Uniswap V3 has successfully launched its first shot, is it about to overtake V2?

At the end of March, Uniswap Labs released the highly anticipated Uniswap V3 protocol. At its core is the introduction of the concept of "concentrated liquidity", that is, liquidity providers (LPs) can make markets within a custom price range and create a personalized price curve in the process. The design promises a 4,000x increase in capital efficiency for LPs, enabling LPs to offer the same depth of liquidity as V2 at a given price range, with far less capital sitting idle.

Source: Uniswap Blog

Two months later, on May 5, Uniswap V3 finally went live, and it was a huge success in its first two weeks. In just 3 days, Uniswap V3 has become the top decentralized exchange (DEX) on Ethereum after Uniswap V2. In the past 7 days, V3 has achieved a transaction volume of more than 6.5 billion US dollars. See below:

Uniswap is currently the largest Gas consumer on Ethereum: CoinDesk issued an article stating that Uniswap, a decentralized exchange, is currently the largest Gas consumer on Ethereum. Uniswap was responsible for almost 30% of all trades initiated on the network in the last 8 hours. Since Nov. 13, Uniswap has been the most-used decentralized application (DApp) by fees. In second place is Tether, which accounted for 11% of total fees on Ethereum, which began moving its token supply to Ethereum in 2019. [2020/12/22 16:01:38]

Above: Weekly transaction volume (in billions of dollars) of major DEXs on Ethereum for the week ending May 16. Source: Messari & Dune Analytics

In fact, Uniswap V3 was so successful that its transaction volume soon approached that of Uniswap V2. At the current rate of growth, it will likely surpass V2 by the end of May.

Uniswap lock-up volume has shrunk to US$1.75 billion, a 24-hour drop of nearly 40%: According to DeFi Pluse data, Uniswap lock-up volume has shrunk to US$1.75 billion at the time of writing, a 24-hour drop of 39.6%. Some insiders analyzed that the sudden drop in locked positions may be related to Uniswap’s cessation of the liquidity mining incentive plan, because investors should migrate funds after the end of the incentive plan. [2020/11/17 21:02:37]

Above: Uniswap V3 trading volume as a percentage of V2 trading volume growth trend as of May 16. Source: Messari & Dune Analytics

Perhaps the most notable thing behind Uniswap V3's rapid volume growth is the capital efficiency achieved by V3 in the process of volume growth: V3 is approaching the same volume as Uniswap V2, and V3's total lockup ( TVL) is less than 15% of V2. Currently, V3 is the only AMM (Automated Market Maker) with a ratio of trading volume to total locked positions exceeding 100%. Its capital efficiency is more than 5 times that of Uniswap V2, and the ratio of V2's trading volume to total locked positions is at Ranked second in Ethereum DEX. See below:

DeFi startup OpenDeFi will conduct IDO on Uniswap on November 11: DeFi startup OpenDeFi will conduct its initial Dex offering (IDO) on Uniswap at 08:30 on November 11.

In October 2020, OpenDeFi announced the completion of a $1 million private placement financing. Investors include MoonRock Capital, TRG Capital, Alphabit, Lotus Capital, AU21, etc. Recently, OpenDeFi announced partnerships with blockchain companies such as Matic, Tezos, MoonRock Capital, Rarestone Capital, Dfinance, UniLend, and Frontier. (Globenewswire) [2020/11/10 12:10:39]

Listing of UNI 3L/3S and YFI 3L/3S in the leveraged ETF area of BiKi platform: According to the official announcement, the ETF area of BiKi platform will list UNI 3L/3S trading pairs at 22:10 (GMT+8) on September 17. At 22:30 on the 17th (GMT+8), the YFI 3L/3S trading pair will be launched, supporting 3 times long/short.

Leveraged ETF 3L and 3S are an index fund that anchors the target 3 times long and 3 times short a certain digital asset. Compared with the contract, it has the characteristics of simple operation, never liquidation, and no margin. BiKi leveraged ETF management fee 0.1%. [2020/9/17]

Above: Uniswap V3 landslides as the most capital-efficient DEX, data for the week ending May 16.

