New innovation and growth in decentralized exchange

Jake Brukhman

Jun 11, 2020

Dex volumes are inflecting

Dexes are here!

It took a little longer than anticipated, but decentralized exchanges are finally seeing accelerating growth in volumes and serving certain assets more effectively and globally than centralized exchanges. Technological maturity, the proliferation of tokens, and a bullish outlook on the market are helping to drive volumes.

The dex space saw $2.4 billion of volume in 2019. But in 2020, we’re estimating approximately $7.1 billion in annualized volume, a 194% year-on-year increase.

CoinFund’s Devin Walsh identifies some of the drivers of dex volume.

Devin Walsh @devinawalsh

DEX volume for month of May is up 29% MoM from April and 255% from 2019 volumes on an annualized basis h/t @DuneAnalytics

Protocol tokens are driving growth

Protocol tokens are playing a key role in the growth of dexes and other open finance protocols. After Balancer Labs introduced the $BAL token as part of their governance roadmap and liquidity mining program, active network participation shot up dramatically across key metrics like revenue and number of liquidity pools. The number of liquidity providers on Balancer saw a 10-fold increase.

Jake Brukhman @jbrukh

1/Thanks to @DuneAnalytics and @teo_leibowitz's *awesome* @BalancerLabs dashboard, we bring you some on-chain growth stats and demonstrate the impact of having a protocol token. Dashboard: explore.duneanalytics.com/dashboard/bala… Balancer:

balancer.exchangeBalancer ExchangeSwap ERC20 tokens trustlessly across all Balancer liquidity pools

Dexes competing with centralized exchanges

New technologies are increasingly enabling dexes to compete with centralized exchanges. AMMs like curve.fi, have been able to give traders better exchange rates for stablecoin trades than traditional order book markets like Coinbase. The following analysis we ran at CoinFund shows that Curve consistently outperforms Coinbase exchange rates, after fees, in the DAI-USDC market by 33.6 basis points.

Jake Brukhman @jbrukh

On-chain data shows that since late April, @CurveFinance is outperforming @coinbase in the DAI-USDC market. This happens about 80% of the time and, post-fees, the average outperformance is about 33.6 basis points. This is bullish for stablecoin exchanges. Congrats to Curve team!

Loopring is one of the first zk-rollup based exchanges, using the technology to create a user experience indistinguishable from a centralized exchange but fully non-custodial. There will be much more innovation in this space, but Loopring has been one of the first such dexes to hit market and its token, $LRC, has returned over 300% year to date.

Loopring 🧞‍♂️ @loopringorg

Loopring Exchange FAQ Answers to the most common questions we get from users on Ethereum's zkRollup DEX, Loopring.io

medium.comLoopring Exchange FAQFrequently Asked Questions about the Loopring Exchange, Ethereum’s zkRollup DEX.

Jake Brukhman is the founder and CEO at CoinFund, a blockchain technology investment firm based in New York City. This content is presented for informational purposes and should not be construed as legal or financial advice or as a solicitation to invest in any opportunity.