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Spotlight 🔎
0x
0x has now had $100 million in volume flown through the 0x API.
0x launched their liquidity aggregation tool at the start of 2020. The API leverages smart order routing in order to split transactions across numerous exchange venues for the lowest slippage possible. The 0x API has been implemented by numerous DeFi projects over the last few months (e.g. Nuo, Zerion) which have integrated the REST API endpoint within their own applications.
The Formally Verified Take
For some time now, liquidity aggregation tools have shown to be increasingly important pillars within the DeFi ecosystem. It helps to think of 0x API as not just a price feed but rather a diverse product offering - Beyond aggregating liquidity, it’s also possible to create advance trading UIs as well as bolster infrastructure around meta transaction. Similar to the phenomenal adoption of liquidity aggregator 1inch in recent months, the 0x API is demonstrating good product/market fit.
Diving into the data, we can see that the API adoption has only really strengthened in the last few weeks. Throughout July, the 0x API frequently accounted for >30% of the total daily 0x volume.
While end users have been kept happy, it's important to recognise the implications of this adoption on 0x network stakeholders (i.e. market makers and ZRX stakers). As highlighted in previous issues, 0x has introduced a reduced protocol fee (ZEIP-79) and FillNonNative Transformer. Critically, this transformer re-routes on-chain liquidity bridges (e.g. Uniswap, Curve) and effectively bypasses the V3 exchange and thus protocol fees entirely. In other words, rewards for market makers and ZRX delegators are being continually sliced.
While protocol fees have generally been climbing over the last 3 months, they have yet to pass $5k for a single day. For perspective, Kyber which has taken $150k in network fees so far in the current Epoch (giving an average of $16k per day in fees).
These protocol fees shown are gross and the rewards distributed out to MMs and ZRX stakers will end up being just a fraction of this. So while the 0x API growth has been beneficial for the end users and adoption of the V3 protocol in general, it is another question entirely how MMs and ZRX stakers can reap some of this benefit. Over time, the 0x team will need to rethink how it can encourage growth for native V3 orders which can justify the usage of protocol fees before incentives for these participants become too ineffective.
Quick Takes ⚡️
Set
Set Protocol iterates with the release of V2.
The new protocol upgrade will bring multi-asset support that will diversify the tokens that Sets can offer, including additional DeFi tokens, LP tokens, and synthetics. Other benefits for users also include the ability to create strategies around yield farming and lower gas costs. Meanwhile, Set managers will be able to use the new Set Portfolio feature, which will provide them with greater flexibility in creating strategies, such as an index consisting of n number of assets. V2 features will be rolled out in the coming months.
The Formally Verified Take
It’s clear that Set protocol has quickly emerged as a key tool for traders participating in the DeFi, allowing anyone access to index products, automated trading strategies, and social trading products. The Set Protocol vault has grown from $500k to an ATH of ~$24m in a little over a year with $49 million in cumulative SETs purchase volume. The V2 upgrade will clearly help enrich Set’s product offering even further so we should expect adoption to continue as these roll out over the weeks.
On a more macro level, the fast moving pace of DeFi has meant that protocols have had to iterate faster than ever in order to capture new opportunities that present themselves to users in the ecosystem but also be effective at capturing those opportunities (i.e. refinement).
What’s also interesting to note is how Sets have changed their outlook over the last 3 months depending on market volatility. In May, the majority of Sets turned bearish when ETH moved from $210 to $180. Likewise, in June Sets moved to cash when ETH declined from $250 to $230. Since the start of July, however, most Sets have returned to being very bullish and moved almost entirely out of cash as we head into August.
Ren
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