This document analyzes the decentralized exchange (DEX) landscape and provides insights into past and future growth. It discusses the rise of automated market makers (AMMs) like Uniswap and their success over first generation DEXs. The current state of DEXs is presented in terms of liquidity, volume, fees, capital efficiency, and governance. Opportunities for future growth include expanding to multiple chains and layers, addressing traditional exchanges and financial markets, and integrating with non-fungible tokens. In conclusion, DEXs have grown significantly but aspects remain experimental as the on-chain exchange market is still in its early stages.

1. Analyzing the DEX
Landscape - Key
Insights into Past &
Future Growth

2. Agenda
❖ The Rise of AMMs
❖ Current state of DEXes
❖ Potential Opportunities & the Path Ahead
2

3. A quick update about ITB…

4. 4
4
Partnerships

5. 5
5
ITB Releases - Curve & Fees Stats

6. 6
6
ITB Releases - DEXes to Come
V2

7. 1
The Rise of
AMMs
7

8. 1st Generation DEXes in Ethereum
Etherdelta, IDEX
▸ Peer-to-peer
▸ Off-chain order
books
▸ Slow (days)
▸ Costly
8

9. Automated Market Makers (AMMs)
Bancor, Kyber, Uniswap, Balancer, Curve
Order books → x*y = k
LPs take fees from volume
Democratized market making
Impermanent loss/gain
9
Source: CoinTelegraph

10. Reasons Behind AMMs’ Success
▸ Speculation is crypto’s “killer app”
▸ Highest decentralized wealth generation
▸ Permissionlessness
▸ Long-tail assets
▸ Going from A → C
10
Source: Arthvigyan

11. Trade-offs With AMMs
▸ Decentralized ↔ Fast/Cheap/Secure
▸ Ease of LP ↔ Capital Efficiency
11

12. Current State of DEXes

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13
Liquidity/TVL
▸ Power of liquidity mining ▸ ~50x YoY ▸ 4x YTD

14. 14
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Volume
▸ 14x YoY Growth ▸ 2.5x YTD ▸ dYdX fee/OI mining

15. 15
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Fees - Uniswap Reaches $1B
▸ First protocol to surpass $1 billion ▸ Total ~ $1.02B w/ v1 + L2

16. 16
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DEX Aggregate Fees
▸ Multi-billion revenues ▸ Not all fees are the same…

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Capital Efficiency
▸ Concentrated liquidity ▸ Low slippage with low TVL

18. Governance & Community
18
▸ Decentralization of governance
▸ Community involvement
▸ Gray area - what is “decentralized enough”?

19. Censorship-Resistance
19
▸ Uniswap Labs token removal incident
▸ Broker definition
▸ Anon teams: risky or resilient?

20. The Path Ahead for DEXes

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22. Multi-Chain, Multi-Layer
22
▸ Navigating cross-chain/layer simply
▸ Emphasis on security post Poly Network hack
▸ Liquidity mining game theory
(0, 0) (-1, 2)
(2, -1) (1, 1)
No liquidity mining
L2 liquidity mining
L1
liquidity
mining
With liquidity mining
No
With

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Aave Polygon Example: Multi-Layer Liquidity Mining
Source: DeFi Llama
▸ 20x liquidity in L2 in 1W ▸ -10% in L1 in 1W ▸ Both grew 1M+

24. Addressable Market - CEXes
24
▸ 25% MS increase YoY ▸ 27x MS increase since 2019

25. Addressable Market - TradFi
25
▸ More with less
▸ Supply-side revenues
▸ “Ownership economy”

26. Addressable Market - NFTs & STs (?)
26
▸ Beyond ERC20s into 721s
▹ Fractionalized NFTs as first step
▸ Securities on the blockchain
▹ Is it still a DEX if it has KYC?

27. 27
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Conclusions
▸ DEXs have grown into multi-billion dollar organizations
▸ Revenues are being accrued both by LPs and token holders
▸ Many aspects remain in an experimental phase (e.g. token incentives, cross-chain)
▸ Market for on-chain exchanges still in its early days

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29. INTRODUCING
CONTACT INFORMATION
Lucas Outumuro
Head of Research
Twitter: @LucasOutumuro
Email: loutumuro@intotheblock.io
Thank you! Do you have any
Questions/Feedback?