DeFi Industry Review: Overview of Mainstream DEX Development in 2022

The year 2020 is known as the year of DeFi, while 2021 was the year of the NFT explosion. However, for 2022, it seems difficult for people to assign a clear label.

Although 2022 was supposed to be the year of large-scale application of DAOs, the entire cryptocurrency industry's innovative development has been significantly suppressed due to the Federal Reserve's tightening policies and several black swan events.

With the frequent problems of centralized trading platforms and the comprehensive development of DeFi applications, the concept of Decentralized Finance has further gained recognition in the market. This article will review the development of mainstream decentralized exchanges (DEX) in 2022, as well as their future plans.

Uniswap

Uniswap was launched in November 2018 and is the most representative decentralized exchange in the DeFi field. In 2022, Uniswap Labs completed a $165 million Series B funding round, with a valuation reaching $1.66 billion.

Uniswap is a protocol for token trading and automated market making on Ethereum and its scaling networks. Users can trade tokens directly in liquidity pools through smart contracts.

Over the past four years, Uniswap's monthly active users (MAU) have experienced volatile growth. By the end of December 2022, Uniswap's MAU was approximately 356,000, a year-on-year decrease of 46%. However, even during the bear market, it maintained a high level of activity.

Uniswap is expanding towards multi-chain development and has launched a 1bp(0.01%) trading fee tier on most networks. It will be deployed on more public chains in the future. As a leading liquidity provider, Uniswap is seeking to expand its influence. Recently, it partnered with a certain deposit and withdrawal service provider to allow users to purchase cryptocurrencies using credit/debit cards.

In addition, Uniswap has acquired an NFT marketplace aggregator, entering the NFT space. There are rumors that Uniswap V4 is in development, anticipating further innovations to maintain its leading position.

SushiSwap

SushiSwap was founded in 2020 and is a fork of Uniswap. After experiencing early governance turmoil, it is now managed by the new Chef Jared Gray.

Unlike Uniswap, SushiSwap has recently fallen into difficulties, with its current TVL even lower than in December 2020. The main reasons include poor performance of the token incentive program and a lack of innovation leading to a loss of first-mover advantage. Currently, its market share in the AMM sector is less than 3%.

To turn the situation around, SushiSwap has released a new tokenomics proposal, introducing time-lock and burn mechanisms. The 2023 roadmap focuses on user experience, including the launch of a DEX aggregator, decentralized incubator, and more. The new Chef stated plans to increase market share tenfold and enhance sustainability by optimizing tokenomics.

Curve Finance

Curve Finance was launched in January 2020, aiming to achieve efficient stablecoin trading. Its unique AMM model allows for the exchange of large amounts of stablecoins with minimal slippage.

Although the monthly active user count is relatively stable, Curve's TVL ranks fourth, higher than Uniswap. This may be because most users on Curve are stablecoin whales, and its token economics design attracts users for long-term retention.

Curve has been actively innovating. In November of last year, it released a new white paper for its decentralized stablecoin crvUSD, utilizing an innovative lending liquidation AMM algorithm. This will allow Curve to enter the stablecoin market and maintain its leading position in the DEX space.

GMX

As an emerging DEX, GMX launched on Arbitrum in September 2021 and was deployed to Avalanche in January 2022. It is a decentralized spot and perpetual contract exchange, characterized by low fees and low slippage.

As of December 2022, GMX's monthly active users exceeded 20,000, a year-on-year increase of over 1300%. Its TVL grew nearly fourfold, platform fees increased more than twice, making it the highest TVL decentralized derivatives exchange on Arbitrum.

One of the reasons for GMX's success is its unique payment mechanism and high leverage of up to 50 times. For liquidity providers, GMX is considered low risk with almost no impermanent loss.

Currently, the GMX team is developing the X4 model (, a PvP AMM mechanism ), and is seeking multi-chain deployment. Future developments are worth looking forward to.

Summary

In 2022, different DEX projects showed varied performances. Some projects actively innovated, while others struggled in the bear market. In the future, the development goals of DEX will not be limited to basic AMM functions but will also include multi-chain development, more complex token models, and high capital efficiency AMM, among others. In this rapidly evolving industry, "survival of the fittest" will still be the prevailing rule.