DEX adoption requires greater capital efficiency – the leader of the pancake swap product
Decentralized finance (DeFi) Decentralized exchanges (DEXs) need significant capital efficiency to increase market share, according to PancakeSwap.
Chef Momo, an unnamed DEX product manager, told Cointelegraph:
“Such initiatives that promote capital efficiency and integration will be critical to expanding the market share of DEXs.”
PancakeSwap is a popular multi-chain DEX that launched on April 8, 2018, integrating its DEX platform with the Stryke options trading protocol to offer an enhanced Liquid Automated Market Maker (CLAMM) options platform on Arbitrum.
CLAMM Options introduces a new approach to building on-chain liquidity in DeFi based on supply and demand mechanics, Chef Momo said:
“The lack of liquidity of options continues to be a major challenge not only in DeFi but also in CeFi. [centralized finance] as well as. DEXs serve as the basic liquidity infrastructure in DeFi. Using this liquidity for option writing offers a great opportunity to strengthen the liquidity of options on the chain.
The new options are live for ARB/USDC, ETH/USDC, and wBTC/USDC trading pairs. CLAM Options aims to provide crypto investors with new opportunities for liquidity providers with more complex options trading features. According to Chef Momo:
“Liquid providers can increase the amount of liquidity in the v3 pools on pancake swaps to write options and earn a premium that maximizes their total return.”
According to CoinMarketCap data, PancakeSwap is currently the 10th largest DEX, with a 3.37% market share on PancakeSwap V2 and a 2.92% market share on PancakeSwap v3.
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DeFi requires more capital efficiency
Initiatives similar to CLAM that promote greater capital efficiency and integration in DeFi will be critical to increasing the market share of DEXs, said Chef Momo.
“Options markets dominate the distribution sector in TradFi, but its presence in crypto is minimal, showing huge growth opportunities. Options including hedging and monetization of investment portfolios bring significant value to DeFi.”
DEXs are far behind their centralized counterparts. Binance, the world's largest CEX, currently has a trading volume of $26.4 billion.
By comparison, Uniswap is the world's largest DEX, handling just $1.44 billion in 24-hour trading volume, according to CoinMarketCap.
Looking at individual traders, Binance averaged more than 21 million weekly visits, while Uniswap, the largest DEX, was used by only 733,930 unique active wallets in the past week, Dapradar reported.
Uniswap's weekly volume of $25.5 billion is still less than Binance's daily trading volume.
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