Uniswap users
As of May 2022, Uniswap continues to have the most active users among decentralized exchanges.
Fig. 18. Uniswap monthly active users
It can’t be denied that the newest users participated in DeFi space and started to trade in Uniswap in May 2021 when crypto crashed, with 617,399 new users, increasing the total number of Uniswap users to 1,043,195 users ever. Recently, the number of users was back to exactly the same in July 2020 when the DeFi summer happened, with 72,068 new users. Compared to the first peak period, the number of old users has decreased by almost 53.6% (Fig. 18).
If considering a period from the second peak in November 2021 to May 2022, traders are no longer active in Uniswap V2, the quantity has been reduced 7 times (Fig. 19). It can be interpreted into two cases, the first is that traders move from V2 to V3 on Ethereum and other networks, and the second is that they decide to experience other DEXes or CEXes. The number of users in Uniswap V3 have fluctuated during the period, in recent times, there is a negligible difference in the number of traders in Uniswap V2 and V3.
Fig. 19. Uniswap daily active traders
Fig. 20. Percentage of Uniswap Traders who also deposited as Liquidity providers
As it observed, only one of every ten users has access to decentralized exchanges as both traders and liquidity providers (Fig. 20). Users still prefer Uniswap V2 in terms of providing liquidity, especially, in the period from February to April 2022, the number of LPs of V2 maintained above 1000 users, and on 12th Feb, this number increased to more than 2225 users. However, when entering the early stage of May, the number of LPs on V2 decreased markedly, falling to 431 users. Contrary to V2, the number of LPs on V3 in May changed dramatically, reaching the milestone of 2495 users and 2307 respectively on May 7 and 8, while previously Uniswap v3 only hit 1000 users twice (Fig. 21).
Fig. 21. Uniswap daily active liquidity providers
Uniswap performance metrics
Looking at the whole picture since Uniswap was launched, the Proof-of-Concept for Uniswap V1 was a significant success, prompting the network to release an improved version of Uniswap v2 in May 2020. The biggest flaw of Uniswap V1 was the lack of ERC20-ERC20 tokens, which made it difficult to "bridge ETH". In terms of user interface and experience, Uniswap V2 outperforms V1. It also solved the problem of ETH bridges by introducing the idea of ERC20-ERC20 token pairs. That is the reason why thousands of ERC-20 token pairs are created on V2, occupying the majority of all Uniswap versions. One year right after Uniswap V3 was officially deployed on Ethereum blockchain on 5 May 2021, 6873 pairs of tokens were added to this platform, compared with 73,975 pairs added in Uniswap V2 at the same time (Fig. 22).
Fig. 22. Number of token pairs in Uniswap
Uniswap V1 is just the idea of a theoretical model for the Constant Product, Uniswap V2 and V3 are applied in more practice. However, the staggering increase in the number of token pairs on V2 also coincides with “meme coin season” which is created without any economic or technical purpose; it is unavoidable to have scam tokens, the so-called “rugpulls” traded in Uniswap V2. In the breakdown of each Uniswap version, this analysis filters out the most popular mainstream trading pairs.
Fig. 23. Swap count on V2 and V3
The most common way to interact with the Uniswap protocol is through swapping ERC-20 tokens. It’s obvious that more traders on V2 will do more swaps, eventually, swaps on V2 outnumber on V3 double or triple as of Nov 2021. However, six months later, the number of swaps is not considerably different, the total swap count of V3 has surpassed for four consecutive days (from 9th May to 12th May). This also coincides with the number of traders dwindling on V2 in May, they are likely to experience on V3 (Fig. 23).
Fig. 24. Trading volume in Uniswap V2 and V3
Fig. 25. Volume share of Uniswap V2 and V3
Although the overall number of trades has been led by Uniswap V2, V3 has dominated the trading volume. The volume difference is computed by subtracting V3 from V2, this is more clear when looking at the difference in average volume. Since Nov 2021, the trading volume on V3 has totally exceeded V2. As of 12th May 2022, the volume of Uniswap V3 hit a peak of $5.29 billion, on the other hand, the volume of V2 gained $600.36 million. In mid-May 2022, the V3 pools have consistently contributed a higher aggregate volume, which is 4.5 times more than the V2 pools (Fig. 24). In other words, in mid-May 2022, the trading volume on V3 accounted for 93.8% of Uniswap volume share (Fig. 25).
