Sushiswap is surpassing Uniswap?
Editor's Note: This article comes fromCrypto Valley Live (ID: cryptovalley)Editor's Note: This article comes from
Crypto Valley Live (ID: cryptovalley)
, Author: Lukas Wiesflecker, translation: Miko, reproduced by Odaily with authorization.
When we talk about decentralized exchanges (DEX), we cannot avoid SushiSwap and UniSwap. These two are very similar and compete with each other.
This similarity is no coincidence. After all, SushiSwap is an imitator of UniSwap. What started as a simple imitation is now a serious contender for SushiSwap.
The price of SushiSwap’s cryptocurrency SUSHI is hovering around $1.5 after the initial price hype died down. SUSHI price is targeting the $15 mark, with a current market cap of just under $1.8 billion. SushiSwap has come this far.
There are plenty of reasons to compare the performance of these two competitors in the battle for DEX leadership.
While they started out as the same product, over the past few months the two protocols have morphed into two completely different products. SushiSwap is constantly releasing new features. At the same time, the core community of SushiSwap is very good at conveying these developments to the outside world, while the core developers of UniSwap are working behind closed doors to develop V3. No one knows what this update will bring. However, people have high expectations for UniSwap, and the pressure is mounting in the face of SushiSwap, an increasingly powerful competitor.
The goal of this article is to compare the two protocols based on salient on-chain metrics, how they compete with each other for dominance in their niche markets.
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Round 1: Trading Volume
One of the most basic metrics for measuring the success of a decentralized exchange is trading volume. After all, the core purpose of a decentralized exchange is to facilitate the exchange of tokens between participants.
Over the past three weeks, UniSwap has seen an average daily volume of between $700 million and $1 billion. Meanwhile, SushiSwap shows an average daily trading volume between $300 million and $600 million.
The transaction volume of UniSwap is still twice that of SushiSwap, but the monthly transaction volume trend shows that SushiSwap has entered the fast lane.
Monthly transaction volume of UniSwap and SushiSwap
SushiSwap catching up becomes even more apparent when we plot the percentage of trading volume on SushiSwap vs. UniSwap. A month ago, SushiSwap processed an average of 25% of UniSwap’s weekly trading volume. The processing volume is now an average of 48% of UniSwap.
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Percentage of weekly volume that SushiSwap realizes on UniSwap. Source: Dune Analytics, Bankless
However, it is doubtful that UniSwap will relinquish its DEX dominance so quickly. Therefore, there is no final conclusion here. At present, UniSwap is leading in terms of trading volume.
🏆 Round 1 Champion: UniSwap
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Round Two: Total Liquidity
As the saying goes, liquidity is king. That slogan didn't come out of nowhere, so the key fundamental metric to analyze next is total asset value. This represents the total amount of liquidity provided by users to the platform.
SushiSwap gained notoriety for its vampire attack at the time and damaged the protocol's reputation in its early days. After all, it directly and publicly attacked the darling of the DeFi circle. The attack still worked, at least for a short period of time, so that SushiSwap successfully surpassed UniSwap in its monetization ability during the hype stage.
The success of this comeback was achieved by rewarding users with SUSHIToken for providing liquidity. SUSHIToken has existed longer than UNI Token. With this added incentive, this comeback success shows that no advantage is set in stone.
But Uniswap fought back.
The wind immediately turned again due to the launch of Uniswap’s Token. After SushiSwap absorbed a large amount of liquidity in August, liquidity providers flocked to UniSwap to obtain newly issued UNI Token from the initial liquidity mining.
Meanwhile, after a few months, things have calmed down. Both protocols have billions of dollars in liquidity. However, there is a key difference. After UniSwap’s additional liquidity incentives ended in November 2020, a lot of liquidity was redistributed instead of further token issuance. This is because SushiSwap continues to reward its liquidity providers with its native token SUSHI.
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Liquidity on Uniswap and Sushiswap. Source: Token Terminal, Banales
It should be noted here that although UNI Token does not directly support the liquidity of Uniswap, many projects use Uniswap as their main trading venue and encourage their communities to provide liquidity for their respective Uniswap pools.
Although UniSwap is still the first port, more and more projects are also providing measures to motivate users to provide liquidity on SushiSwap. For example, the ecosystem around Yearn Finance prefers SushiSwap. This fact alone highlights that SushiSwap has become such an integral part of the ecosystem that even project parties can no longer ignore it.
Regardless, despite the lack of additional incentives, higher liquidity is a strong indicator of a product and its market position. UniSwap remains the leading trading platform for traders and Token projects. However, SushiSwap crossed the $2 billion mark at the end of January, further underscoring its own health.
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However, UniSwap has higher liquidity, currently at $3.15 billion, and has won round 2 of the title race.
