DeFi Industry Review: Overview of Mainstream DEX Development in 2022

The year 2020 is known as the year of DeFi, while 2021 is the year of the explosion of NFTs. However, it is difficult to summarize 2022 in one word; this year saw a lack of innovation in the crypto industry, mainly affected by the Fed's tightening policies and several black swan events.

Nevertheless, as centralized trading platforms continue to be embroiled in scandals, DeFi applications have developed comprehensively, and people's belief in decentralized finance has further strengthened. This article will outline the DeFi track, review the performance of mainstream DEX in the bear market of 2022, and discuss future development plans.

Uniswap

Uniswap was established in November 2018 and is the most representative DEX in the Decentralized Finance space. In 2022, Uniswap Labs completed a $165 million Series B funding round, with a valuation of $1.66 billion.

Uniswap is a protocol for trading and automated market making on Ethereum and its layer 2 networks. Over the past four years, Uniswap's monthly active users (MAU) have shown a fluctuating growth trend. As of the end of December 2022, Uniswap's MAU was approximately 356,000, a decrease of 46% year-on-year.

Nevertheless, having over 300,000 MAU still proves that Uniswap performed well during the bear market. The multi-chain development strategy and the introduction of the 1bp fee tier are key to retaining users. Uniswap will be deployed on more public chains in the future.

As a leading DEX with over 65% market share, Uniswap is seeking a larger potential market. Recently partnering with MoonPay to allow users to purchase cryptocurrencies with fiat currency is expected to bring more users to Web3 and Decentralized Finance.

Uniswap has also entered the NFT space by acquiring the NFT marketplace aggregator Genie. With the new universal router, users can purchase NFTs with lower gas fees.

Currently, rumors about the development of Uniswap V4 are rampant. Although not yet officially confirmed, the new version may introduce further innovations to maintain its industry-leading position.

SushiSwap

SushiSwap was established in 2020 as a fork of Uniswap. However, due to various reasons, SushiSwap is currently in trouble, with its current TVL even lower than the levels in December 2020.

The new head, Jared Gray, pointed out that SushiSwap is currently facing a budget deficit issue, which affects the project's sustainability. Although the annual spending budget has been reduced from $9 million to $5 million, the treasury funds are only enough to last for about a year.

Due to a lack of innovation and a slow response to market changes, SushiSwap has almost lost its first-mover advantage in the DEX competition. Currently, its market share in the AMM space is less than 3%, and it has made no achievements in the DEX aggregation market.

To turn the situation around, SushiSwap has released a new tokenomics proposal, introducing a time-locking layer and a burn mechanism, reallocating transaction fees in an attempt to rebuild the relationship between xSushi holders and LPs.

The 2023 roadmap focuses on user experience, including the release of a DEX aggregator, supporting ecosystem growth through a decentralized incubator, and launching a governance dashboard. SushiSwap plans to increase its market share tenfold in 2023.

Curve Finance

Curve Finance was launched in January 2020, aimed at facilitating stablecoin trading through a simple and efficient AMM formula. The V2 version of Curve supports trading of non-stablecoin tokens while retaining the core concepts of V1.

Interestingly, Curve Finance's MAU has been quite stable over the past three years. As of December 2022, it had about 10,000 MAU, ranking fourth in TVL, even higher than Uniswap. This may be because most users on Curve are stablecoin whales, who stay in the Curve ecosystem for the long term due to the underlying mechanisms.

The tokenomics design of Curve is considered revolutionary, indirectly changing the governance structure of many DeFi protocols. The veCRV mechanism encourages users to lock CRV tokens for the long term to obtain higher yields, which is one of the key factors for Curve maintaining a high TVL.

In November 2022, Curve released a new white paper for its decentralized stablecoin crvUSD, introducing the innovative LLAMMA algorithm to manage collateral risk. This will allow Curve to carve out a share of the stablecoin market and maintain its leading position in the DEX space.

GMX

GMX was launched on Arbitrum in September 2021 and is a highly anticipated emerging DEX. It is a decentralized spot and perpetual exchange, characterized by low slippage, low fees, and other features.

As of December 2022, GMX's MAU has surpassed 20,000, with a year-on-year growth of over 1300%. Its TVL has almost quadrupled, and platform fees have increased by more than 100%, making it the top decentralized derivatives exchange by TVL on Arbitrum.

One of the reasons for GMX's success is its unique payment mechanism and high leverage up to 50 times. For LPs, GMX's mechanism is considered very friendly and low-risk.

The TVL of GMX has shown stable growth throughout the year, mainly due to:

1. Provide high APR by staking GMX and GLP
2. GLP serves as a basket of assets, including blue-chip assets and stablecoins.
3. All transaction fees are allocated to token stakers, forming a good compound interest mechanism.

Currently, the GMX team is developing the X4 model (, a PvP AMM mechanism ), and is seeking multi-chain deployment. In November 2022, the proposal from GMX Labs was approved, and future developments are worth looking forward to.

Conclusion

Looking back at the performance of mainstream DEXs in 2022, we can see that some projects are actively innovating, while others are struggling to survive in the bear market. As the crypto industry continues to evolve, people's expectations for DEXs are no longer limited to basic AMM functions. Multi-chain development, complex token models, efficient AMM, and vertical scaling will all become the development directions for DEXs.

In this industry, "survival of the fittest" remains a universal law.