Theoretically, trade volume is a measure of liquidity. The larger Uniswap V3 trade volume shows a greater overall market interest in a new AMM version.
Fig. 26. Total liquidity of Uniswap
Undoubtedly, the highest total liquidity occurred during the period of extreme volatility, on 1st December 2021, with $7.92bn in liquidity across all Uniswap markets in which V2 generated $4.56bn, overtaking V3 with $ 3.36 bn worth of liquidity. Even though the liquidity between V2 and V3 isn't a straight comparison owing to the latter's better capital efficiency, the total reserve levels underpinning both markets are worth looking into. Over just one month, V3 has steadily increased its liquidity, eventually surpassing V2 in overall liquidity on 28th Jan 2022. Since Q1 2022, the liquidity of the whole market has sunk deeply to $3.99bn in mid-May 2022, in which V3 still reached 61% of total liquidity. It can be seen that the liquidity of V3 fluctuates in the range from $2.1bn to $3.66bn, more stable than the liquidity of V2 which dropped 68% from $4.56bn to $1.44 bn within six months (Fig. 26).
Fig. 27. Daily liquidity providers (LP) fees in Uniswap
During this period, daily fees received by LPs in V3 exceeded those generated by LPs in V2. The general tendency was for V3 to gain more revenue, in reality, LPs made 232 percent more aggregate earnings from V3 in mid Q2 than they did from V2, due to high trading volume offsetting lower fee tiers (Fig. 27). The highest days of the period are December 4, 2021 and May 12, 2022, with respectively $4.82 billion and $5.29 billion in trading volume executed in V3 (Fig.24). The latter day has more than the former day by 9.75 percent of trading volume, but LPs earned less 13 percent of total revenue on May 12, 2022 than on December 4, 2021. This paradox stems from the difference in setting fee-per-trade in Uniswap V3.
With larger trading volume, better liquidity and higher LPs’ earnings, V3 obviously contributes more revenue to Uniswap in total. At the time of writing on May 22, 2022, Uniswap’s revenue dropped significantly from the highest point in Q2, 2022 with $8.79 million to the lowest point with $182.18 thousand, in other words, Uniswap’s revenue decreased sharply 48 times within eleven days (Fig. 28).
Fig. 28. Total revenue of Uniswap
Uniswap gas fee impact
Fig. 29. Median gas price on Ethereum since 1st May 2022
Since the beginning of 2022, the crypto market has the most volatility in May. We can definitely notice the rocket in gas price on 12th May 2022 (Fig. 29), the demand for trading congested the whole Ethereum network. With gas prices reaching top of the chart, the network was essentially inaccessible for a few hours. Users lost thousands of dollars in gas expenses as a result of numerous transactions failed.
Fig. 30. Average gas fees per swap on Ethereum
Fig. 31. Average gas fees per swap on Polygon
Fig. 32. Uniswap’s gas fees on Ethereum (percentage) in the last 30 days
Fig. 33. Uniswap’s gas fees on Polygon (percentage) in the last 30 days
In the same period of time Q2 2022, an Uniswap transaction executed on Polygon was much cheaper than that on Ethereum. On May 1st, users had to pay about $80 for a swap on Ethereum while they only needed to pay $0.02 for a similar swap on Polygon on average, in other words, it is 4000 times less than that on Ethereum. Remarkably, on the same day, Uniswap achieved the lowest point of gas fee on Ethereum (Fig. 32), accounting for approximately 1.4% of the total gas fee required for transactions on Ethereum of which 1.3 % for V3 and 0.1% for V2. The highest point of Uniswap gas fee on Ethereum was about 15% of the total gas fee. Due to a large amount of trading volume on V3, gas fees generated by V3 were always higher than those generated by V2 on Ethereum. The gas fees needed for transactions in Uniswap V3 were at a maximum point of 0.45% of total gas fees on the Polygon network.
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