The Shipyard DEX Brief No. 19

Top of Mind at Shipyard

DEX aggregators have evolved. In the beginning, they simply did the work of integrating multiple DEXs. That wasn’t difficult because there weren’t many DEXs and they were all Uniswap clones. With superior execution, aggregators were able to pull around 20% of the market away from Uniswap. But then market share stagnated and the effort required to integrate new sources skyrocketed as the number and variety of DEXs exploded. Recently, aggregators have realized they can kill two birds with one stone. First, gasless transactions wherein traders get a worse price but shift the burden of gas onto a third party. Second, allowing third parties to propose multi-DEX routes to remove the “routing” and integration burden from the aggregator themselves. We see this at CoW Swap with solvers, 1inch Fusion with resolvers, and now it looks like 0x with gasless transaction relayers (although details are still murky). A smart move.

What does this mean for DEXs and their ability to capture value? Acquiring flow becomes a Vickrey Auction, where the DEX who can trade cheapest captures the surplus between its marginal cost and that of the next bidder. That’s terrible for undifferentiated DEXs, who will see good trade flow dry up, but it’s fantastic for any DEX with a structural pricing advantage for some subset of trade flow. The “Intel Inside” era of DEXs is emerging. 

Insights From Our Team

• What the Binance CFTC Lawsuit Means for Crypto: “The allegations are not about issues that exist 'in a gray area of regulation,' but rather about evasion of cut-and-dry, well-understood regulations and rules that exist for pretty good reasons." - Shipyard CEO, Mark Lurie on why crypto at large shouldn’t be worried about the allegations made against Binance.

• Bank of Russia to set up entities for crypto mining and cross-border settlement: "While investors are increasingly distrustful of the Fed, neither investors nor the BRICS themselves will necessarily trust the Russia-led governing body of such a currency not to devalue itself. [...] Ultimately, it's not trust but relative trust that matters most” - Shipyard CEO, Mark Lurie on how commodities-backed currencies used for settlements are not intended to replace USD dominance.

DEX Headlines That Caught Our Attention

• 0x rolls out a new suite of APIs, making them better equipped to provide professional-grade tools to institutions.

• CoW Swap introduces partially fillable limit orders.

• PancakeSwap V3 launches on BNB Chain and Ethereum, featuring improved capital efficiency, lower fees, and higher LP returns. 

What We're Reading

Liquidity management has become increasingly important with the expansion of the DeFi ecosystem. Enter active liquidity management (ALM) solutions. But current ALM solutions lack precision. How can we enable development of a new generation of ALMs? Advanced AMM Applications (AAAs) may hold the key. 

‍What’s New at Shipyard

Clipper 

The DEX built to give self-made crypto traders the best possible prices on small trades

• Clipper has undergone its latest redeployment on mainnet–expect even lower trading prices and increased LP yields! Check out this blog post for all the details. 

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WTF, Crypto 

A Shipyard Software Production, hosted by CEO Mark Lurie

• On-Chain Real Estate with Sanjay Raghava: Sanjay from Roofstock joins us to discuss bringing real-world assets on-chain, including how tokenized houses (real brick and mortar ones) can be bought and sold on the blockchain. 

• Regenerative Finance with Kevin Owocki: What is regenerative finance? Gitcoin founder, Kevin Owocki explains. Kevin also digs into why regenerative finance and regenerative funding are important right now and  why he believes the future of Web3 and crypto lies in "regen" projects. 

• Live from ETHDenver: Governance: How does community governance actually happen? To what degree is it happening? And what do all these governance tokens actually do? Yitong and Charlie from Agora fill us in.

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In the Works & Other Updates

Galley (part of the AdmiralDAO fleet): 

• Rarity tool now available!

• Regular auction feature added: Users can now choose between guaranteed or regular auctions when selling on the platform.