24 Sep 2020 by rate3

Since February 2018, when Kyber launched its mainnet, a lot of money has gone under the bridge connecting users and the DEXs wonderland. Specially so during the latest couple of months, when daily trading volumes have increased from a meager 10 mio at the end of July to about $3 billion in the mid-August (it is still under $10 bln monthly).

Please, correct me if you can, but it looks like with 180000% yearly expansion rate, we have, probably, just created the fastest growing market in history :) Apparently, ‘Volume’ is to be set at the ‘a’ level, right? Well, not so fast (for the reasons to be clarified in the following couple of paragraphs).

However, we all, also, know that Kyber is neither the largest nor the most dynamic DEXs out there (the crown is Uniswap’s, of course).

Still, Kyber is in the top five (4th) by volumes (with Uniswap, Curve, Balancer and 0x) but second only to Uniswap and IDEX by the number of users (totaling under 40 thousands daily).

In fact the DEXs big family (which, basically, includes several dozen other members — most notably the following, by the order of a magnitude: Uniswap, Balancer, Curve, 0x, Kyber, dYdX, Synthetix, IDEX, Bancor, Oasis, Loopring, DDEX and Gnosis) is pretty small by all imaginable standards. Therefore, Kyber’s ‘Singularity’ (reverse to the ‘strength of competition’) is also in the ‘a’ range. Let’s make it ‘a-’, for the number of smaller DEXs continues to grow as more and more developers are FOMOing into the space.

Nonetheless, the DEX market is still in its early infancy. For example, compare this to about 280 centralized crypto- exchanges and their more than $2 Trillion monthly volumes (DEXs barely have 0.4% of that bonanza now :))

In essence, if we take only one large exchanges, which monthly trading volumes alone are nearing 300 billion, all DEXs are in 3% range of this one exchange alone .

Important to note here that under the current regulatory regime DEXs can’t trade USD pairs, which might prevent them from reaching their full growth potential in the nearest future. Obviously, before getting to DEXs users have first to channel their money through ‘legalized’, custodial coins / tokens exchange platforms. That fact (coupled with rising fees and an aversion felt by most ‘regular users’ to ‘speculations’) might get DEXs volumes lagging far behind their centralized counterparts for a prolonged period of time (unless, of course, the proportion of ‘day traders’ will increase sharply).

Notwithstanding, the question is how far could DEXs market grow and will it capture some alts’ volumes from the centralized exchanges or will it create its own market, composed from newly issued tokens?

Difficult question to answer. The way it’s going now it looks like DEXs are mostly trading a whole new generation of second and third layers protocols, most of which have already became part of DeFi by themselves.

So, where does it put Kyber’s ‘Volume’ rating? Looking at the most recent astonishing piece of DEXs’ growth it is easy to forget that not so long time ago, in February 2020, the percentage of DEXs volumes in the total exchanges volumes was actually decreasing (since January 2019 level of 0.1%) to a sub-critical level under the 0.01% :)

That makes me to be more cautious now in estimating the potential market size for DEXs. Hence, I set Kyber’s Volume’ to ‘b’.

With that I still have its ‘Timing’ (right / wrong time coming to the market) and ‘Empathy’ (users emotional attachment) left to value.

As to the former it’s about ‘b+’, for Kyber founding in 2017 turned to be a bit premature, but, at the same time, it has positioned them to meet Summer 2020 rush already backed by the two years of coding and growing its community. Speaking of which it has a tiny bit but, still, relatively more than the rest of the pack: about 3.5 thousands traders (>120th Twitter followers).

Not to mention that Kyber is completely overshadowed by Uniswap’s 65th people trading each day. On top of that, I haven’t noticed an extensive level of users admiration with Kyber, although, the general public attitude appears to be positive. Hence, ‘Empathy’ is ‘b-’.

Result for Vision (Singularity — Volume — Empathy — Timing): a-/b+/b-/b+