What is the usage of Uniswap?
To answer this question, I have analyzed Uniswap V2 and Uniswap V3 in terms of total volume and total dollar value respectively. I would love to get a deeper understanding of the dollar volume of Uniswap V3, but since the focus here is on the ‘usage’ metric and the dollar value is fluctuating, let’s focus on the ‘volume’ metric first.
Above: Volume situation – left: total volume; right: total volume (hourly chart); data used in this article, extracted on May 8, 2021.
As we can see, Uniswap V3 officially went live on May 5, with a spike in volume on the day it went live, and then began to grow steadily with a larger share. By the end of the day on May 5, Uniswap V3 accounted for 10% of Uniswap’s total transaction volume. However, at the time of writing (May 8), this figure has risen to 25%.
Above: USD trading volume – Note: Since the release of Uniswap V3, the price of ETH-USD pairs has increased by about 7%
Will the new release affect Uniswap trading pairs?
This is probably one of the most pressing questions I’ve asked as well.
One of the main innovations of Uniswap v3 is the ability for liquidity providers (LPs) to specify the range they wish to fund, rather than from 0 to infinity as was the case in the past. If all goes well, this innovative mechanism could help users get better prices on Uniswap, especially for similar pairs with consistent and predictable exchange rates (e.g. DAI / USDC, ETH / stETH, etc.). In the past, access to on-demand trading services for trading pairs was only available through a few DeFi protocols designed for such services, such as Curve.
Now, Uniswap’s application user interface is set to V3 by default, but users can switch to the older version with one click if they feel they can get better prices on V2. As a result, we should see a natural flow of transactions to the Uniswap version with better prices. If users can get better prices on “like for like pairs”, then we should also see more demand for such pairs on Uniswap compared to competing products.
If you still don’t understand how Uniswap works, read the article “How Uniswap Works” to learn some of the basics.
Above: Uniswap V3 trading interface – guiding users to “get better prices on V2” (slippage of 1.92% on V3)
So, what is the difference between Uniswap V3 and Uniswap V2 when comparing the most traded pairs?
Frankly, there are indeed some differences between Uniswap V3 and Uniswap V2 in some of the most traded pairs.
Since the release of Uniswap V3, the top 10 most traded pairs by USD on Uniswap V2 were all “ETH pairs”, such as ETH/USDT, ETH/WBTC, etc. And on Uniswap V3, three of the top 10 pairs with the highest trading volume by USD are stablecoin pairs, namely
USDC/USDT, ranked fourth
DAI/USDC, ranked sixth
DAI/USDT, ranked ninth
Uniswap V3 should be better suited for stablecoin trading pairs, and it has succeeded in doing so, at least so far.
WBTC surprise: I was surprised by the amount of WBTC / Stablecoin trading pairs traded on Uniswap V3 (Chain News note: WBTC = Wrapped BTC). Since the launch of V3, a whopping 99.95% of the dollar volume of the WBTC / USDT pair has gone to Uniswap V3, totaling about $7.5 million (83.4% of total volume), while 88.5% of the dollar volume of the WBTC/USDC pair has gone to Uniswap Is Uniswap V3 already signaling a “capture of WBTC”? Uniswap V3 users seem to prefer Bitcoin-anchored coins to other cryptocurrencies, or perhaps Uniswap V3 users have a greater demand for both Bitcoin-anchored and cryptocurrencies.
ETH pairs are still concentrated on Uniswap V2 – value opportunity? ETH/Stablecoin pairs have the largest trading volume on Uniswap, but compared to WBTC, ETH pairs are still concentrated on Uniswapv2, with ETH/USDT accounting for only 27% of USD trading volume on Uniswap V3 and ETH/USDC on Uniswap ETH/USDT only accounts for 27% of USD transactions on Uniswap V3, while ETH/USDC accounts for a slightly higher 36% of USD transactions on Uniswap V3. Although ETH/Stablecoin pairs are more traded on Uniswap V3, Uniswap V2 still has a bigger advantage in terms of trading volume. Generally speaking, where the ETH pairs are, the money is, but if we look at how much of the liquidity provider’s trading volume is actually captured on Uniswap V3, the results may be surprising.
V3 Market Dominance”: the percentage of a pair’s Uniswap volume that passes through V3 as a percentage of total volume.
Above: Comparison of Uniswap V2 and Uniswap V3 transaction volumes and the “V3 market dominance advantage”: transaction volume of a pair through Uniswap V3 / (Uniswap V2 transaction volume + Uniswap V3 transaction volume) * 100%
Above: The most popular pairs on Uniswap V2 – all are ETH pairs
Above: The most popular pairs on Uniswap V3 – three of the top 10 most traded pairs by USD are stablecoin pairs
Which pairs are the most popular with Uniswap V3, and which pairs are the “least” popular with Uniswap V3?
We have already explored which pairs are the most preferred to use Uniswap V3, and to better compare, we will then turn our focus to value capture and see which pairs are the “least preferred” to use Uniswap V3.
As of now, the number of pairs that “dislike” Uniswap V3 the most does not seem to be very high, so it is likely that there are other reasons why these pairs still choose to trade on Uniswap V2, one of the most typical examples being the BADGER / WBTC pair, which is primarily used to provide BadgerDAO incentive, designed to give token rewards to those who provide liquidity to the pool. As such, BadgerDAO’s lack of selection to Uniswap V3 is likely related to their liquidity incentives, so we would expect them to ensure the status quo remains intact before switching the liquidity provider’s incentives to Uniswap V3.
We do not yet know the reasons why other pairs have not opted for Uniswap V3, but one thing that may be of concern is that it takes more effort for users to start a brand new Uniswap V3 vault, so the cost may become quite high for those who try to take advantage of certain opportunities for arbitrage.
Above: Some of the most popular Uniswap V2 pairs that are not currently using Uniswap V3
Uniswap V3: success or failure?
In fact, the analysis in this article was done out of personal curiosity, but as soon as the research began to unfold, a series of questions began to haunt me. I know that Uniswap V3 has only been live for a few days, but this small percentage of transactions seems to be a cause for concern. Or is it really a good idea to still have such a small percentage after several days? And what should I say about this phenomenon? Then I saw a tweet from Uniswap founder Hayden Adams, who had this to say about Uniswap V3
I really like Uniswap V3, so let’s see what it becomes in the future. I found an analysis that compares the dollar volume trend of each Uniswap version release by day. (as shown in the chart below)
From the above chart, what do you think of Uniswap V3’s performance since its launch?
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/the-numbers-dont-lie-how-does-uniswap-v3-really-perform/
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