Decentralized exchanges or DEXs allow users to buy and sell cryptocurrencies with each other without the involvement of brokers. Users connect their crypto wallet to a DEX, select their crypto trading pair of choice, enter the amount and press 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 issue, let’s discuss the top five decentralized exchanges. These are:
- Curve (CRV)
- Uni swap (UNI)
- Pancake Swap (CAKE)
- Sushi Swap (SUSHI)
- Balancer (BAL)
Curve (CRV)
Curve is a decentralized liquidity pool on Ethereum. It is specially designed for:
- highly efficient, stable coin trading with low slippage
- low risk, liquidity provider compensation income
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 determined by the Curve Decentralized Autonomous Organization (DAO). The fee for all pools is 0.04 percent. Half of the compensation goes to the liquidity providers and the other half to the members of the DAO.
- Total Locked Value: $21 Billion (approximately Rs. 1,58,569.45 crore)
- Mcap/TVL ratio: 0.06
Uni swap (UNI)
Uniswap is a decentralized protocol for automated liquidity provision on Ethereum.
A major problem with illiquid assets on mainstream exchanges is ‘high spreads’. Uniswap solves this problem by enabling anyone to become a market maker. Uniswap suffers from high slippage on large orders because the price paid increases with the increase of the quantity.
- Total Locked Value: $9 Billion (approximately Rs. 67,958.33 crore)
- Mcap/TVL ratio: 0.8
Pancake Swap (CAKE)
PancakeSwap is an automated market maker and revenue farm on the Binance Smart Chain (BSC). Although PancakeSwap is a fork of SushiSwap, it allows cheaper and faster transactions because it runs on BSC.
PancakeSwap also offers yield farming, raffles, and initial farm offers.
- Total Locked Value: $7.7 Billion (approximately Rs. 58,142.13 crore)
- Mcap/TVL ratio: 0.4
Sushi Swap (SUSHI)
SushiSwap is a decentralized protocol for providing automated liquidity on Ethereum. It is a decentralized exchange and a decentralized credit market. It also enables performance instruments and investment derivatives. In late 2020, Yearn.finance and SushiSwap announced a merger where they would share development resources but keep separate tokens and governance systems.
- Total Locked Value: $5.5 Billion (approximately Rs. 41,530.09 crore)
- MCap / TVL ratio: 0.2
Balancer (BAL)
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 Locked Value: $3 Billion (approximately Rs. 22,652.78 crore)
- Mcap/TVL Ratio: 0.05
Remark:
- The figures are from December 10, 2021 and are rounded
- Sources: CoinMarketCap, Messari, Future Money Wallet
- TVL = Total value locked
- Mcap = Market Capitalization
This is the third in a series of articles on DeFi, with more to follow 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.
Cryptocurrency is an unregulated digital currency, not legal tender and subject to market risks. The information contained in the article is not intended as financial advice, trading advice or any other advice or recommendation of any kind offered or endorsed by DailyExpertNews. DailyExpertNews is not responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article.
