DEX hegemony: comprehensive comparison of six key indicators of Uni and Sushi
Original title: "DEX Hegemony: A Comprehensive Comparison of the Six Key Indicators of Uni and Sushi"
Original Source: Blockchain Institute
Although they compete with each other, the development of Sushiswap and Uniswap is actually mutually beneficial, and they are both working together to make the cake of DEX bigger. This article compares Sushiswap and Uniswap from five on-chain indicators to help us better understand these two heavyweight AMM products.
Although Sushiswap was just a typical example of Uniswap's various food-named fork projects at the beginning, Sushiswap not only survived, but its AMM model Development and innovation have also exceeded all expectations, and now Sushiswap can compete with Uniswap on many levels.
At present, these two AMMs have differentiated into two completely different products, and Sushiswap has been continuously releasing new features, such as Bentobox. The core developers of Uniswap have been concentrating on building Uniswap V3. The development prospects of Uniswap V3 are currently difficult to estimate, but what is certain is that the competition between the two protocols is heating up.
This article conducts an in-depth study of the on-chain indicators of Sushiswap and Uniswap, and compares how these two AMM protocols complement each other in the DEX protocol king competition.
Trading volume comparison: Uniswap wins
Want One of the most fundamental metrics for measuring the success of any decentralized exchange is, of course, trading volume. After all, the core purpose of a decentralized exchange is to facilitate the exchange of tokens between participants. Although Uniswap still dominates the trading volume of the entire DEX space, Sushiswap's trading volume is also hard to ignore.
Over the past three weeks, Uniswap has averaged nearly $6 billion in weekly volume, while Sushiswap has processed $2.8 billion in volume - - Quite a lot for a protocol that has only been around for a few months.
Just a month ago in December, Sushiswap processed an average of 25% of Uniswap's weekly volume. The protocol now handles an average of 48% of Uniswap’s transaction volume.
Data source: Dune Analytics
Data source: Dune Analytics
Comparison of total protocol liquidity: Uniswap wins
In addition to trading volume, DeFi The total value locked in the protocol, or the total liquidity available in the protocol, is also a key indicator of the success of a DEX.
Sushiswap started to obtain its own transaction volume through a novel "vampire attack" operation. In the early days of Sushiswap, this kind of gameplay damaged its reputation. After all, its opponent is Uniswap, the darling of DeFi.
The temptation of token incentives makes it difficult for people to resist. Sushiswap's strategy of "forking + adding tokens" shows the power of token incentives. But Uniswap also fought back. In the weeks after Sushiswap went live, Uniswap also adopted a currency issuance strategy. Of course, this competition is not over yet.
Uniswap is a step further than Sushiswap, retroactively assigning 15% of tokens to previous users, and those who used Uniswap before have earned thousands of dollars in return . Just like Compound 's market-making and mining craze, Uniswap's retroactive distribution method has also become a standard configuration in the DeFI industry. Both new and old protocols will adopt this method when listing tokens.
After Uniswap issued coins, it instantly flipped the disk.
After Sushiswap absorbed a large amount of liquidity in August, liquidity providers returned to Uniswap one after another to take a share and participate in the flow of Uniswap tokens after they went online Sexual mining to obtain UNI tokens.
After a few months, the situation gradually stabilized. Both Uniswap and Sushiswap have billions of dollars in liquidity today. However, there is also a key difference.
After the liquidity incentives ended in November 2020, Uniswap’s current $3 billion liquidity pool is completely free of token incentives subsidy. At the same time, Sushiswap continues to vigorously reward LPs (liquidity providers) and further distribute SUSHI token rewards.
Data source: Token Terminal
It should be noted here that although Uniswap’s market makers (LPs) are not directly incentivized by UNI tokens, many projects are using Uniswap as their main trading venues and incentivize their own communities to provide liquidity to their respective Uniswap pools.
In any case, the coexistence of high liquidity and lack of native UNI incentive mechanism marks that Uniswap has reached a product-market fit. Uniswap continues to dominate the market as the premier trading platform for traders and token projects. Yet Sushiswap also crossed the $2 billion milestone in terms of total liquidity, an achievement that is hard to ignore.
Sushiswap now has a lot of market depth, and key DeFi projects, especially the Yearn ecosystem, choose to use Sushiswap as their main source of liquidity .
Revenue comparison: Uniswap wins
Uniswap and Sushiswap in terms of trading volume and liquidity depth With fierce competition, revenue has become another key metric to watch. The income mentioned here refers to the cash flow brought to LP (market maker) by the transaction fees of users. It’s worth noting that both protocols feature a 0.3% transaction fee on any trading pair.
Looking at the entire DeFi field, Uniswap is like a king. The protocol is a money printing machine. In January 2021, Uniswap generated an average of more than $2.3 million in revenue per day for LPs — significantly higher than any other protocol in the space.
Which competitor is closer to it? Yes, you guessed it. It is Sushiswap. Although Sushiswap's AMM only accounts for half of Uniswap's daily income, it still brings Sushiswap's LPs an average of 7-figure income, generating an average daily income of about 1.2 million US dollars.
Similar to transaction volume data, from a revenue perspective, Sushiswap is also growing. Earlier this month, the agreement soared, generating about 64% of Uniswap’s daily income during the same period, and at the same time, in the past 7 days, the average income was about 46% of Uniswap’s daily income. Although Sushiswap is still significantly lower than Uniswap in comparison.
