DEX capital efficiency: revenue to TVL across Uniswap, Sushi, Joe and peers
Thread779 words
Argues TVL alone misleads and ranks DEXs by 365-day revenue divided by average TVL. Trader Joe and SpookySwap lead while Sushi is lowest, with caveats on the simplified method.
Key claims
Revenue/TVL: Joe 0.30, Spooky 0.27, Uniswap 0.17, Quick 0.12, Clipper 0.11, Sushi 0.09
Uniswap made $1.2bn in 365d on about $7bn average TVL
0/ when analyzing a DEX, it's essential to look at efficiency metrics that provide an indication on how efficiently a DEX is able to generate volume & revenues on its TVL 📊🔍
feat. $UNI, $SUSHI, $JOE, $BOO, $QUICK
🧵 investor's guide on #DEX capital efficiency (0/30)⚖️👇
1/ often people use the TVL (total value locked) metric in order to measure success of decentralized exchanges. However, this metric alone can be very misleading
2/ the goal of a #DEX is to generate volume and subsequently earn trading fees
a better DEX metric than TVL is hence capital efficiency or in different words, how well a DEX is able to maximize utilization of the available liquidity (get volume) & generate revenue on the pools
3/ in this short analysis, we will divide total 365d revenue by TVL (avg. last 365d) in order to arrive at a simplified metric for DEX capital efficiency (revenue generated per liquidity unit)
2/ the focus will be on the following #DEX protocols:
- @Uniswap / $UNI
- @SushiSwap / $SUSHI
- @traderjoe_xyz / $JOE
- @SpookySwap / $BOO
- @QuickswapDEX / $QUICK
- @Clipper_DEX
3/ @Uniswap is the largest DEX by TVL and volume. Its total value locked amounts to currently $5.6bn
on average, #Uniswap TVL amounted to approx. $7bn during the past 365 days
source: @DefiLlama
4/ during the past 365 days, @Uniswap generated $1.2bn in revenues
source: @tokenterminal
5/ consequently, #Uniswap's revenue/TVL ratio on an annual basis amounts to 0.17
6/ @SushiSwap's TVL amounts to $675m with an average of approximately $3bn over the past year
source: @DefiLlama
7/ $SUSHI generated $270m during the past 365 days
source: @tokenterminal
8/ this leaves us with a revenue/TVL ratio of 0.09 for $SUSHI
9/ $JOE is the largest DEX on #Avalanche measured by TVL and currently stands at $162m with an average TVL of approximately $850m during the past 365 days
source: @DefiLlama
10/ during the same time period, $JOE generated $260m in revenues
source: @tokenterminal
11/ consequently, @traderjoe_xyz's ratio amounts to 0.3
12/ $BOO is the largest DEX on #Fantom with a TVL of $122m and an average of roughly $500m during the last 365 days
source: @DefiLlama
13/ revenues on $BOO during that time amount to $136m
source: @tokenterminal
14/ @SpookySwap's revenue/TVL ratio hence stands at 0.27
15/ the largest DEX by TVL on #Polygon is @QuickswapDEX. Its TVL currently amounts to $275m with an average of approximately $500m during the past 365 days
source: @DefiLlama
16/ during the same time period $QUICK has generated a total of $60m in revenue
source: @tokenterminal
17/ this means a revenue/TVL ratio of 0.12 for $QUICK
18/ finally, @Clipper_DEX, a DEX that operates on a couple of EVM-compatible L1s & L2s (incl. $OP), has a TVL of $10.7m with an average of roughly $17m in the past year
source: @DefiLlama
19/ @Clipper_DEX has also generated a total of $895k in revenue in the past 90 days and 2m in the past 365 days
source: @tokenterminal
20/ that leaves us with a revenue/TVL ratio of 0.11
21/ in conclusion, we have the following ratios:
1) @traderjoe_xyz: 0.3
2) @SpookySwap: 0.27
3) @Uniswap: 0.17
4) @QuickswapDEX: 0.12
5) @Clipper_DEX: 0.11
6) @SushiSwap: 0.09
22/ we need to keep in mind though, that this calculation is highly simplified and only meant to provide an indication
23/ the approach could be modified and from a LP perspective it would probably make more sense to make the calculation based on supply-side revenue rather than total revenue, while token holders likely primarily care about protocol revenue (value that accrues to the protocol)
24/ but since we're talking about a metric for the success of a #DEX we look how much users are willing to pay to use the protocols and hence consider the total fee revenue that is generated, without differentiating between protocol & supply-side revenue
25/ while the approach is very simplified and a more comprehensive analysis that also includes the cost the protocol incurs (token emissions), etc. is necessary to make investment decisions...
26/ ...the ratio does provide investors with an indication on how much revenue per unit of #TVL the protocols are able to generate or how much users are willing to pay per unit of TVL
27/ an interesting insight for LPs since in relative terms there is more revenue being generated per liquidity unit (not considering liquidity mining programs) if the ratio is higher
28/ similarly for investors, because revenue is a function of volume, a higher ratio shows that liquidity (TVL) is concentrated in pools generating volume & hence revenue (which is a measure for operational efficiency of a protocol). Consequently, a high ratio is desirable as...
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What came next · since 12 Sep 2022
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This data piece reports the numbers without making a call on the token, so price moves since publication are shown as market context.
Since then
Zero has written 3 more pieces on Uniswap and $UNI and $SUSHI and $BOO and $JOE since this one.
Daily closes in USD from DefiLlama and Yahoo Finance. Only a bullish or bearish call in a thesis or market take is tracked; explainers, lists, maps and mentions are neutral context. Not financial advice.