3-First half of 2021: DEX shows strong growth as new contenders vie for lead position
Author: Footprint analyst, Simon in Aug 2021
As the performance of public chains improves, decentralized exchanges (DEXs) have continued to be crucial infrastructure for DeFi while demonstrating strong growth.
Automated Market Makers (AMM) allow users to exchange crypto assets without intermediaries.
As more competitors continue to emerge on the DEX racetrack, let’s take a closer look at data from Ethereum and Binance Smart Chain(BSC) to uncover macro trends from 4 perspectives.
Dex Daily Volume by Chain (since Jun 2021) Data source: Footprint
DEX has been the main application on Ethereum, and with the rise of DeFi, the trading volume of the DEX project also rose rapidly from March this year and doubled at the end of May.
The rapid growth also drew regulatory attention. As countries released their policies on blockchain one after another, some bearish voices also negatively affected DeFi, and the trading volume of DEX dropped rapidly after May. However, it still saw breakthrough growth compared to 2020.
Dex Daily Volume Market Share (since Jun 2021) Data source: Footprint
The rapid development of DeFi has increased congestion on Ethereum, causing higher gas fees. Now, BSC has been jockeying to catch up by using relatively low Gas fees. As observed from data on Footprint, in terms of transaction volume, BSC started to rise gradually from February this year and even surpassed Ethereum in market share in the second quarter.
However, Ethereum still dominates, with Uniswap V3 launching an Alpha version on the Optimistic Ethereum mainnet in July. Congestion also gradually improved as the Layer2 solution landed, and Ethereum regained market share in terms of volume.
On August 5, 2021, Ethereum EIP-1559 completed its hard fork upgrade, and the proposal contains many advantages benefits, including transaction fee destruction. We will wait to see whether it will further enhance Ethereum's market share.
Dex Platform Monthly Volume in Ethereum (since Jun 2021) Data source: Footprint
Uniswap V2 and V3 nearly 50% of volume（in Jul 2021） Data source: Footprint
There are more DEX platforms on Ethereum, including Uniswap, Sushiswap, and Curve. Uniswap, which accounts for the highest percentage on Ethereum, takes up nearly 50% of the volume on both chains.
Footprint data shows the volume of Uniswap V3 is already more than twice that of V2, and the performance of V3 since its launch has been outstanding.
PancakeSwap and MDEX mainly dominate BSC. It is worth noting that PancakeSwap has become a strong rival of Uniswap in the development of the BSC and has been encroaching on the market share since February, reaching a peak in April.
However, Uniswap upgraded to V3, and BSC had a lot of problems after May. PancakeSwap's market share was squeezed again, and Uniswap's market share returned to 50%. While Sushiswap also introduced bentobox, the competition between Ethereum and BSC is still going strong.
It's still anybody's game.
Token Price (since Jun 2021) Data source: Footprint
Data on Footprint shows that most DEX platform tokens kept an upward trend until May, among which PancakeSwap's token, Cake, rose most obviously. It even once caught up with UNI in May and reignited the strength of BSC, with both platform and chain achieving mutual success. Although the token prices of all platforms took a big dive after June, Uniswap and PancakeSwap, the head platforms of Ethereum and BSC, still led the pack.
Sushiswap as a DEX is often compared to Uniswap on the Ethereum, and while SUSHI holders can staking their tokens in exchange for xSUSHI and thus receive Sushiswap transaction fees, it is clear that the market is still more favorable to UNI in terms of token price.
Transaction Fee (GWei) in Ethereum （in Jul 2021） Data source: Footprint
Any operation on the chain consumes a variable amount of Gas fees, depending mainly on the amount of work required for the process. Currently, contracts related to token exchange are among the contracts that consume the most blockchain resources, so DEX accounts for most of the on-chain Gas consumption.
The conversion to UNI generated the most fees of any token issued by Dex in the last month via Footprint statistics, further reflecting the market's bullishness on Uniswap.
Volume of Dex Pairs（in Jul 2021） Data source: Footprint
In July, the top 50 most traded pairs on the DEX platform were ETH/USDC, followed by USDC/ETH, which shows that the major pairs still revolve around stablecoins and ETH. Although various platforms have issued their own tokens, the market still recognizes stablecoins and ETH above all others.
Pairs anchored by WBNB in Coin On BSC (in Jul 2021） Data source: Footprint
The main pairs on BSC are also stablecoins and WBNB, except for pairs anchored by WBNB. Cake has the highest percentage.
Distinct Pairs by day(since Jun 2021) Data source: Footprint
Regarding the distinct pairs with daily transactions, PancakeSwap overtook Uniswap in March this year and now has a daily number of over 20,000 pairs, while Uniswap's has remained stable Sushiswap's is at the bottom. PancakeSwap seems to be going places.
According to Footprint, the number of Sushiswap pairs with transactions in July was only 1,750, while Uniswap V2 has 16,534, Uniswap V3 has 3,386, and PancakeSwap has 135,278 pairs in July.
However, the SEC and CFTC have recently increased their scrutiny of exchange-traded tokens. In late July, Uniswap said it had decided to restrict access to more than 100 tokens in light of the "evolving regulatory landscape."
Summary
Decentralized Exchanges(DEXs)grew rapidly in the first half of this year, even though regulations soon hit hard.
In light of this, Uniswap, Sushiswap and PancakeSwap led among DEXs, with SushiSwap in the first half of the crazy erosion of the market, he competition between Ethereum and BSC is continuing: BSC shows more advantageous Gas fee and the strong coming PancakeSwap, while Ethereum just upgraded to EIP-1559. Whether it can pull the lead in the second half of this year? We can expect this together.