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The DEX Brief No. 8

A lot has happened since the famed DeFi summer. More protocols have launched, talent is rapidly migrating, and there's a lot of movement in the space.

Written by

Mark Lurie

Published on

May 2, 2022

Top of mind at Shipyard:

A lot has happened since the famed DeFi summer. Many more protocols have launched, talent has rapidly migrated into the space, and most strikingly - prices have fallen significantly.

Despite increased usage (Q1 2022 DEX volumes are up 40% YOY), DeFi blue chips are down 70% to 90% across the board from all-time highs. DegenSpartan even pointed out that UNI is now at an all time low against ETH. Meanwhile, crypto’s overall market cap is down only around 50%. 

So is DeFi…dead? The answer is no. 

While it is true that a lot of the Ethereum DeFi coins are down more than the overall market, not all of DeFi has suffered the same fate. DeFi as a whole is really only down 30%. So if anything there's not a DeFi dip, there’s a DeFi premium. What is actually happening is the fragmentation of DeFi across dozens of chains all competing for capital and users. Ethereum has priced out a lot of individuals due to high gas costs and a lot of them have turned elsewhere.

Additionally, newer projects like algorithmic stablecoins and bridges have taken over the attention of investors. While the blue chips are the backbone of DeFi, they’re just not that interesting to investors who are constantly looking for the next 100x or revolutionary project.

What’s next for the DeFi narrative? At the end of the day, DeFi remains a slam-dunk. Historically, traditional financial services capture 20% of GDP, and there is no reason to think DeFi won’t do the same with on-chain activity. Gaming, NFTs, metaverse land and other on-chain activity all generate a need for financial services. In addition, the sector is primed to break out with new tokenomics - after all, users will always value tokens for the personal utility they can unlock more than hedge funds will value projected cash flows. Today may be the best time to invest in DeFi, just as the years immediately following the 2008 financial crisis were amazing vintages for venture returns.

Shipyard Insights:

CoinDesk recently published a piece on how Western Sanctions on Russia could accelerate the push to make crypto an international reserve currency. The article was co-authored by Shipyard’s Mark Lurie and Peter Dittus, the former secretary general of the Bank for International Settlements. If you’re interested in seeing how the recent weaponization of the dollar-denominated global financial system may impact the crypto industry, Mark and Peter offer an informative take. 

The most recent episode of the “WTF, Crypto” podcast focuses on business development within the crypto industry. In this episode, Mark sits down with Nikita Ovchinnik, Chief Business Development Officer at 1inch Network, to discuss the constant flood of new partnerships and announcements within the space, and how to determine what's real and exciting versus what’s just for show. Tune in today, and if you haven’t already check out our other recent episodes on crypto taxes and Russia Sanctions.

DEX headlines that caught our attention:

What we're reading:

While new DEXs are giving market incumbents a run for their money, Uniswap continues to be a major force within the DeFi space. This Messari report on the State of Uniswap (Q1 2022) gives a comprehensive overview of the DEX’s performance while providing interesting details on the most actively traded markets and Uniswap LP profits and losses. Uniswap’s trading activity can also be viewed as a proxy for broad crypto investor sentiment, and this piece provides a great temperature read for the DeFi space during what has been a turbulent year to date.

Clipper updates:

Clipper recently deployed a new set of smart contracts across all its chains, which included the deployment of a novel FMM (Formula Market Maker) DEX architecture. These structural upgrades have been in the works for quite some time and include new features that improve the trading and liquidity provision experience for all of Clipper’s DeFi pirates. Check out the full details here!

Clipper’s second community Adventure will also be kicking off soon! Over 4k Clipper users signed up to participate in the first Adventure, The Search for Polygon Isles, and the next round will be even more jam-packed with action. The last day to sign up for the Adventure is Friday, May 6 (midnight UTC) – join the Clipper Discord for more details.

Written by

Mark Lurie

Published on

May 2, 2022

August 12, 2022

The possibilities for derivatives are nearly endless, but the design space for DeFi derivatives remains largely unexplored. Shipyard is working on a solution.

August 4, 2022

A breakdown of the recent Nomad attack, the future of crypto funding, and other ongoing developments within the DeFi space.

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