Introduction

The battle for Aggregation market share is heating up as Sushiswap recently unveiled its roadmap for 2023. The plans include launching a DEX aggregator in Q1 and a “decentralized Incubator” throughout the year. In a recent post by CTO Jared Grey, he mentions the goal for Sushi is to “become a market-leading DEX by improving our product stack & delivering feature parity to provide a firm foundation enabling innovation…“. Some of the features highlighted include new tokenomics, improved governance, educational resources i.e Sushi Academy, and much more.

As it stands, Sushiswap only commands ~2% of the AMM market and 0% of the DEX aggregation market, according to CoinTelegraph, Dropping well over 80% from its all time high in July 2021. As a result, Sushi redesigned its business model to promote sustainability in all areas of its business & focus on optimizing user experience while significantly increasing market share among competitors. However, gaining market share will be more difficult than expected as the competition gets sharper by the day.

Full post:

jared-grey.medium.com

Methodology

One significant problem DEXs face, is lack of liquidity. When large transactions occur, liquidity on DEXs are diminished, directly impacting the price. This happens when the AMM is forced to execute at a different price than the initial quote, leaving some traders with a loss. Aggregators address this issue by allowing users to access liquidity across multiple DEXs at a time. With more liquidity, DEX aggregators offer better pricing and reduce the risk of slippage and unnecessary fees.

In this analysis we will covering Sushiswap’s potential impact on the aggregator market following their revitalization. I used Dune Analytics Ethereum V1 schema to run queries. You can find the tables used in the sources below. Queries will run using PostgresQL.

This is a submission for @MetricsDAO Sushiswap - 2. DEX Aggregator

Analysis

We will be taking a look at the top 5 liquidity pools on Sushiswap to see how the metrics have changed over the past 6 months compared to the first 6 months. Our objective will then be to analyze what Sushi's competition will look like as it enters the aggregator market. To do this we must answer the following questions:

Have Daily Active Users and Daily Volume in Liquidity Pools been increasing?
Which dex aggregator(s) have gained the most market share over the past 6 months and why is that the case?
How does volume compare to other aggregators like 1inch and Matcha?

Lets break down our analysis in 3 main parts:

Sushiswap Pools
DEX Comparative Analysis
Aggregator Market Share Over Time

Sushiswap Pools

Ever since the beginning days of DeFi summer in 2021, Sushiswap has been a key player in introducing Liquidity Pools and Yield Farms to crypto market participants. Below we’re going to analyze the state of Sushiswap’s top 5 pools over the last 6 months. We are also going to The top 5 pairs on Sushiswap are the following:

USDC-WETH
SYN-WETH
USD-WETH
ILV-WETH
SUSHI-WETH

Since the spread between the top 5 and the rest of the pool are so wide, we retrieved the aggregate volume, Trades, Users, and Fees for the pairs listed above.

It is quite clear that the USDC-WETH and USDT-WETH pools are where a majority of the volume and trading activity has been. One obvious reason for this could be that it is less volatile than the other pools.

When observing the daily volume & active users 6-month chart, we can see a few key events starting with the November Contagion & collapse of FTX. Shortly after there is a grind down due to dried-up volume; however, leading into 2023, there was

DEX Comparative Analysis

Since the fall of FTX and Celsius, interest in Decentralized exchanges (DEXs) have skyrocketed. Daily active users and volume are up nearly 2-3x across all DEXs, with Uniswap continuing to hold it’s spot as king DEX by a large margin.

In this section we’re going to be comparing DEX market share over time from the first 6 months to the last 6 months. The start time will be at August 28th, a few days before the launch of Sushiswap V1 and end 6 months later. As we can see, Uniswap captures over 75% of users and liquidity across all DEXs; however, according to the data below, Sushiswap controlled around 19% of user market share and up to 36% DEX market share in the first 6 months after launch.

*Since then we can see that Sushiswap controls roughly 2.6% of DEX market share, down close to 88%.

To answer some of our questions from above, let’s break down some metrics from the leading aggregators. Taking a look below, it is quite clear that 1inch is the leading Aggregator and has been for the past 6 months. Matcha and Cow protocol are lagging, but 0x API gaining traction. Overall Aggregator volume is up 2x from September 2021.

Conclusion

Based on our findings, there are plenty of key takeaways that support our research. Our objective was to measure the state of Sushiswap’s top 5 pools, as well as analyze the competition for aggregator market share. When observing the top 5 pools, there was clear signs of growth since the start of 2023, with 2 of the 5 pools reaching the top 5 within the last 6 months (SYN-WETH, ILV-WETH). Furthermore, we break down the DEX aggregator market to compare differences between the first 6 months of Sushi launch and the last 6 months. Looking back at the early DeFi days in 2020, incentives were an essential tool to bootstrap liquidity and users. Giving that new tokenomics design and potential incentives could play a role in pool growth, we can only assume that more liquidity will be poured into Sushiswap’s pools prior to the aggregator launch. Our prediction for Sushiswap is to grab around 5-6% of the aggregator market share out of the gate.

Sources

The following tables were used from Flipside Crypto for this analysis:
- dex.trades
- sushi.Factory_evt_PairCreated
- prices.usd
You can find the corresponding Dune Analytics dashboard with queries and all: Here