🏆The second round champion: UniSwap.
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Round 3: Income
Revenue is another key metric to watch as the two protocols compete fiercely in terms of trading volume and liquidity. Revenue is derived from the cash flow LPs receive from transaction fees. It’s worth noting that both protocols charge a 0.3% transaction fee on all token exchanges.
Based on the previous two metrics, the results of this comparison are not surprising. Not only compared to SushiSwap, but also in the entire DeFi field, UniSwap is the absolute leader. The protocol is a real cash flow generating machine. As of January 2021, UniSwap has collected over $2.3 million in LP fees on average, and the unit is per day! That's a lot more than any other company in the space.
Yes, you might have guessed that. It's SushiSwap.
The information released by SushiSwap is "only" half of UniSwap's daily revenue, with the average daily fee of 7 liquidity providers being $1.2 million. That's not a bad thing, as a clear trend is emerging, SushiSwap is on the rise.
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This means that UniSwap still leads in the third round, but the emphasis is on "still". That's because the Challenger is catching up at an insane pace.
🏆The third round champion: UniSwap
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Round 4: Price to Sales Ratio (P/S)
The price-to-sales ratio (P/S) is becoming a standard valuation metric for DeFi protocols.
Simply put, in the same niche market, a Token with a lower P/S is more reasonably valued than a similar protocol with a higher P/S. However, this is not necessarily true. It is also possible that the market has assigned lower future growth expectations to agreements with lower price-to-sales ratios. After all, in an efficient market, future expectations are priced at current prices. However, the price-to-sales ratio is still an effective indicator, and as long as it is carefully analyzed, it can be a powerful tool for investment decision-making.
UniSwap currently has a price-to-sales ratio of 17.86, and it is worth noting that it has increased significantly since the end of January. This could be mostly due to the GameStop event, or user anticipation of the imminent release of V3.
Price-to-sales ratio of UniSwap. Source: Token Terminal
The price-to-sales ratio of SushiSwap is relatively stable. Currently, the value is 8.02.
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Price-to-sales ratio of SushiSwap. Source: Token Terminal
According to the price-to-sales ratio, it can be inferred that the current market pricing for UniSwap (UNI) is twice that of SushiSwap (SUHSI). Since UniSwap's cash flow has increased more, its higher pricing is also understandable. Despite the rapid rise of UNI, we do not believe its value is overvalued. Meanwhile, SUSHI's share price rally has been equally impressive, and its value may still be undervalued.
In contrast, SushiSwap already owns over 40% of UniSwap’s trading volume, owns around 66% of its liquidity, and generates over 55% of its revenue. The growth rate of these three categories is also higher than that of UniSwap itself. So, if we assume that this trend will continue, as you can see from the price-to-sales ratio, this fact has not been widely recognized and priced in by the market.
In addition, although UNI is a governance token, token holders do not have the economic rights of cash cows. On the other hand, holders of SUSHI place demands on the cash flow of the protocol, hoping to make it a productive asset. One of the reasons for this discrepancy may be regulatory issues on the part of UniSwap.
However, how to interpret this data is entirely up to each reader. For us, SUShiSwap is already ahead in this regard.
🏆 Round 4 winner: SushiSwap.
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Fifth round: price-volume ratio (P/V)
Price-to-volume ratio (P/V) is a newer DEX-specific valuation indicator, and its characteristics are similar to price-to-sales ratio.
Price-to-volume ratios are not valued based on the fees incurred by these liquidity agreements, but on volume to determine the market's valuation of the agreement.
As of yesterday, UniSwap had a trading volume of $982 million and a current market capitalization of $5.663 billion. This means that the P/V ratio is now just below 5.77. In other words, for every $1 of trading volume that UniSwap facilitates per day, the market value is about $5.77.
SushiSwap had a volume of $472 million yesterday and a current market cap of $1.85 billion. Correspondingly, the P/V ratio is just below 3.92.
Like the price-to-sales ratio, the market may value Uniswap at a higher price-to-sales ratio because it has higher growth expectations for the protocol than Sushiswap. However, this is not reflected in the last growth trend to be observed, which we have fully explained.
🏆 Round 5 Winner: SushiSwap.
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Comparison conclusion of UniSwap and SushiSwap
So let's summarize the comparison of the last five rounds.
While UniSwap is still the leader, SushiSwap's growth in recent months and its competitiveness suggest that the market will allow new ratings soon. But the future is arguably uncertain, so we assess the current status quo.
The final result of today's game is that UniSwap won 3-2. This means that the defending champion still has a favorable position. Due to its advantages as the leading trading venue in the DeFi space, it has won in basic indicators such as transaction volume, liquidity and transaction value.
