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Fortunately, Uniswap has announced that it is developing the V3 version of the agreement. Hayden Adams has publicly stated that the next version will solve all the problems currently encountered by AMM.
Written by: Donnager
Only a two-week on-line bifurcation project, volume of precipitation funds have been operating for two years far more than the original project. Things that are unimaginable in the business world happen naturally in the DeFi world.
SushiSwap is the hottest topic in the cryptocurrency world, especially in the DeFi community , and its story is so exciting that it can be called a soap opera. With vampire barbaric invasion for the current decentralized Exchange (DEX) in the largest trading volume Uniswap the agreement, SushiSwap Lock became the industry’s largest total DEX protocol.
For traders, this may be good news: Lock the largest total, it represents compared to Uniswap, SushiSwap more suitable for performing token transactions, because slippage may be lower.
SushiSwap’s website style
Vampire attack brings Dex ecological changes
But for Uniswap, it is the outright bad news: liquidity providers are losing, liquidity is losing, and users are also losing.
SushiSwap able to go beyond the core reason Uniswap is that it Uniswap to put a super patch: add native tokens for the entire agreement. As for what can native tokens be used for? SushiSwap program does not pull those virtual, giving direct dividend rights, governance than Compound or tokens MakerDAO more directly capture the overall value of the agreement.
Interestingly, if the clock back a year, DeFi community but also because Uniswap did not consider the issue of currency and for the elephants: Uniswap once and go to another center in the same trading platform Bancor “automated market makers AMM” track, Uniswap and Bancor The biggest difference is that there is no native token, but the transaction fee collected is directly shared with the liquidity provider, reducing the transaction friction caused by adding native tokens.
But the situation is completely different now. It is almost ironclad that Uniswap will launch the protocol native token in the next V3 version update, which may become the most important strategic change. Currently there is relatively little public information about Uniswap V3 . Uniswap founder Hayden Adams only publicly disclosed that the new version will solve all the problems of AMM (automatic market maker) currently on the market.
Of course, from the data Uniswap is still a great advantage, the number of users and transaction volume is far ahead of other DEX, accounting for half of the Ethernet Square DEX total trading volume. Uniswap in terms of worst case, as long as SushiSwap better flowability, the flowability of other aggregator (e.g. 1inch) will be routed to more SushiSwap the transaction, the transaction slip point reducing users.
But this is good news for the DeFi ecosystem. Ethernet Square DEX overall liquidity because SushiSwap have been significantly improved, increasing the amount of billions of dollars of assets locked, users can obtain liquidity trading needs better trading experience.
An unscrupulous copy has brought about changes in the entire ecology, making people dumbfounded, but this reality must be accepted.
Token incentives vs natural growth
If there were no vampire SushiSwap, Uniswap should be enjoying the most comfortable time.
Uniswap is the largest amount of assets before the transaction and the number of users an Ethernet protocol DEX Square locked, especially since the liquidity and the use of Uniswap mining boom tokens were issued after the opening, locking its liquidity has been more rapid growth, an increase from the previous millions of dollars to more than $ 300 million.
This fully reflects the natural growth rate of assets under custody in the Uniswap agreement without token incentives. The number of users and transaction volume growth in line with this growth rate, independent of the number of addresses per day to about 20,000.
Uniswap’s daily unique address trends in the past three months
SushiSwap’s migration of Uniswap liquidity can be said to be a “vampire attack”, but from another perspective, it can also be said that it “helps” Uniswap invisibly. If token incentives or liquidity are added After mining, its potential growth rate.
Indeed the effect is immediate, Uniswap prior to the natural growth of liquidity compared with the token incentives, worth mentioning: Uniswap Hedging assets soared to its highest close to $ 2 billion in two weeks.
Of course, there are also institutions in the layout.
