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Spotlight 🔎
Aggregated DEX volumes reached a monthly ATH in June.
Aggregated monthly DEX volumes across all types of DEXs (i.e. exchanges and AMMs) surpassed $1.5 billion marking a 70% increase from the previous month of May. Overall, DEX volume for 2020 has so far amounted to more than $5.1 billion, more than double of that seen throughout 2019.
The Formally Verified Take
One of the biggest catalysts driving the surge in trading volume has no doubt been due to the plethora of liquidity mining mechanisms being introduced. While there are concerns with how long the yield farming frenzy can last, a more interesting question is how the introduction of such mechanisms have altered the DEX landscape in the last few weeks.
Compared to 2019, the number of venues/protocols with significant trading volume has clearly become more diverse but this diversity has intensified further in the last month alone. As pointed out earlier in June, Curve was experiencing a surge of activity by being used as a popular USDC-USDT venue for opportunistic COMP farmers. While total volume on Curve now seems to be dwindling slightly, the short-term intense activity was enough to secure Curve as the 2nd largest venue for June after Uniswap. Why might volume become a salient topic for curve in the coming months? The Curve team just released details of an Aragon-based Curve DAO which is designed to collect trading fees that will buy back Curve’s cryptoasset, CRV.
We can also clearly see the effects of the BAL distribution on bootstrapping the Balancer network - Balancer showed just under $100m in trading volume. Does this matter for Uniswap? The platform, which tends to take the top position, is now starting to be the new playground for new liquidity reward programs like Ampleforth. And these programs seem to be effective - the AMPL-ETH pool on Uniswap V2 is now already ranked 4th in 24hr volume ($1.9 million) and 3rd in liquidity ($2.4 million).
We can also look through the lens of DEX aggregators - one of the fastest growing areas of the DeFi space. 1inch, one of the prominent aggregators has shown consistent strong growth in monthly volume as well as high user retention. Remember, 1inch users are able to keep trading costs down through the usage of GasToken - which continues to be somewhat of favourable integration with the recent Ethereum network congestion.
A natural question we might ask ourselves is to what extent is trading activity facilitated by aggregators, such as 1inch? In other words, what is the ratio of 1inch volume to total DEX volume for each period? Since it’s launch, 1inch volume has represented a greater portion of total DEX volume - June being a new ATH for the protocol accounting for ~20% of total DEX volume. In the future, we can expect 1inch to continue expanding its functionality, create new incentive structures, and cement the protocol’s position (and the role of aggregators more broadly) within the ecosystem.
Quick Takes ⚡️
Matcha
0x release their decentralised exchange, Matcha.
Matcha will be an in-house built DEX on the 0x protocol that will leverage the 0x API and 0x Mesh to aggregate liquidity from different venues. Instead of relying on relayers to provide a front-end, the 0x team have now created a minimalist interface which will allow traders access to useful information such as slippage warnings and descriptive information about tokens listed.
The Formally Verified Take
Matcha fills a void that has been left empty for a while - providing a more direct route for traders to interact with the 0x V3 protocol. Since the launch of V3, the emphasis has really been on the market makers (MMs) given their critical role in the proliferation of the network. In this sense, the release of Matcha is now placing a greater emphasis on the demand side - but the key question is whether Matcha will provide a unique and favourable experience for traders.
As it currently stands, volume relayed through the 0x API only accounts for 20% of total 0x volume but this might start increasing with Matcha in the mix. Importantly, increased adoption of Matcha will drive further value to MMs (and ZRX delegators) through the application of protocol fees. Time will tell whether Matcha is effective enough in its design to warrant this extraction on users.
See here for Formal Verification’s recent analysis on 0x.
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