Several of the most popular trading pairs (liquidity pools) on Uniswap V3 are similar in terms of capital efficiency. In particular, the volume of stablecoin trading pairs on V3 is comparable to that of the 3Pool pool on Curve (DAI+USDC+USDT), while the TVL of the former is only a fraction of the TVL of 3Pool: $1.65 billion locked in Curve’s 3Pool , while the total TVL locked in the two trading pairs of USDC/USDT and DAI/USDC of Uniswap V3 is only 125 million US dollars.

New oxygen will be listed on the three major exchanges of Leidun (LOEX), Uniswap and Rebi on September 8: According to official news, New oxygen will be launched on September 8 and launched on Leidun (LOEX) , Uniswap, and Hotcoin.

Through the development of the underlying public chain of the game, New Oxygen uses blockchain technology to create a blockchain game ecological platform that can break through the pain points of the current game industry. It organically integrates DeFi + radar technology mining + 2.0 new way of joining a group. Its original new way of joining a group of 5 people adopts a double reward mechanism, that is, no matter how many users succeed in joining a group, all users participating in the group will get NOE rewards. [2020/8/19]

As of this writing, 3Pool on Curve has a 24-hour volume of $265 million, while Uniswap V3’s USDC/USDT and DAI/USDC pairs have a combined volume of $198 million. For these trading pairs, Curve has a 24-hour volume to TVL ratio of 16%, while Uniswap V3 has a 24-hour volume to TVL ratio of 158%. See the comparison chart below:

Above: 7-day trading volume, 24-hour trading volume, and TVL data for each trading pair on Uniswap V3. Source: Uniswap Analytics

Above: TVL, liquidity usage (16.04%), and daily transaction volume for 3Pool (DAI+USDC+USDT) on Curve. Source: Curve.fi

Uniswap's Growing Dominance

Currently, the success of Uniswap V3 coupled with the continued dominance of Uniswap V2 has increased Uniswap’s market share to a new 2021 high of 61%. Uniswap's market share has been growing in 2021. See below:

Above: Since 2021, the market share of major DEXs on Ethereum has changed, and Uniswap's market share has grown to 61%.

The increase comes as DEX trading volumes are surging again. In the first 16 days of May, the trading volume of all Ethereum DEXs almost reached the previous record for the highest monthly trading volume set in the previous month. Trading volume on these DEXs is expected to exceed $123 billion this quarter, nearly double April’s volume.

Above: Since May 2020, the total monthly transaction volume growth trend of all DEXs on Ethereum.

The increase also comes as some DEX competitors release new protocol upgrades of their own. The theme of every DEX protocol is capital efficiency, and each team approaches this problem through a variety of different methods. For example, SushiSwap's upcoming upgrade, Deriswap, will introduce a brand new AMM that combines trading, lending, futures, and options into a single agreement.

For another example, Balancer's upcoming upgrade Balancer V2 will introduce a single Vault (vault), which will be used to save all assets deposited in different liquidity pools, which not only reduces the transaction Gas across multiple liquidity pools Cost (this is a pain point of Balancer V1), also allows Balancer to increase capital efficiency through "Asset Managers", that is, these "Asset Managers" will allocate idle assets in Balancer's liquidity pool to Other agreements (such as Aave) to earn income.

Whether these capital-efficiency alternatives resonate better with the market will be determined in the coming months. Regardless, Uniswap V3 is just getting started and will continue to improve in the meantime. Other Token project parties have not yet begun to provide incentives for LPs on V3, users are just familiar with the parameters of V3, and the protocol for managing passive LP strategies has not yet been launched, not to mention that Uniswap V3 is about to be deployed to Optimism (L2 network) which may further push transaction volume.

But now one thing is clear: Uniswap V3 is a huge success.

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