Part 2: Follow the leader (Jupiter)

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.

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:

1. 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.

2. 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.

3. 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):

1. Fees Chart: Avg. fees accrued per 30 days has been approximately $1.5M based on available data

   

2. Users Chart: Traders pushing swaps via different AMMs

   

3. 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

Part 1: Follow the leader (Uniswap)

This section will highlight how to learn from the leaders in the DEX space and build superior, competitive, and high revenue/fee generating products.

What is Proxyswap?

Proxyswap is the new kid on the block in the Degen L3 (DL3) ecosystem, taking inspiration from Uniswap V3 (the OG of concentrated liquidity) to bring some DeFi magic to the party. Funded by the devs themselves, it's all about growing the DL3 space and giving users more bang for their buck.

What's next for Proxyswap? We need to learn from the DEX industry leaders: Uniswap and Jupiter. Uniswap

Think of Uniswap and Jupiter as the giant successes of our industry. Proxyswap's like the underdog waiting to prove itself, ready to shake things up with a user-centric revolution. However, it's always good to learn from the OGs but also recognize how/where they can't move fast enough.

Proxyswap learned from Uniswap's most profitable product: V3

Three years ago Uniswap v3's whitepaper introduced a game-changer: concentrated liquidity pools.

Here's the gist: LPs (liquidity providers) can target specific price zones for their loot (capital) instead of spreading it thin across the whole market. Stray outside those zones, and poof! No liquidity, no fees. This superpower lets LPs be way more efficient with their cash (see images below). They can tweak their risk based on their strategies and potentially rake in more rewards with less capital (and less impermanent loss to boot). Basically, Uniswap v3 ditches the rigid, one-size-fits-all approach and lets the market dictate where the liquidity goes. It's like a decentralized order book, mimicking the sweet efficiency of traditional systems.

The results of V3 have been nothing short of spectacular for Uniswap on the Ethereum ecosystem.

Uniswap dominates Ethereum ecosystem with its DEX volumes. With a massive 53.3% market share. As of April 2024, the last 180 days Uniswap has generated approximately $535M in fees with an average fee charge of 0.15% on the total $343B trading volume. And given Uniswap's total market cap today stands at $7.4 billion, we can them ascertain that the market has attributed a 5.28x multiple to the annualized trading fees that Uniswap accrues, which are approximately $1.4 billion.

The question now remains, what kind of earnings, valuation, and user insights (size, volume, activity) do we apply to Proxyswap given that it is trading only on Degen Layer 3 chain vs. Uniswap that trades on almost all ETH chains. For the sake of this experiment, I will presume that Proxyswap becomes the dominant DEX on Degen.

Let's take a generous 30,000 users on Proxyswap. I came up with this number by simply looking at Degen bridged users data and assumed 100% of the 29k users will use Proxyswap as their leading DEX.

Proxyswap with a 30k user base, trading with a generous $5000 in volume every 30d gives us approximately $150M 30d trading volume. We will apply the 0.15% average fee charge, Uniswap charges on this $150M volume.

There are a lot of assumptions and exaggerations, I understand. But this is only an exercise to demonstrate how we can start valuing Proxyswap and build out different models for its path to success in the future.

As of today, I believe Proxyswap trades at a rich multiple today with a $17.5M mcap. Even though I believe in early stages of a newly launched project and a token, the mcap is meaningless. Token liquidity itself is a poor parameter in volatile market conditions.

Final thoughts:
I am writing this entire multi-page article because I'm a big fan of Degen Layer 3 and I believe the Proxyswap team has what it takes to dominate the DEX landscape.

In my follow-up article, I will reveal Part 2 which highlights the successes of Jupiter and how Proxyswap can learn from that leader.

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.

Back in 2013, I emerged from the hallowed halls of Purdue University, a computer whiz with a thirst for network security and a minor in the art of making money dance (finance, for the uninitiated). I landed a sweet gig at a Fortune 100 firm, where I led teams like a digital Captain America, wrangling projects and mastering the art of Scrum (think Agile Avengers assembling for a product launch).

But by day, I was a mild-mannered corporate soldier. By night? A crypto-curious cat, sniffing out the future in the form of Ethereum and the revolutionary blockchain. This was all mid-late 2016 - things were just slowly warming up for crypto - I could feel it. I even championed Augur, an early prediction market platform that felt like a psychic's wet dream fueled by crypto!

See, around 2017, the crypto scene was like a feeding frenzy for gold prospectors with pocket protectors full of whitepapers. There was a thirst for knowledge drier than a forgotten Reddit meme account. We were pickaxing away at a motherlode!

Cryptosomniacs, our crew of crypto comrades who wouldn't sleep until they'd cracked the code on this whole blockchain bonanza. We were like a crypto cavalry, riding in to answer the call of confused millionaires, tech wizards, and finance folks who were basically lost in the DeFi desert.

We wrote whitepapers like they were treasure maps, consulted for projects hotter than a play-to-earn game in July, and schooled high net-worth individuals who wouldn't know a DAO from a disco. Let me tell you, it felt like we'd unearthed the holy grail of crypto – a chance to educate the masses and get filthy rich in the process (well, at least educate the masses, the filthy rich part came later).

Then came 2018 - the dark forces of the bear market descended, leaving my portfolio flimsier than a memecoin rug pull. But fear not, intrepid crypto citizens! My inner hedge fund heir (thanks to the fam's business in Texas) saw through the FUD. I knew, deep down in my diamond-encrusted blockchain heart, that crypto was here to stay. I was truly 'in it for the tech' (I swear).

So, in 2018, my wife and I, fueled by wanderlust and crypto conviction, ditched the cubicle life and became digital nomads in South America. Think of us as crypto-Captain Planet and Crypto-Captain Planet's wife, traveling the world, spreading the gospel of Bitcoin and crypto! We held webinars, wrote research papers, and invested in the future like financial fortune tellers.

Fast forward through a wild crypto ride (including some stonkin' gains in 2021!), and here I am, a crypto OG with a resume longer than a Bitcoin blockchain. In 2022, I even moonlighted at Meta (wassup Zuck), streamlining their business like a laser-eyed efficiency expert in their Whatsapp and Instagram divisions. Left Meta to join venture capital - a dream come true of working with startups, founders and cultivating them to build the coolest sh*t, ever. And never giving up!

Now, in 2024, I'm Partner at Antennae Ventures, an Indian-based accelerator. Think of me as Professor X, using my crypto knowledge to guide the next generation of mutant... I mean, startup founders... in India! My mission? To help them navigate the crypto galaxy, achieve product-market fit faster than a FOMO-fueled doge purchase, and ultimately, conquer the world (or at least the web3 space).

So, the next time you hear whispers of a crypto hero, a blockchain whisperer, a venture capital sensei – that, my friends, is just me, continuing my quest to make the web3 world a better, more prosperous place.

Stay tuned for the next chapter, where I join badass builders and together we build cool web3 tech. I'm trying to become the ultimate crypto Nick Fury, assembling a team of the brightest minds to build the web3 future! LFG.

Thank for my reading. Now witness below - your boy rockin' that fly tux w/ his wifey!