From DeFi to DEX: A Brief History of the Development of the Ether Protocol

DEX actually existed four years ago?

From DeFi to DEX: A Brief History of the Development of the Ether Protocol

May 31, 2012 – Today’s decentralized finance (DeFi) has become an industry that continues to grow, and like other economies with competing products, a number of decentralized finance protocols have experienced their ups and downs, with some going to the top in a short period of time and others falling fast. But in the process, decentralized financial protocols have never given up on innovation, and it is because of this that the decentralized financial market landscape seen today has been formed. The history of decentralized financial protocols may be subjective, but the Ethernet blockchain is not. Ether has grown since its official launch in July 2015, and the ecosystem based on its decentralized applications (dApps) has grown phenomenally.

DEX was actually available four years ago?

Many people think that Uniswap was the first decentralized exchange, but that’s not the case; the history of using smart contracts for de-trusted token exchange goes back much further. The most notable of these is the decentralized exchange 0x, whose first OTC marketplace was launched in 2017, taking the “middleman” role out of the equation.

In the earliest decentralized exchange models, developers wanted to mimic the order book model of centralized cryptocurrency exchanges, but ultimately it was too computationally intensive and slow to make it practical to use. 0x, however, deployed a solution based on on-chain trade settlement – 0x OTC – in July 2017. because when people trade on an OTC market, they typically face two problems: price discovery only happens between two parties; there is no guaranteed quote negotiation taking place (one party can withdraw at any time, but in open market, an order placed by one party can be accepted immediately). Instead, 0x launched this solution that allows users to post orders on social media such as Twitter, which are off-chain platforms, and then settle them on-chain through 0x. By 2018, 0x had reached an average daily transaction volume of $4 million.

Immediately after, by August 2018, Bancor came out of nowhere. in a blog post, Bancor mentioned the idea of building an automated market maker designed to completely disrupt the order book style trading market, and they paired all tokens with BNT, a practice that continues to this day. In contrast, we can see a variety of pairs matched to each other on the Uniswap platform.

Not only that, but Kyber has left its mark on the history of decentralized exchanges. Essentially, Kyber wants to promote a decentralized way for parties to access and contribute liquidity, but it is not a decentralized exchange per se, but rather focuses on aggregating liquidity from various pools of money sources, including decentralized exchanges and centralized market makers. In fact, Kyber could be seen as a universal Uniswap router where liquidity from all parties could be leveraged by entities such as payment networks, which was extremely groundbreaking for its time.

When the time came in 2019, a whole new financial economy emerged and Chainlink has grown into a key part of the decentralized financial space. chainlink first launched the Prophecy Machine (Oracle) in 2017 to securely connect external off-chain data to ethereum smart contracts. People don’t realize the importance of the prophecy machine for synthetic assets and margin products, BZx uses the Chainlink prophecy machine for its margin trading platform, and Synthetix also implements integration with Chainlink to provide feed price information for real-world assets. In addition, another prophecy machine service, Tellor, briefly saw a spike in usage in October 2019.

Right after Prophecy Machine, some decentralized financial advanced trading features began to take root, such as the custodial lending trading platform Dydx, which launched a margin trading feature in 2019 with a sleek user interface that enables up to 4x leverage and an almost similar experience to that of a centralized exchange.

Also, Synthetix has found a niche of its own in 2019. dedicated to creating markets for synthetic crypto and inverse value assets (IVA), Synthetix has reached $60 million in trading volume in July 2019. synthetix was actually known at first as Havven, this synthetic asset protocol was originally designed as a stablecoin protocol similar to Maker. The chart of gas spending trends shows that Maker has dominated for years.

In May 2019, Compound V2 launches with a new look. The cryptocurrency market for Compound has remained virtually unchanged over the years, but its stable gas fee throughput (1.5-5%) has proven Compound’s design to be very successful. Not surprisingly, the lending DeFi protocol has consistently generated lower gas fees than decentralized exchanges over the years.

