【Selected Blockchain News】Ethereum user growth stagnant, yet decentralized exchanges thriving?

Over the past year, the daily active users of decentralized exchanges Kyber, Uniswap, and Tokenlon have all more than tripled, while there hasn't been a significant increase in active users on Ethereum.

Original Title: "An Unignorable Fact: DEX is Gradually Going Mainstream"
Author: Lucas

Decentralized exchanges, as one of the main application areas of Ethereum blockchain technology, have been highly anticipated since their conceptualization. However, with several decentralized exchanges landing in 2018, the flat trading data seemed to give everyone a taste of reality. Just as in 2019, when hopes shifted to staking and lending applications, decentralized exchanges seem to be welcoming their spring. So, are DEXs really starting to attract user usage? What about the recent growth?

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This article analyzes the user growth of Kyber, Uniswap, and Tokenlon on the Ethereum chain through data and shares some observations in a Q&A format, hoping that readers can have a clearer view of the recent performance and changes of DEX.

Research Scope

• Platforms: Kyber, Uniswap, Tokenlon (3 main DEXs with similar exchange experiences)
• Time: 2019.6.1 - 2020.5.31 (12 months)
• Data: Number of trading addresses

Assumptions

• User ≈ Address (In reality, one user may trade through multiple addresses, and multiple users may also be counted as one address due to third-party applications)

Data Source

• BlockchainETL

Why Choose Kyber, Uniswap, Tokenlon? What Makes Them Different?

First, let's briefly introduce the three DEX platforms.

Kyber, launched in February 2018, provides on-chain liquidity aggregation services by consolidating liquidity from automated market makers, professional market makers, Uniswap, Oasis, and other on-chain liquidity providers. Kyber does not charge users directly but collects KNC or equivalent tokens worth 0.25% of the trade value as fees from market makers.

Uniswap, launched in November 2018, is based on the on-chain automated market maker model proposed by Ethereum founder Vitalik Buterin in 2017. It provides on-chain liquidity that fully utilizes smart contracts for asset pricing. Uniswap charges a 0.25% fee in equivalent tokens per trade (note: the recent launch of Uniswap v2 increased the fee to 0.3%), which is used to reward liquidity pool contributors.

Tokenlon, launched in April 2019, efficiently aggregates liquidity from professional market makers off-chain and matches trades. It then completes on-chain settlement through the 0x protocol. Tokenlon charges a fee equivalent to 0.3% of the trade volume in tokens as fees. However, Tokenlon adopts a tiered fee mechanism where the more trades, the lower the fee rate.

Kyber, Uniswap, and Tokenlon offer very similar user experiences while employing significantly different implementation methods. These three DEX platforms rank in the top five in terms of users and trading volume on Ethereum, making them highly representative. This is the main reason for selecting these three DEX platforms for discussion.

How Have the Active User Numbers of the Three DEX Platforms Fared in the Past Year?

From the data, we can see that in the past year, the daily active users of the three DEX platforms have all more than tripled, with the growth mainly occurring in the first quarter of 2020. Uniswap has exceeded 2,000 daily active addresses, while Kyber and Tokenlon have surpassed 1,500 and 800, respectively.

Daily Active Addresses

In May 2020, the active addresses for Uniswap, Kyber, and Tokenlon reached 20,623, 16,554, and 10,706, respectively. The combined and de-duplicated address count for the three DEX platforms was 45,780. Notably, although Tokenlon has a relatively smaller user base, it is the fastest-growing and youngest among them, showing significant growth potential. In May 2020, Tokenlon's active addresses were 764% higher than in June 2019, Uniswap was 652%, and Kyber was 354%.

Is the Growth of DEX Platforms Due to an Increase in Ethereum Users? How Does Their Growth Compare to Ethereum's User Base?

As shown in the data within the research period (June 2019 - May 2020), there was no significant increase in the number of Ethereum users. In June 2019, Ethereum had 4.12 million active addresses, which decreased to 4.03 million by May 2020. However, during the same period, the combined de-duplicated address count of the three DEX platforms increased from 8,694 to 45,780, representing a rise from 0.21% to 1.13% of Ethereum's active addresses.

DEX Monthly Active Addresses

Ethereum Monthly Active Addresses

Is the Growth of the Three DEX Platforms Fast? How Do They Compare to Traditional Startups?

One of the founders of Y Combinator, Paul Graham, mentioned that at YC, everyone strives to maintain a 5-7% weekly compound growth rate. Maintaining a 5% weekly compound growth rate is equivalent to a 12.6x growth in a year. In the past year, Tokenlon, Uniswap, and Kyber had weekly compound growth rates of 4.3%, 3.9%, and 2.5%, respectively. Although they did not reach the 5% weekly compound growth rate, the current growth of over 3x in a year still outperforms most startup companies in terms of data performance.

If we only observe the weekly compound growth rate from January to May 2020, Tokenlon, Uniswap, and Kyber had rates of 6.2%, 5.6%, and 4.1%, respectively. If these three DEX platforms can maintain this growth rate in 2020, their performance will surpass the vast majority of traditional startup companies.

Is the Growth of the Three DEX Platforms Healthy? Are Users Satisfied with the Service?

We all know that a product that cannot retain users is like a leaking bucket - no matter how much water is poured in, it may not hold. Here, we can explore whether the growth of the three DEX platforms is healthy by looking at the user churn rate through user address loss.

Through the monthly address churn statistics below, we can see that in May 2020, the user churn rate for Tokenlon was 59.7%, Uniswap was 53.9%, and Kyber was 66.9%. The combined monthly churn rate for the three was 58.8%, meaning that 58.8% of users who used any of the three DEX platforms in April did not return in May. While this churn rate seems relatively high, it is better than Ethereum's 75.4% address churn rate during the same period. Referring to Mixpanel's statistics showing an average monthly churn rate of 95% for financial products, the three DEX platforms are among the top performers in financial products.

Monthly Churn Rate

From the data above, we can see that the three mainstream DEX platforms have achieved over a 3x user growth in the past year, with a total of over 45,000 monthly active addresses. This growth is particularly pronounced in 2020, accompanied by a decent user churn rate. Currently, the total monthly active addresses of the three DEX platforms account for only 1.1% of Ethereum's user base, and the total of all DEX platforms should not exceed 2%. There is still a significant gap compared to centralized exchanges with millions of active users, indicating substantial growth potential for DEX platforms in the future.

This article is authorized for reproduction with permission from ChainNews. Source: ChainNews (ID: chainnewscom)