Derek Walkush
@derekmw23
It’s been almost a year since UnixwapX’s launch - bringing offchain liquidity to the largest DEX. What happened? The AMM continues to fill 60-80% of total volume, even substantial volume of major tokens on CEXs. @jhackworth and I explored why: https://blog.variant.fund/the-future-of-dex-trading
2 replies
4 recasts
5 reactions
Derek Walkush
@derekmw23
We explore ETH/USDC trading through the Uniswap front end. Since ETH prices are set on CEXs, and fees are much lower, theoretically most volume here should be filled offchain. That’s not the case, however, and almost ~30% of volume is filled by the AMM.
1 reply
0 recast
0 reaction
Derek Walkush
@derekmw23
Why? We have two hypotheses.
1 reply
0 recast
0 reaction
Derek Walkush
@derekmw23
1. Stale prices - AMMs can sometimes quote stale, better prices when the pool doesn’t have time to adjust to the market price, set on the CEX.
1 reply
0 recast
0 reaction
Derek Walkush
@derekmw23
2. Filler economics - fillers have various fees, in addition to CEX trading fees, which can impact their economies of scale, making it difficult to fill smaller orders.
1 reply
0 recast
0 reaction
Derek Walkush
@derekmw23
Why is this interesting? If we’re correct, with trade execution moving up to L2s, lower gas and faster block times have the potential to mitigate both of these issues, leading to more trades potentially being filled offchain.
1 reply
0 recast
0 reaction
Derek Walkush
@derekmw23
This is undoubtedly a centralizing force, and AMM designs will need innovation for this new execution environment to keep up with offchain fills. Read more here: https://blog.variant.fund/the-future-of-dex-trading
0 reply
0 recast
0 reaction