By 2020, more leading crypto exchanges began to surface. uniswap first began to dominate the automated market maker (AMM) market. In fact, Uniswap went live back in November 2018, but it wasn’t until February 2019 that its trading volume officially surpassed that of Bancor. while both decentralized exchanges are based on a 50/50 reserve model, Uniswap’s design is more efficient and user-friendly. Not only that, but Uniswap’s design also supports license-free crypto asset uplisting, allowing it to build a massive combinability with the larger DeFi ecosystem.

One platform has stated that the process of creating a Uniswap contract is much simpler and easier than other exchanges, like filling out a short form that can be easily done with the click of a button. And the process of adding liquidity to a contract on Uniswap is equally simple, the process takes just a minute or two and there is absolutely no need to contact the Uniswap team and they do not require that any liquidity must be added to the contract.

Immediately afterwards, 1inch began breaking into the decentralized entry market. 1inch primarily offers a decentralized exchange aggregation service that analyzes various liquidity pools to split and route orders to find the most cost effective transactions. It was perhaps the fastest growing decentralized financial protocol last year, but did not close its early seed round until August 2020, and subsequently captured 6% of the gas market in just 3 months. Right at the end of 2020, 1inch made an airdrop to users and captured a 10% share of gas fees in December.

Subsequently, Forsage activity surged and became rapidly popular. Users are required to pay ETH to the platform if they want to use Forsage. in addition, users can receive ETH token incentives if they recommend the Forsage platform to others. Although this makes the project seem like a bit of a pyramid scheme scam, they are still running it today.

The last one that has to be mentioned has to be Yearn, and I’m sure there is no decentralized finance user who hasn’t heard of it. Since 2020, Yearn has been at the forefront of the decentralized finance market and its growth in structure and form has shown the way to other newly created decentralized finance protocols today. The history of ethereum would not be complete without the colorful YFI airdrop from Yearn Finance. The price of this “worthless governance token” increased 35 times in just seven days.

Until this year, we found that Tether and Center, which account for a large percentage of Ether blockchain activity, were like the best “proxies” for moving the amount of assets in and out of Ether, as gas was used to mint and destroy USDT and USDC stablecoins. They account for almost 12% of the total current gas fees.

Of course, the Wrapped Ether contract is still widely used and has gradually become the backbone of the decentralized financial market in Ether. For now, WETH is a very revolutionary idea that meets a broad market demand, and this tokenized ETH can be used as collateral, a means of trading, and a pricing benchmark for other tokens that are already widely used and fairly stable in price.

By looking at the statistics on the trend of total gas fees spent on the Ether blockchain from 2018 to date, we find that during 2018 to 2019, the Ether blockchain activity is quite quiet, with the total amount of gas spent barely exceeding 40,000 ETH per month. but from 2020 onwards, the Ether blockchain activity starts to rise, with gas fees spent increased parabolically. Until September 2020, Ether’s total 4-week gas expense peaked at 650,000 ETH, when the ETH price was only $400 per month.

In fact, the amount of gas fees spent on decentralized financial protocols depends on many factors, such as the computational intensity required to execute the function; how many users interact with the smart contract; and the overall price of gas on the Ether blockchain at the time.

It is worth noting that the 2018-2019 ethereum market landscape was very different, and many of the smart contracts that were very active at the time are no longer in use today. In addition to entities, we also find that token contracts account for roughly 10% of Ether activity.

Summing up

While Uniswap still dominates for now, a range of token exchange protocols on the Ether blockchain now have their fair share. Since the beginning of 2021, over 2.8 million contracts have been deployed on decentralized exchange protocols alone. In addition, ERC-2 has also deployed approximately 198,000 copies to date.

In fact, every token exchange, pledge, deposit, withdrawal, and mint we make is recorded on the Ether blockchain, and everyone is a participant in the Ether forest The Ether product ecosystem has been formed, and the next step is to keep growing, adapting, and thriving.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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