For example, Sam Bankman-Fried , the founder of FTX and Alameda Research, participated in the ecological construction of SushiSwap very early, and finally became one of the nine multi-signature members of the project. He also frequently disclosed his personal views on the future development and ideas of the SushiSwap project. . One of the most likely directions is to explore more with Serum , his latest DEX project.
Uniswap data is still eye-catching, but SushiSwap may catch up soon
Although since SushiSwap liquidity migration is complete, liquidity Uniswap decreased by about 70%, currently only less than half of the former, but compared with SushiSwap data not yet available, the overall amount of assets Uniswap locked or has improved, From 300 million US dollars before to 460 million US dollars , an increase of more than 50%.
Another aspect is the number of users from the point of view, Uniswap currently still far ahead, more than the sum of all other users DEX. Reference number of independent address DeBank statistics, after the flow of migration, the number of users accounted for only Uniswap SushiSwap fraction.
However, if the needs of users from the trading point of view, SushiSwap will have an advantage, after all, better liquidity of the latter. If you refer to the transaction slippage data of the transaction aggregator 1inch, for a slightly larger transaction of 10,000 ETH , most of the transactions will be routed to SushiSwap for execution because it has better liquidity.
Therefore, with the popularity of user-oriented transaction aggregators like 1inch , the agreement to master more liquidity provider (LP) assets can generate more transactions and gather more users.
Of course, the algorithm and mechanism of AMM itself is also a factor that affects liquidity. At present, similar algorithms like Uniswap, Balancer or SushiSwap are not much different and barriers to each other. Compared with execution, new AMM protocols such as DODO or Mooniswap that introduce other algorithms have more technical barriers or competitiveness.
How does Uniswap counterattack?
Uniswap With extremely simple market-making algorithms, gain a lot of fans and community influence, because the city needs to be done for any asset liquidity is, Uniswap is the default option, reducing the role of the original market maker – -They are replaced by algorithms.
Also because the algorithm is extremely simple and open source, the cost of forking it for other projects is very low. Reference is also open source project early DeFi MakerDAO, it’s the whole system is much more complex, the number of contracts also several times in the Uniswap, but also because there is an agreement of governance tokens and decentralized autonomous organization (DAO), the difficulty and cost of bifurcation Larger. These directions are at least the potential commercial barriers that Uniswap and similar agreement products need to consider.
Fortunately, Uniswap has announced that it is developing the V3 version of the agreement. Hayden Adams has publicly stated that the next version will solve all the problems encountered by AMM and will strengthen cooperation with institutional traders to provide products that are more suitable for such users. In addition, it will also use the second-tier technology of Ethereum to improve Transaction performance and reduce gas fees paid by users. Obviously, the founder hopes to keep away from the fork project in terms of product evolution.
The most important of course is the protocol native token. Many people believe that Uniswap community’s priority is to release native tokens, or Uniswap total market value of the entire project can not reflect, because none of tradable objects (ie tokens). If, as participating tokens such SushiSwap there is regulatory risk, and that the use of Compound tokens or MakerDAO governance program that is at least a minimum guarantee of choice.
The other two problems to be solved is AMM criticized the slippage is too large, the problem of impermanence loss (Impermanent loss) of. Curve by introducing a custom curve and support specific assets to the optimization problem slippage and loss of impermanence, DODO is through the introduction of oracle trying to solve these two problems. How the V3 version of Uniswap solves this problem is worthy of attention.
In addition, there is a hot demand how to achieve user penetration. The biggest obstacle currently is the high transaction costs on the chain. Although the Ethereum Gas fee has been reduced to around 100 in recent days, it is still at a high level, so the introduction of Layer 2 can lower the user threshold and introduce more users with fewer assets.
After all, for Uniswap, the most important competitiveness is the team’s own development and execution capabilities. Even SushiSwap forked code and assets Uniswap, but developed this algorithm formula AMM team is still Uniswap, if they can continue to create new LP features to meet the needs of both traders and, Uniswap is still a great chance of winning.
In the current round, SushiSwap is slightly ahead; next, the show has just begun.