By Thor Hartvigsen
Compiled by: TechFlow
Since the collapse of FTX, more and more traders have turned to on-chain perpetual DEX, and its market size has continued to expand.
Although centralized exchanges such as Binance are still the main venues for derivatives trading, as decentralized technology continues to mature, more funds are expected to flow into the decentralized perpetual contract market in the future.
This article will conduct a comparative analysis of the trading volume, transaction fees, and native token valuations of several representative decentralized perpetual contract exchanges, and explore the challenges they may face and future development directions.
Overview of the decentralized perpetual contract market
In the first quarter of 2023, the total trading volume of on-chain perpetual contract exchanges was US$164.2 billion.
While this is a substantial increase from before, Binance generated $4.5 trillion in derivatives volume in the first quarter alone.
Since the collapse of FTX, more and more traders have turned to on-chain, and several new protocols have emerged. As the market matures, I have no doubt that the cumulative volume of on-chain perpetual contracts will grow to trillions of dollars per quarter.
The table below shows the total volume and fees generated by the leading on-chain perpetual swap exchanges. Two things stand out:
• dYdX still attracts a lot of trading volume;
• Despite significantly lower trading volume, GMX’s fees are almost equivalent to those of dYdX.
dYdX
Total transaction volume: $913 billion;
14-day volume: $12.15 billion;
14-day cost: $3.24 million.
dYdX currently runs on a custom zk-rollup designed by Starkware, but will move to an application chain in the Cosmos ecosystem later this year (dYdX V4).
In V4, dYdX validators will operate an on-chain decentralized order book and matching engine. Current testing has been able to achieve a throughput of 500+ TPS. After launch, all fee income will not be distributed to centralized entities.
GMX
Total transaction volume: $100.5 billion;
14-day volume: $4.93 billion;
Total fees: $148.2 million;
14-day fees: $7.43 million.
Last year, GMX sparked the on-chain perpetual contract narrative. Despite many new entrants in the past few months, GMX's daily trading volume, number of users, and transaction fees continue to grow.
GMX V2 will introduce synthetic asset (not just crypto) trading capabilities.
• Use Chainlink low-latency oracles to get better real-time market data;
• Each trading pair will have separate liquidity to isolate risks;
• Phase out GLP tokens after V2.
It is expected to be released in the second or third quarter.
GainsNetwork
Total transaction volume: $35 billion;
14-day volume: $1.8 billion;
Total fees: $254 million;
14-day fee: $1.6 million.
After gTrade was deployed on Arbitrum in January, it saw a significant increase in daily trading volumes.
About 80% of total trading volume now happens on Arbitrum. There has also been a significant influx of liquidity since the introduction of the gDAI vault, which tokenizes a user’s share of the vault’s liquidity and allows them to deposit it into AMMs, lending protocols, etc.
Account
Total transaction volume: $6.4 billion;
14-day volume: $500 million;
Total fees: $12.6 million;
14-day handling fee: $800,000.
Kwenta launched V2 in February, adding a host of new tradable assets, and has seen a significant increase in trading volume since then.
Kwenta uses Synthetix as a liquidity layer for perpetual derivatives trading. As Synthetix V3 rolls out more collateral assets to back sUSD, we may see deeper liquidity on Kwenta.
Current Kwenta Roadmap:
Level
Total transaction volume: $10.3 billion
14-day volume: $3.2 billion;
Total fees: $12 million;
14-day fees: $3.9 million.
Level is the largest perpetual contract exchange on the BNB chain, providing four trading pairs: ETH, BTC, BNB and CAKE.
Tranches are used to provide liquidity for traders with higher risk appetite, and riskier tranches will receive a larger proportion of transaction fees. Level also plans to expand to new chains in 2023 and upgrade the current liquidity structure.
comparative analysis
The table below shows recent transaction volumes, fees, and native token valuations.
The lower the FDV/Volume and FDV/Fees ratios, the better the valuation. Note that there is a big difference between calculating these values based on market cap and FDV.
According to these numbers, GNS and GMX are the best valued (also because their FDV is closer to market cap). Based on market cap, DYDX is the best valued token. However, it is important to pay attention to future token unlocks.
It’s also worth noting that both Kwenta and Level incentivize traders through native token issuance. Will they continue to grow with reduced token issuance?
Personally, I am keeping a close eye on $DYDX and $GMX as they have catalyst events coming up later this year (e.g. version updates, new products, etc.).
In short, I firmly believe that there will be a lot of liquidity flowing into the market in the future. If trading volumes grow 10-20x in the future, many of these coins could rise significantly from their current prices due to this additional growth.
