41 Interactions, 10 Today
However, no research is complete without a critical review of how it is holding up against its rivals. So, let’s look again at Uniswap; this time, compared to the famous Sushiswap, a contrast that was also the subject of a recent bankless newsletter.
Context is important here, as is often the case. Consider this – SushiSwap arose from the mania of food farming that was part and parcel of last year’s DeFi season. In fact, for a long time, mainstream thinking has indicated that it is merely a “generic, tokenized fork” of Uniswap. Quick forwards to 2021, and many would say that it’s given Uniswap a run for his capital.
According to Bankless analyst Lucas Campbell,
“Sushiswap has not only survived, but thrived and innovated on the AMM model beyond all expectations. Sushi is now genuinely competing with its predecessor on multiple levels.”
Trading volumes and market share are a good way to start making comparisons. Consider this – Uniswap held a market share of 51.6 per cent on weekly DEX volume, while SushiSwap had a market share of 23.8 per cent on 1 February. Just three months earlier, though, the latter had a stake of just 1.98 per cent.
Also on a month-to-month basis, SushiSwap’s volumes grew exponentially, overshadowing the rest of the competition, including the likes of Uniswap, despite the fact that Uniswap continues to hold the lion’s market share. Though SushiSwap processed just over $3 billion in monthly DEX volume in December, the same number was $12.2 billion in January.
Further, as Campbell was quick to point out,
“Just a month ago, in December, Sushiswap was processing an average of 25% of Uniswap’s weekly volume. Now, the protocol is averaging 48%. It’s nearly impossible to deny the trend: it’s up and to the right.”
At the time of publication, Uniswap appeared to have the upper hand on the liquidity available under the protocol. Thanks to the UNI airdrop during which the protocol dispersed 15 per cent of the UNI supply to previous users, the LPs were flooded, particularly after the initial Sushiswap craze had faded away. Right now, Uniswap’s liquidity is overshadowing Sushiswap’s, considering the fact that the former is now absolutely unsubsidised by its procedure.
This does not mean that SushiSwap can be overlooked, particularly because its own liquidity has been rising too, with the same rising over $2 billion recently.
In the sales side, too, Uniswap appeared to have the upper hand, with the procedure averaged over $3.28 million in daily payments relative to SushiSwap’s $1.43 million. However, closer inspection of the charts would be consistent with Campbell’s observations, namely, “the trend is tough to ignore: Sushiswap is chipping away at its competitors.”
It’s just a matter of how the protocol is valued. According to Token Terminal, “Sushiswap has remained steady with a P/S ratio of ~5 while Uniswap has recently touched ~15.” What does this mean? Well, though it would appear like the market is overvaluing Uniswap in comparison to SushiSwap purely in terms of the cash flows it produces today, it does not mean that one is overvalued while the other is undervalued.
Simply put, taken alone, this statistic doesn’t show anything because it doesn’t look at things like the economic nature of a token. The results of the P/S ratio are also subject to interpretation.
This is also the case for the P/V ratio, with Campbell noticing that a cursory observation of the charts will show that the customer is having a better bang for their buck on SUSHI, not UNI. Alas, a number of other considerations come into play here as well, such as aspirations for growth and taking prices.
Ergo, what do we know from the latter analysis? Well, Uniswap remains the leader, but SushiSwap manages to chip away at the market share of the former. The latter is doing so not only with the aid of well-timed launches such as Bentobox, but also with organic innovations such as the merger with the Ann ecosystem. In reality, the same thing was pointed out by Messari’s Mira Christanto when she tweeted,
“….. Under #Yearn’s ecosystem, it’ll [Sushiswap] benefit from new network effects.”
This does not mean that Uniswap does not have its own range of improvements or changes to look forwards to. In reality, the UNI protocol token just got off the hike that followed the Coinbase token listing. Finally, his audience is still looking forwards to the start of v3.
So what? Ok, the condition can better be summed up by what Campbell said,
“I believe Sushiswap is growing the pie for Uniswap and vice-versa. Big picture: it’s true these protocols compete, but it’s even more true that they benefit one another.”