Drift: orderbook makers, JIT liquidity providers, and the DAMM vault.
Orderbook Execution Layer
Drift v2 introduced a fully on-chain orderbook that supports limit orders, post-only orders, resting liquidity, and advanced order types. The orderbook receives regular updates from makers who post bids and asks, providing deeper liquidity than an AMM alone can support.
The system includes:
On-chain matching logic
Market maker APIs
Time-in-force and post-only flags
Maker rebates and taker fees
Range orders for strategy execution
This orderbook complements the DAMM by providing additional liquidity at tighter spreads.
JIT (Just-in-Time) Liquidity
JIT liquidity is one of Drift’s defining innovations. When a user submits a trade, JIT makers can compete to fill the order at the moment of execution. This mechanism creates a competitive, low-latency market-making environment where multiple participants attempt to provide the best price.
JIT liquidity improves execution quality by:
Reducing slippage for large orders
Tightening spreads
Allowing highly efficient capital deployment
Creating competitive price discovery across multiple liquidity sources
The execution flow for a trade attempts to fill orders in this priority:
Resting orderbook liquidity
JIT makers competing to fill
DAMM vault liquidity for any remaining size
This layered system ensures that orders receive the best possible price at the time of execution.
Unified Cross-Margin System
Drift uses a unified cross-margin system for both perpetual futures and spot positions. Users deposit collateral into a single margin account, and all positions share the same collateral pool. Margin requirements are determined dynamically based on asset volatility, open interest, and position size.
Key margin features include:
Multi-asset collateral
Dynamic initial and maintenance margin
Real-time risk checks
Portfolio-based risk modeling
Automatic liquidation engines with partial liquidation paths
This unified margin system allows users to create complex portfolios, such as hedging perp positions with spot assets, and benefit from collateral efficiency.
Sub-Accounts and Portfolio Margining
Drift supports multiple sub-accounts per user. Each sub-account maintains isolated risk, enabling traders to run multiple strategies or segregate long-term holdings from leveraged trades.
Borrow/Lend Architecture
Drift's borrow-lend pools allow users to supply liquidity and earn a variable yield paid by traders who borrow assets for margin trading or spot leverage. These pools introduce a passive liquidity layer that supports perpetual and spot markets.
Participants in lending pools earn:
Borrowing interest
Potential additional protocol incentives when active
Lenders effectively support the broader trading ecosystem by enabling leveraged positions and collateral flexibility.
Spot Trading Integration
Drift supports spot trading directly within the unified margin system. Spot assets can be used as collateral, borrowed for shorting, or traded alongside perps. This creates a seamless trading environment where spot and perps interact naturally within a single portfolio.
Spot markets include:
SOL, USDC, USDT, and major ecosystem assets
Direct access through Drift’s interface or API
Collateralization and borrowing within the same margin account
Oracle Infrastructure (Pyth and Switchboard)
Drift uses multiple oracle feeds to maintain accurate pricing across markets. Pyth provides high-frequency prices, while Switchboard adds redundancy and additional coverage.
Oracle-based risk checks include:
Confidence intervals for price adjustments
Deviation guards to halt execution when oracles drift
Time-weighted price feeds for liquidation calculations
The oracle system underpins DAMM, margin calculations, and liquidation engines.
Key Features
Drift has expanded into a multi-product trading environment that supports a wide range of traders, strategies, and liquidity providers.
Perpetual Futures
High-leverage trading on major assets
Funding payments between longs and shorts
Deep liquidity supported by DAMM, orderbooks, and JIT
Spot Markets
Unified margin spot trading
Spot positions usable as collateral
Default settlement on Solana for fast finality
Hybrid Liquidity
DAMM vaults for passive LPs
On-chain orderbook liquidity
JIT market makers for best execution
Advanced Order Types
Limit
Market
Post-only
Trigger (stop-loss, take-profit)
TWAP
Conditional orders
LP Vaults
DAMM vaults allow liquidity providers to earn:
Trading fees
Funding payments
Yield from participating in the protocol’s baseline liquidity layer
Borrow/Lend Pools
Supply assets to earn yield
Enable leveraged spot and perp trading
Integrated into unified margining
Developer Tools and APIs
Market maker APIs
SDKs for automated strategies
WebSockets for low-latency order flow
DRIFT Token
The DRIFT token supports governance, staking, fee rebates, and insurance mechanisms across the protocol.
Utility
DRIFT is used for:
Governance participation
Protocol fee discounts
Incentivizing market makers and LPs
Staking for protocol rewards
Staking and the Insurance Fund
Staked DRIFT contributes to the insurance fund, which is used to cover shortfalls in extreme volatility or liquidation events. In return, stakers earn:
A portion of trading fees
Potential incentives depending on governance parameters
Governance
Holders can propose and vote on:
Fee schedules
Incentive programs
Risk parameters
Market additions
Fee Rebates
Active traders and market makers may receive DRIFT-based fee rebates tied to volume tiers or maker activity.
esDRIFT
Earlier stages of the protocol involved escrowed DRIFT for long-term incentive alignment. esDRIFT still appears in certain long-term vesting schedules depending on governance decisions.
Security and Audits
Drift maintains a multi-year security track record with audits from established firms and a series of layered protections across both protocol and network levels.
Audit History
Audits have been performed by:
OtterSec
Trail of Bits
Zellic
Each major upgrade has undergone multiple reviews, including simulations of liquidation cascades and oracle failure scenarios.
Insurance Fund
The insurance fund covers:
Bad debt from undercollateralized positions
Oracle failure-related losses
Shortfalls during volatility spikes
Circuit Breakers and Safeguards
Drift includes:
Rate limits for abnormal price movements
Oracle deviation checks
Funding rate caps
Liquidation throttling during extreme market conditions
Solana Network Security
Being on Solana provides:
Fast settlement
Parallel execution
Low fees
However, Drift inherits network-level risks, including potential congestion or temporary outages.
Strengths
Drift’s strengths come from its hybrid architecture and the capabilities of Solana’s execution environment.
Efficient liquidity from AMM vaults, orderbooks, and JIT providers
Low-latency trading with on-chain transparency
Unified margin system for better capital efficiency
Deep risk controls and robust liquidation systems
Strong ecosystem integrations and developer tooling
Spot and perps combined into one trading portfolio
Risks
Drift, like all on-chain trading systems, has inherent risks.
Smart contract vulnerabilities despite audits
Oracle dependency, including potential manipulation
Liquidation risk during extreme volatility
Solana network congestion or downtime
Reliance on JIT makers for optimal execution
Divergence between oracle prices and external markets
No protocol can eliminate risk entirely, and users should manage leverage and collateral appropriately.
Conclusion
Drift has grown into one of the most advanced decentralized trading platforms in the Solana ecosystem, offering a wide range of markets, competitive liquidity, and transparent on-chain execution. Its hybrid architecture unifies perpetual futures, spot markets, borrow-lend pools, and advanced risk management into a single system. With deep integrations, strong security practices, and a broad set of tools for both retail and institutional traders, Drift represents a significant step forward in on-chain derivatives trading while expanding into a full-spectrum DeFi trading environment.
