ON–052: DEXs

Happy New Year! This is issue #52 of the on-chain analytics newsletter that reaches nearly 6500 crypto investors every week 📈

1inch, whose v2 offers the best rates by discovering the most efficient swapping routes across all DEXes—swap on the customizable new UI. And also Aave, where you can experience DeFi: Deposit, Earn, & Borrow on Aave.

This week our contributor analysts cover DEX: Curve, 0x, and Perpetual Protocol.

• It was assumed that when “DeFi summer” is over, trading volume and total value locked for earning yields will die off. Graphs for trading volume and TVL show that DeFi activity is back on-chain. (Source)

• Curve Finance started taking part of fees to distribute to the protocol participants who lock tokens for voting in a decentralized / non-custodial manner. It is still early to say if there are any trends in it, yet there were few weekly admin fee distribution events already. (Source)
  

• Owners of CRV lock tokens in order to receive voting power and the mentioned above fee distribution. Voting power of locked tokens is called veCRV and is proportional to both locktime and locked tokens. Since launch of the DAO, the total veCRV is growing steadily. (Source)

• Users locking veCRV are the ones controlling the protocol. So, protocol decentralization can be quantified with Gini coefficient (see non-CRV examples). Source for veCRV Gini coefficient.

• Shortly after Matcha reached 1 billion cumulative trading volume, on Nov 18th, the team launched the“Power-Up” upgrade to open up token listing from ~60 tokens to an arbitrary amount of tokens, which doubled the daily active users instantly. It largely increased the diversity of traded tokens and pairs. Before the launch there were ~30 different tokens and ~60 different pairs actively being traded, while after, that number went up to ~100 tokens and ~120 pairs, respectively. DeFi yield farming tokens (SFI, FARM, ROOK, etc.) are the newest tokens to gain popularity.

• The crazier user boost happened around Christmas when 1inch airdropped their governance token. There were ~13.7k new Matcha users in December altogether. Most of them flooded into the protocol in the last few days, bumping DAU to 3.7k at peak. This also shows that the DeFi community as an ecosystem has synergetic impact.

• In the past 3 months, there have been a number of DEX aggregators and DeFi asset management Dapps integrating 0x API for trading needs on their platforms. In October after Metamask’s integration, DexKit joined the 0x API network. In November, Zapper adopted 0x API and so far has already accumulated over 82.5 million of trading volume in less than 2 months. Maskbook and DODO also became 0x API affiliates since December. As other aggregators joined the network, Matcha’s share dropped from over 95% of volume before November, to ~70% of total volume now, while still leading the board. The overall trading volume across 0x API has picked up to almost 2 times in the recent DEX aggregator governance token frenzy.

• Participants in the 0x ecosystem have been leveraging 0x staking mechanisms to earn a profitable amount of rewards. As an example, in 2020, Volleyfire (a 0x Market Maker) served 41k trades, which collectively paid 284ETH in protocol fees. Meanwhile, Volleyfire’s staking pool got rewarded for 576ETH, roughly 2X-ing the fee they initially generated. 33% (189 ETH) was shared with ZRX token holders participating in their pool. This doubling is due to the system also redistributing protocol fees paid on trades originated by users not registered as a staking pool, which consequently generates a net 2X subsidy to all Market Makers serving Open Orderbook liquidity in 0x. (read more from Theo’s thread) The team is aimed to continuously streamline this market model in 2021 to reach better network economics.

• Perpetual Protocol is a decentralized perpetual contract trading platform. The protocol has been running on Ethereum mainnet and the xDai Chain since December 14th. Here are some key stats (12/14 -12/31):

• Daily trading volume on Perpetual Protocol has gradually increased since its launch, peaking at $9M USDC, which places Perpetual Protocol in the top 15 DEXs on Ethereum.

• On average, the protocol generates $4,080 USDC in transaction fees each day (the protocol charges a 0.1% fee per transaction). Currently, 100% of the transaction fee goes to the Insurance Fund. In the future, 50% of the transaction fees will be distributed to stakers on the protocol.

• Since the launch of the protocol, keepers have liquidated 18 under-collateralized positions on the BTC perpetual market. Only one was not liquidated in time, resulting in a bankrupt position which was covered by the Insurance Fund.