The Changing DEX Market

DEXes are an important way for users and protocols to capture value within the ecosystem as well as being the fundamental financial primitive to generate the liquidity needed to power OpFi

Decentralized exchanges were some of the first OpFi products that found Product Market Fit. They are an important way for users and protocols to capture value within the ecosystem as well as being the fundamental financial primitive to generate the liquidity needed to power the OpFi Ecosystem. However, the market has changed since the first iteration of AMMs launched. With this in mind it was important for us to recognize how the market has changed, and how AMMs can best serve their users.

First Generation AMMs

In the first generation of AMMs. They were built with Liquidity Providers as the end user. This was because LPs were the primary users and earned trading fees based on their share of a pool and the respective trade volume. However, once token-based incentives launched, it changed the way in which participants use AMMs. The end user shifted from LPs to other protocols/projects.

Today, since the market has shifted, it means that AMMs are primarily needed for projects, either through token incentives, bootstrapping liquidity, or even protocol-owned liquidity.

AMMs Today

With this shift, it means that instead of end users (traders or LPs) being the primary users, now other protocols are the new most important AMM end users.

As a protocol using an AMM, it is important to have the following functionality so that they can best leverage product:

• Must be able to easily add token incentives to your liquidity

• Must be able to easily bribe token emissions onto your liquidity

• Must be able to accrue fees from liquidity you incentivize

• Must be able to permissionlessly deploy your liquidity

Therefore, we started to build 3xcaliSwap based on the Solidly codebase.