I saw a terrific thread posted by Derek Walkush yesterday, who works at the venture fund Variant. In this post, Derek outlines how Uniswap now has more than half the market share of DEX trading on Polygon. Additionally, Derek offers a compelling argument for why Uniswap is dominating the Polygon DEX market.
Let's dive into some of the numbers Derek amalgamated and see if the conclusions he comes to make sense.
Uniswap started out far behind
Initially, Uniswap started out well behind the other DEXs on Polygon. Yet within the first week, the most recognized DEX quickly took approximately 30% of the DEX market share on Polygon. Uniswap was able to take this market share mostly from SushiSwap and QuickSwap.
Clearly, the brand recognition of Uniswap played a large role in its quick adoption on Polygon, as the the product differentiation between UniSwap, QuickSwap, and SushiSwap is minimal (in fact, the QuickSwap UI is a straight rip off of UniSwap's v2 UI).
Despite market share growth, TVL growth still lags
Interestingly, despite Uniswap growing its market share on Polygon so quickly, their TVL still significantly lags their competitors on Polygon. While UniSwap's TVL, which is now around $160 million, roughly 2xed in early February, it still is approximately around 1/5 of QuickSwap's TVL and 1/2 of SushiSwap's TVL. This deficit in TVL compared to QuickSwap and SushiSwap is likely because UniSwap is far more frugal in terms of giving out extra rewards for pooling liquidity compared to their competitors, who have robust token incentives for using their DEXs on Polygon.
UniSwap's dominance comes in spite of its lack of token offerings
While Uniswap is currently the top DEX by volume on Polygon, they offer far less coins than their competitors. In fact, only 34 tokens are listed for trading on Uniswap's Polygon deployment compared to 269 tokens for QuickSwap and 169 tokens for SushiSwap.
We can deduce from these stats that Uniswap is attracting the most volumes in the most significant asset pairs, such as ETH and USDC. Additionally, we can deduce that coin offerings is not the driving factor of volume for these DEXs on Polygon.
Where is Uniswap's volume coming from?
Uniswap is doing a better job of attracting new users to their DEX compared to their competitors. In the graph above, you can clearly see that Uniswap is consistently doing a better job of attracting new users compared to SushiSwap.
My takeaway is similar to Derek's interpretation of the data, which is that Uniswap's brand is so powerful that it is able to attract users to its Polygon deployment without token incentives.
Project brand is increasingly become a larger attractor of users in crypto. Since most the technology is open source and thus can be easily copied, brand plays a much larger role in crypto than other industries. This realization will only become more commonplace overtime. In a few years time, community building will likely have a higher premium than even solidity development.
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