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Analyze the trading situation of Uniswap V2 and Uniswap V3 from the total trading volume and some trading pairs.
For a more in-depth understanding of Uniswap V3, please read: ” Everything you need to know about Uniswap V3 “
Written by: Michael Silberling
Translation: Lu Jiangfei
How is Uniswap being used?
In order to answer this question, I compared the transactions of Uniswap V2 and Uniswap V3 according to the total transaction volume and the total dollar transaction volume. I very much hope to learn more about Uniswap V3’s U.S. dollar transaction volume, but since the focus here is on the “usage” indicator, and the value of the dollar is fluctuating, we first focus on the “trading volume” indicator :
Above: Transaction volume situation-Left: Total transaction volume; Right: Total transaction volume (hour chart)
Link Wen’s Note: The data used in this article was extracted on May 8, 2021.
As we have seen, Uniswap V3 was officially launched on May 5, and the transaction volume surged on the day of launch, and then began to grow steadily, with an increasing share. At the end of May 5th, Uniswap V3’s transaction volume accounted for 10% of Uniswap’s total transaction volume. However, at the time of writing (May 8), this proportion has risen to 25%.
Above: USD trading volume-Note: Since the release of Uniswap V3, the price of the ETH-USD trading pair has increased by about 7%
Will the new version affect Uniswap trading pairs?
This may also be the most pressing question I have raised.
One of the main innovations of Uniswap v3 is to allow liquidity providers (LP) to specify the range of funds they wish to provide, rather than from 0 to infinity as in the past. If everything goes well, this innovative mechanism can help users get better prices on Uniswap, especially for similar trading pairs with consistent and predictable exchange rates (such as DAI / USDC, ETH / stETH, etc.) ). In the past, if you wanted to obtain on-demand trading services for trading pairs, you could only use a few DeFi protocols specifically designed for such services, such as Curve.
Now, Uniswap’s application user interface has been set to V3 by default, but if users feel that they can get a better price on V2, they can also switch to the old version with one click. Therefore, we should see the transaction volume naturally flow to the Uniswap version with better prices. If users can get better prices on “like for like pairs”, compared to competing products, we should also be able to see more demand for such trading pairs on Uniswap.
If you still don’t understand how Uniswap works, please read the article ” How Uniswap Works ” first to learn some basic knowledge.
Above: Uniswap V3 trading interface-guiding users to “get a better price on V2” (the slippage rate on V3 is 1.92%)
So, if you compare the trading pairs with the largest trading volume, is there any difference between Uniswap V3 and Uniswap V2?
Frankly speaking, in some of the most traded trading pairs, there are indeed some differences between Uniswap V3 and Uniswap V2.
Since the release of Uniswap V3, the 10 trading pairs with the highest USD-denominated trading volume on Uniswap V2 are all “ETH trading pairs”, such as ETH/USDT, ETH/WBTC, etc. On Uniswap V3, among the 10 trading pairs with the highest trading volume in USD terms, three are stable currency trading pairs, namely:
- USDC/USDT, ranked fourth
- DAI/USDC, ranked sixth
- DAI/USDT, ranked ninth
Uniswap V3 should be more suitable for stable currency trading pairs, at least so far, it has successfully done this.
Surprise for WBTC: I am surprised by the transaction volume of WBTC / stablecoin trading on Uniswap V3 (chain note: WBTC=Wrapped BTC). Since the launch of V3, up to 99.95% of the U.S. dollar transaction volume of the WBTC / USDT trading pair has flowed to Uniswap V3, a total of about 7.5 million U.S. dollars (accounting for 83.4% of the total transaction volume). Of the total, 88.5% went to Uniswap V3, totaling approximately US$7.6 million (51.8% of the total transaction volume). Has Uniswap V3 released a “capture WBTC” signal? Compared to other altcoins, Uniswap V3 users seem to prefer Bitcoin anchored coins, or perhaps Uniswap V3 users have a greater demand for both Bitcoin anchored coins and altcoins.
ETH trading pairs are still concentrated on Uniswap V2-value opportunities? ：The ETH/stable currency trading pair has the largest trading volume on Uniswap, but compared with WBTC, the trading of the ETH trading pair is still concentrated on Uniswapv2, and the U.S. dollar trading volume of ETH/USDT on Uniswap V3 accounts for only 27%. The U.S. dollar transaction volume of ETH/USDC on Uniswap V3 accounted for a little higher, but only 36%. Although the trading volume of ETH/stable currency trading pair on Uniswap V3 is relatively large, Uniswap V2 still has a large advantage in terms of trading volume. Generally speaking, where the ETH trading pair is, the funds are, but if we look at how much liquidity provider’s trading volume can be captured on Uniswap V3, the results may be surprising.
“V3 market dominance advantage”: The ratio of Uniswap transaction volume of a trading pair through V3 to the total transaction volume.
Above: Uniswap V2 and Uniswap V3 transaction volume comparison, and “V3 market dominance advantage”: the transaction volume of a trading pair through Uniswap V3 / (Uniswap V2 transaction volume + Uniswap V3 transaction volume)*100%
Above: The most popular trading pairs on Uniswap V2-all are ETH trading pairs
Above: The most popular trading pairs on Uniswap V3-among the 10 trading pairs with the highest trading volume priced in USD, three are stable currency trading pairs
Which trading pairs like to use Uniswap V3 most? Which trading pairs use Uniswap V3 for “least favorite”?
We have already discussed which trading pairs like to use Uniswap V3 the most. In order to make a better comparison, we will turn the analysis focus to value acquisition and see which trading pairs “least like” using Uniswap V3.
Up to now, the number of “least favorite” trading pairs using Uniswap V3 does not seem to be many, so there may be other reasons why these trading pairs still choose to trade on Uniswap V2. One of the most typical examples is the BADGER / WBTC transaction. Yes, this trading pair is mainly used to provide BadgerDAO incentives, aiming to give token rewards to those who provide liquidity to the fund pool. Therefore, BadgerDAO did not choose Uniswap V3, which is likely to be related to their liquidity incentive mechanism. Therefore, before switching the liquidity provider’s incentive mechanism to Uniswap V3, we expect them to ensure that the status quo remains unchanged.
We do not know why other trading pairs did not choose Uniswap V3, but one thing may be worth paying attention to, that is, it takes more effort for users to start a new Uniswap V3 vault, so for those who try to take advantage of certain opportunities for arbitrage That said, the cost may become quite high.
Above: Some of the most popular Uniswap V2 trading pairs that have not yet used Uniswap V3
Uniswap V3: Success or failure?
In fact, the analysis in this article is purely out of personal curiosity. However, when relevant research began to develop in depth, a series of questions began to bother me. At present, transactions through Uniswap V3 only account for about 10-20% of the total transactions. I know that Uniswap V3 has just been launched a few days ago, but such a small proportion of transactions seems to be worth paying attention to. In other words, it has been several days, is it really good that there is still only such a small proportion? How should I evaluate this phenomenon? Then, I saw Uniswap founder Hayden Adams posted a tweet, and he commented on Uniswap V3 like this:
“I like Uniswap V3 very much, so let’s see what it will look like in the future. I found an analysis data, namely: compare the dollar transaction volume trend of each Uniswap version after the release of the day.” (As shown in the figure below )
From the picture above, what do you think of Uniswap V3’s performance after it goes live?
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