Decentralised exchanges or DEXs enable users to buy and sell cryptocurrencies with one another without the need for brokers. Users connect their crypto wallet to a DEX, select their crypto trading pair of choice, enter the amount, and hit the swap button.
In the first two editions of DeFi Deep Dive, we learned about Valuing DeFi Blockchains and the Top five DeFi Assets.
In this edition, let's discuss the top five Decentralised Exchanges. These are:
- Curve (CRV)
- Uniswap (UNI)
- PancakeSwap (CAKE)
- SushiSwap (SUSHI)
- Balancer (BAL)
Curve is a decentralised exchange liquidity pool on Ethereum. It is specially designed for:
- extremely efficient, low slippage stable coin trading
- low risk, fee income for liquidity providers
Slippage is the difference between the expected price of a trade and the price at which the trade is executed.
The fees and other parameters are decided by the Curve Decentralised Autonomous Organization (DAO). The fee on all the pools is 0.04 percent. Half of the fee goes to the liquidity providers and the other half to the members of the DAO.
- Total Value Locked: $21 billion (roughly Rs. 1,58,569.45 crore)
- Mcap/ TVL ratio: 0.06
Uniswap is a decentralised protocol for automated liquidity provision on Ethereum.
One major problem with illiquid assets on regular exchanges is "high spreads." Uniswap solves this problem by enabling everyone to become a market maker. Uniswap suffers from high slippage for large orders because the price paid increases with the increase in the quantity.
- Total Value Locked: $9 billion (roughly Rs. 67,958.33 crore)
- Mcap/ TVL ratio: 0.8
PancakeSwap is an automated market maker and yield farm on the Binance Smart Chain (BSC). Although PancakeSwap is a fork of SushiSwap, it enables cheaper and faster transactions because it runs on BSC.
PancakeSwap also provides yield farming, lotteries, and initial farm offerings.
- Total Value Locked: $7.7 billion (roughly Rs. 58,142.13 crore)
- Mcap / TVL ratio: 0.4
SushiSwap is a decentralised protocol for providing automated liquidity on Ethereum. It is a decentralised exchange and a decentralised lending market. It also enables yield instruments and staking derivatives. In late 2020, Yearn.finance and SushiSwap announced a merger under which they would share development resources, but maintain separate tokens and governance systems.
- Total Value Locked: $5.5 billion (roughly Rs. 41,530.09 crore)
- MCap / TVL ratio: 0.2
Balancer is a non-custodial automated portfolio manager and trading platform. In a conventional index fund, the investor pays fees to a portfolio manager for rebalancing the portfolio. In Balancer, the investor collects fees from traders who rebalance their portfolio by following arbitrage opportunities.
- Total Value Locked: $3 billion (roughly Rs. 22,652.78 crore)
- Mcap / TVL ratio: 0.05
- The figures are as of 10 December 2021 and are rounded off
- Sources: CoinMarketCap, Messari, Future Money Wallet
- TVL = Total Value Locked
- Mcap = Market Capitalisation
This is the third in a series of articles exploring DeFi, with more to come next week.
Rohas Nagpal is the author of the Future Money Playbook and Chief Blockchain Architect at the Wrapped Asset Project. He is also an amateur boxer and a retired hacker. You can follow him on LinkedIn.
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