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In the previous article, Part 1: Follow the Leader (Uniswap), we delved into the dynamics that have contributed to Proxyswap trading at a rich multiple. One of the primary considerations was the platform's user base and trading volume, which we explored in detail.
Metrics | Uniswap (Million Active Monthly Users) | Proxyswap (Hypothetical) |
|---|---|---|
Active Monthly Users | 3.18 million | 30,000 (estimated) |
Market Cap (circulating) | $7.40 billion (5.28x of ann. fees) | $14,461,000 (5.28x of ann. fees) |
Trading Volume (30d) | $73.40 billion | $150 million (estimated) |
30d Fees | $115 million (0.15% fee) | $225,000 (0.15% fee) |
Annualized Fees | $1.4 billion (0.15% fee) | $2,739,000 (0.15% fee) |
By extrapolating data from Degen bridged users and assuming full adoption of Proxyswap among this audience, we arrived at a generous estimate of 30,000 users. This user base, combined with an assumed $5,000 trading volume every 30 days, projected a 30-day trading volume of approximately $150 million for Proxyswap. Applying the industry-standard 0.15% average fee charge, akin to Uniswap's fee structure, yielded an annualized fee projection of $2,739,000—an impressive figure that underscores the platform's potential.
In the competitive landscape of decentralized exchanges (DEXs), especially AMMs, it's essential to acknowledge the potential challenges and limitations faced by individual platforms like Proxyswap. Despite its promising features and innovative design, Proxyswap currently lacks a distinct competitive advantage or "moat" that would shield it from market disruptions or the entry of industry giants like Uniswap or Aerodome into Degen Layer 3.
Without a clear differentiation or unique selling proposition, Proxyswap may struggle to defend its market share against new entrants or established players with greater resources and brand recognition. In a rapidly evolving ecosystem, where user preferences and market dynamics can shift quickly, relying solely on a standalone DEX model may not be sufficient to sustain long-term growth and relevance.
In contrast, transitioning to an aggregator model, as exemplified by platforms like Jupiter (on Solana), presents a strategic opportunity for Proxyswap to leverage its strengths and adapt to changing market conditions effectively. By consolidating liquidity from multiple DEXs and offering users a superior trading experience with enhanced liquidity and competitive rates, Proxyswap can position itself as a leading aggregator in the Degen Layer 3 ecosystem.
Furthermore, embracing the aggregator model enables Proxyswap to capitalize on its first-mover advantage, strong community support, and user-friendly interface to facilitate transactions seamlessly across various AMMs. Rather than competing directly with individual DEXs, Proxyswap can play a pivotal role in optimizing trade execution and maximizing user satisfaction, thereby solidifying its position as a trusted platform for decentralized trading. We also know Uniswap V4 upgrade has the following features:
A time-weighted average market maker (TWAMM)
Dynamic fees based on volatility or other inputs
Onchain limit orders
Depositing out-of-range liquidity into lending protocols
Customized onchain oracles, such as geomean oracles
Auto-compounded LP fees back into the LP positions
Internalized MEV profits are distributed back to LPs
These features will be easier to implement via the Aggregator model. Why? See below how aggregators increase liquidity, volume, and price discovery for users.
Benefits of the Aggregator Model:
Enhanced Liquidity and Price Discovery: As an aggregator, Proxyswap can access liquidity from multiple DEXs, ensuring users have access to a deeper pool of assets and better price discovery.
Improved User Experience: By offering a wider range of tokens and competitive rates, Proxyswap can attract more users seeking convenience and efficiency in their trading experience.
Diversification of Risk: Aggregating liquidity from different sources mitigates the risk of relying solely on one exchange, ensuring resilience and stability in volatile market conditions.
Jupiter Charts (Fees, Users, Volume by AMM, Swaps):
Fees Chart: Avg. fees accrued per 30 days has been approximately $1.5M based on available data
Users Chart: Traders pushing swaps via different AMMs
Volume by AMM Chart: Avg. 7d volume that passes through Jupiter Aggregator onto other AMMs is approximately
Additionally, considering Jupiter's fee structure of 0% on swaps and 0.1% for DCAs and Limit orders, which aligns with the evolving market trends, Proxyswap could adapt its fee model accordingly to maintain competitiveness. For instance, charging a 0.15% fee for swaps, while offering DCA and Limit order features at a slightly higher fee of 0.25%, would ensure competitiveness against both Uniswap and other competitors like Aerodome (which charges 0.5% fees, as per Dune data). Let's incorporate these fee adjustments into the comparison table:
Metrics | Uniswap (Million Active Monthly Users) | Proxyswap (Swaps) | ProxySwap (DCA + Limit Orders) |
|---|---|---|---|
Active Monthly Users | 3.18 million | 30,000 (estimated) | 30,000 (estimated) |
Market Cap (circulating) | $7.40 billion (5.28x of ann. fees) | $14,461,000 (5.28x of ann. fees) | $23,760,000 (5.28x of ann. fees) |
Trading Volume (30d) | $73.40 billion | $150 million (estimated) | $150 million (estimated) |
30d Fees | $115 million (0.15% fee) | $225,000 (0.15% fee) | $375,000 (0.25% for DCA and Limit Orders) |
Annualized Fees | $1.4 billion (0.15% fee) | $2,739,000 (0.15% fee) | $4,500,000 (0.25% for DCA and Limit Orders) |
We are applying the same Uniswap annualized fee X 5.28x multiple to the Proxyswap DCA + Limit order fee structure given that there is no clean data on Jupiter's annualized fees in proportion to its market cap multiple.
This puts Proxyswap DCA + Limit order marketcap multiple at $23.76M. If we believe the Degen L3 ecosystem and we attribute the above numbers to Proxyswap DEX - which should give us a reasonable valuation if the volume, fees, and users are consistent.
Personal input: Transitioning to an aggregator model presents a compelling opportunity for Proxyswap to solidify its position as a leading DEX on Degen Layer 3. While challenges lie ahead, the potential benefits of enhanced liquidity, improved user experience, and risk diversification that far outweighs the singular AMM DEX model. By embracing innovation and strategic evolution, Proxyswap can chart a course towards sustainable growth and prominence in the decentralized finance landscape.
Part 3 we will put it all together to build a plan and a roadmap of how we elevate Proxyswap to the next level to reinvent the game and be a top-tier DEX.
The future is created by those who dare to be bold and disruptive
By: 0xAmol
ProxySwap: Part 2 /degen Follow the leader (Jupiter) Lessons to learn from a dominant aggregator, Jupiter. How to gauge value, future of Uniswap v4 implementation and ideas for Proxyswap to pivot to Aggregator model.
ProxySwap: Part 2 /proxyswap Follow the leader (Jupiter) Lessons to learn from a dominant aggregator, Jupiter. How to gauge value, future of Uniswap v4 implementation and ideas for @proxyswap