DeFi Sector Review: Overview of the Development of Mainstream Decentralized Exchanges in 2022

The year 2020 was known as the year of DeFi, while 2021 was the year of NFTs. In 2022, the innovation in the crypto industry was relatively lackluster, mainly affected by the Federal Reserve's tightening monetary policy and several black swan events. Nonetheless, with frequent scandals in centralized trading institutions and the comprehensive development of DeFi applications, the concept of Decentralized Finance has been further solidified. This article will sort out the DeFi track and review the performance and future plans of the mainstream decentralized exchanges (DEX) during the bear market in 2022.

Uniswap

As the most representative DEX in the DeFi field, Uniswap has maintained a leading position in the industry since its establishment in November 2018. In 2022, Uniswap Labs completed a Series B funding round of $165 million, with a valuation of $1.66 billion.

Uniswap is a protocol for trading and automatically providing liquidity on the Ethereum network and its scaling solutions. Users can trade tokens directly in the liquidity pool through smart contracts. Over the past four years, Uniswap's monthly active users (MAU) have experienced volatile growth. As of the end of December 2022, Uniswap's MAU was around 356,000, a decline of 46% from the previous year, but still demonstrating its resilience during the bear market.

Uniswap's multi-chain development strategy and the introduction of the 1bp fee tier are key to retaining users. In the future, Uniswap plans to deploy to more blockchain networks. To expand its influence, Uniswap is also collaborating with payment service providers to allow users to purchase cryptocurrencies using traditional payment methods.

In addition, Uniswap has entered the NFT space by acquiring the NFT marketplace aggregator Genie. With the latest universal router, NFT traders can transact with lower gas fees.

SushiSwap

SushiSwap was established in 2020 as a fork of Uniswap. However, SushiSwap has recently fallen into difficulties for various reasons, with its current TVL even lower than the levels of December 2020. The new head, Jared Gray, pointed out that SushiSwap is facing a financial deficit issue, which affects the sustainability of the project.

To turn the situation around, SushiSwap has released an optimized token economics proposal, introducing a time-lock layer and a burn mechanism, and readjusting the fee distribution. The 2023 roadmap focuses on user experience, including the launch of a DEX aggregator, the decentralized incubator Sushi Studios, and the release of a governance dashboard.

Curve Finance

Curve Finance was launched in January 2020, focusing on providing efficient stablecoin trading. Although the MAU is relatively stable, Curve's TVL ranks among the top in DeFi projects, which may be attributed to its unique tokenomics design and governance structure.

To remain competitive, Curve Finance plans to launch a new decentralized stablecoin, crvUSD, using an innovative lending liquidation AMM algorithm (LLAMMA), aimed at better managing collateral risks.

GMX

GMX, as an emerging DEX, was launched on Arbitrum in September 2021 and subsequently deployed on Avalanche. GMX is a decentralized spot and perpetual exchange that offers low fees and minimal price impact.

As of December 2022, GMX's MAU exceeded 20,000, a year-on-year increase of over 1300%. Its TVL grew nearly fourfold, and platform fees doubled, making it the highest TVL DEX on Arbitrum. GMX's success is attributed to its unique payment mechanism, high leverage trading options, and LP-friendly low-risk mechanism.

The GMX team is developing the X4 model (a PvP AMM mechanism) and is seeking multi-chain deployment. Recently, the proposal for the establishment of GMX Labs was approved, and future developments are worth looking forward to.

Conclusion

As the cryptocurrency industry continues to evolve, the development goals of DEX will not be limited to basic AMM functions. Multi-chain development, complex token models, highly capital-efficient AMM models, and vertical scaling will all become the direction for DEX development. In this rapidly changing industry, only projects that continuously innovate can survive and thrive in fierce competition.