Trading Volume Hits New High! Uniswap Outperforms Major Exchanges Due to This Reason

It has long been believed that the majority of trading activities in the market occur within centralized cryptocurrency exchanges. However, the situation seems to be gradually shifting. Last week, leading decentralized exchange (DEX) platform Uniswap set a record-breaking trading volume, even surpassing most exchanges in the market seemingly overnight.

DEX Trading Volume Surges Rapidly

According to data fromThe Block, the total trading volume on DEX reached $4.3 billion in July, a 174% increase from $1.5 billion in June, marking the first time in history that DEX trading volume has surpassed the $4 billion mark. Automated market maker protocol Uniswap and decentralized stablecoin trading protocol Curve contributed the most to the trading volume. Uniswap accounted for 41% of the total trading volume, followed closely by Curve at 24%.

Uniswap, launched in 2018, is an automated market maker protocol (AMM) based on Ethereum smart contracts, where liquidity providers deposit assets into platform pools to earn transaction fee income. Regular users can swap their tokens for other tokens (e.g., ETH for USDC) using the liquidity from these pools. Despite being operational for two years, it wasn't until this year that DeFi attracted the attention of retail investors and institutions, propelling Uniswap to become a mainstream platform in the current DEX landscape.

Uniswap Trading Volume Surpasses Most Exchanges

Interestingly, in terms of daily trading volume, Uniswap has outperformed many second-tier cryptocurrency exchanges in the market. According to a tweet by Qiao Wang, product lead at cryptocurrency data platform Messari, on July 31, Uniswap's 24-hour trading volume briefly exceeded $126 million, approximately one-third of the 24-hour trading volume of the largest U.S. exchange Coinbase at that time ($563 million), and even more than the combined trading volume of Binance US, Gemini, and Poloniex.

Uniswap did $126M volume last 24 hours. This is 1/3 of Coinbase. 1/2 of Kraken. More than Gemini, Polo, and Binance US combined.

Pretty incredible TBH.

— Qiao Wang (👽, 👽) (@QwQiao) July 31, 2020

Data analysis from Uniswap'sdashboard shows that the ETH-AMPL trading pair had the highest trading volume, with approximately $63 million on July 30, accounting for about half of the total volume and collecting over $165,000 in transaction fees. As reported earlier, the token was experiencing a significant decline, dropping from $2.92 on July 27 to a low of $0.64 on July 31, a 78% decrease, and has since rebounded to $1.03.

Apart from the AMPL token, DeFi tokens also contributed significantly to the trading volume, especially during the period when Yearn.Finance (YFI) saw many forked versions of liquidity mining, such as YFII and YYFI. Since these tokens are hardly listed on exchanges, miners who obtain these tokens choose to trade them on Uniswap, resulting in the platform's liquidity being heavily concentrated.

In addition, high-risk alternative tokens like Tendies (TEND) and DMM: Governance DMG also contributed a significant amount of trading volume on the platform.