Motivation

Similar to real world currencies, blockchains’ native currencies accomplish three major functions : Unit of Account, Medium of Exchange and Store of Value.

Swapping is a good example where the three functions are apparent. For example :

• ETH is used to price ERC20s.
• Exchanging ERC20s usually requires ETH as an intermediary due to liquidity and pairing constraints.
• Some Swappers sell ETH to buy ERC20s and store their wealth in ETH otherwise.

So, what is the extent of native currencies use in swapping ?

Methodology

• The analysis start date is May 2022 to examine the subject during a bear market.
• Chains considered are Ethereum & Solana.
• Ethereum DEXs considered are : SushiSwap, Curve, Balancer and UniSwap v2 & v3.
• Solana DEXs considered are : Jupiter Aggregator v2, Saber, Orca and Raydium v4.
• The Ez_dex_swaps table is used for Ethereum & the Fact_swaps table is used for Solana.

• The volume spike on May 11th & 12th is due to major volatility on ETH price as the asset broke below its 2022 low.

  → ETH recorded around 18% move from daily high to daily low during the two days.

• The volume spike on June 13th and the couple of days that followed is due to ETH losing a major support level, its previous all time high (around 1450 USD).

• ETH price went through two major trends during the analysis period :

  • A loss of around 70% from the start of May to mid June (from around 2800 to 880 USD)

  • A gain of around 70% from mid June to mid September (880 to 1500 USD) while recording a local high at around 2k USD (a 130% gain from the yearly low).

    → While the price of ETH has been volatile, the value of ETH bought & sold on DEXs is evenly shared throughout the analysis period.

    → For each 1 ETH bought from DEX pools, 1 ETH is sold to them.

• If we ignore the two major spikes periods, ETH volume on DEXs has been relatively stable at around 1m ETH exchanging wallets every day.

• Similar to ETH, SOL volume on DEXs experienced the same spikes during volatile periods.

• As opposed to ETH, SOL volumes had a major decline starting on July (From more than 1.5m SOL to less than 0.5m).

• SOL also lost around 70% from May to mid June but didn’t have a major comeback afterwards like ETH.

• Although price and volume are both down, the share between SOL buying & selling trades are relatively evenly shared at around 50%.

  → However, the daily share of buying & selling trades is more volatile than ETH.

• Similar to ETH Volume, the number of swaps on Ethereum’s DEXs had two major spikes on May & June due to the price volatility mentioned earlier.
• As ETH price started rallying mid July, the number of swaps on Ethereum’s DEXs stepped up from the less than 100k daily swaps region to 120-140k.
• Around 85% of swaps on Ethereum’s DEXs use ETH as a base asset :
  • Of which 45% are selling ETH to buy ERC20s
  • And 40% are selling ERC20s to buy ETH.
• The other 15% are swaps that don’t involve ETH, usually a StableCoin in either side.

→ ETH has an absolute dominance over the number of swaps on its chain. For each 100 swaps executed on its DEXs, ETH is involved in 85 of them.

• The two major spikes on May & June mentioned earlier are present in the number of swaps executed on Solana as well.

• Solana had a rough summer as the number of swaps on its DEXs declined sharply starting on July.

  
  → SOL is used as a base asset for around 50% of trades on its DEXs. Buy Sol & Sell Sol number of trades are evenly distributed at around 25% each.

• The number of swappers on Ethereum’s DEXs increased since the start of July from less than 40k unique daily swappers to around 50k.
• 80-85% of swappers on Ethereum’s DEXs use ETH as a base asset. Of which 40% are ETH buyers and 40-45% are ETH sellers.
• ERC20s and StableCoins took some market share from ETH since mid July as users started swapping ERC20s after ETH rally.

→ Similar to the number of swaps, ETH has an absolute dominance over the number of swappers on its chain DEXs.

• Similar to the number of swaps, the number of unique daily swappers on Solana declined sharply since the begging of July as well.

• The share of swappers using SOL as a base asset almost doubled since the start of May :

  • At the beginning of May, less than 45% of swappers used SOL as a base asset for their trades.
  • By mid September, more than 70% are using SOL.

  → The gain in market share comes mainly from SOL buyers (20% market share gain).

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Conclusion

• For each 1 ETH (or 1 SOL) bought from DEXs pools, 1 ETH (or 1 SOL) is sold to them.
• ETH dominates as a base asset for trades on its DEXs in both the number of swaps & the number of swappers (80-85% market share).
• Solana DEXs had a rough summer as both the number of swaps & swappers declined sharply.
• SOL is used as a base asset for half the trades on its DEXs.
• The share of swappers using SOL as a base asset almost doubled since the start of May thanks to SOL buyers.