Data source: Token Terminal
P/S ratio comparison: Sushiswap wins
The ratio of market price to revenue (market-to-sales ratio, P/S ) has gradually become a common indicator for DeFi protocols. The P/S value will compare the price of the token with the revenue of the corresponding DeFi protocol. It is based on the transaction fee income of the protocol and is an indicator for evaluating the market price of the protocol.
This means that a token with a lower P/S ratio may be more fairly valued than a similar agreement with a higher P/S value, Or the market has lower growth expectations for the token (or vice versa).
According to Token Terminal, Sushiswap has remained stable with a P/S ratio of around 5, while Uniswap has recently touched around 15 due to the large price increase in the past few weeks.
Data source: Token Terminal
In view of this, judging from the current cash flow generated by Uniswap, compared with Sushiswap, the current market valuation of Uniswap is too high. But this does not mean that Uniswap is overvalued, or that Sushiswap is undervalued. As mentioned earlier, there are a lot of nuances behind this valuation metric, depending on how the reader wants to interpret the data.
Token design of two types of protocols
I want to talk more about these two The token mechanism of the protocol.
UNI tokens are currently a non-productive governance token, meaning they do not represent any economic rights to the Uniswap cash cow. On the other hand, holders of SUSHI do have a claim on the protocol's cash flow, making it a productive asset.
Considering this, Uniswap V2 introduces an optional protocol fee ratio parameter, you can choose the fee ratio that will be transferred to LP, from 0.3 % down to 0.25%s, and the remaining 0.05% is distributed through a decentralized governance process.
Sushiswap adopts this model, but instead of being vague about the intent of protocol fees like Uniswap (and turning it off by default), it makes Holders of SUSHI directly obtain the cash flow of the agreement by mortgaging tokens.
In the past 30 days, Sushiswap has allocated 5.3 million USD in mortgage income to token stakers, which is an annualized rate of return of about 8%. If Uniswap implemented the same model, based on 30-day revenue data, the protocol would generate twice as much revenue for UNI stakers, bringing in $11 million for the month.
Based on this calculation, if Uniswap also adopts the Sushiswap model, the annual income of UNI mortgagers can reach 132 million US dollars, and the annualized rate of return was 3.1%.
Price-to-volume ratio (P/V value): Sushiswap wins
Price-to-volume ratio ( P/V) is a newer, DEX-specific valuation metric that has similar properties to the P/S ratio.
The price-to-sales ratio indicator of P/S will be valued according to the fees generated by the liquidity agreement. When studying agreements with different rates, Fee amounts may vary as a result, making comparisons difficult. The P/V ratio ignores these differences and measures how the market values the protocol based on the transaction volume of the DeFi protocol.
To put it simply, the current P/V value of the market for Sushiswap is 4, which means that for every $1 of Sushiswap’s daily trading volume, the market valuation believes that it can be worth $4; for Uniswap, this ratio is even higher at 11 , meaning that every $1 of transaction volume processed corresponds to a price of about $11.
Data source: Token Terminal
Similar to the ratio of P/S, the market may give Uniswap a higher valuation, expressed as a larger P/V value, because they The growth expectation of Sushiswap will be higher than that of Sushiswap. Also considering that Sushiswap is still a newer protocol, market growth expectations for the protocol may be lower as it does not yet have a well-defined moat, while Uniswap does.
Price performance: Sushiswap wins
Okay, let's get to the point. In the end, fundamentals and valuation indicators can only take you so far, and the market is the ultimate judge. So, how are these protocols performing?
Both tokens have seen massive gains in recent weeks, so whether you hold SUSHI or UNI, you're probably pretty happy right now . But along the way, it wasn't always sunny and flowers everywhere. Uniswap and Sushiswap (and the overall DeFi market) had a tough time in late Q3 and early Q4.
During this period, in the DeFi bear market, UNI held its position better than its forked projects, because UNI was at the lowest in Q4 Valley was down -53%, while SUSHI holders felt more pain, down -61%. Fortunately, both projects have had a big rebound since then.
Looking at it today, since the fourth quarter of 2020, Uniswap’s growth rate has soared to 232%, while Sushiswap broke out again with a 530% increase after everyone thought it was dead.
Data: CoinGecko
It must be realized that Uniswap is an asset with a high market value, which means that more capital inflows will naturally be required to drive the rise. For reference, the circulating market value of Sushi at the bottom is only 48 million US dollars, while the circulating market value of Uniswap at the bottom is still more than 500 million US dollars.
Summary
While Uniswap still dominates, in recent months Sushiswap The development of the company and its competitiveness in the market fully demonstrate that the product-market fit is also improving. The final result of today's battle? A draw.
Uniswap wins on fundamental metrics like volume, liquidity and revenue as it is the primary liquidity and trading venue in DeFi. On the other hand, Sushiswap outperforms on valuation metrics such as P/S, P/V, and price performance due to its more attractive economic design and smaller market cap.
If anything, the year ahead for both agreements will be exciting. It looks like competition will remain fierce.
Both Sushiswap and Uniswap have major releases planned. Uniswap will bring V3, and Sushiswap also laid out an ambitious roadmap earlier this year.
Who is the winner? I think only time will tell.
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