Astroport vs Terraswap: Trading activity
In my last article, I touched on the success metrics of Astroport launch where in the categories of engagement and liquidity, it did very well. The launch managed to attract 8k new wallets to provide liquidity and the protocol was given a 200M liquidity guarantee for the coming 52 weeks.
I also mentioned that a vital part to evaluate success is trading activity post launch. Well, Astroport launched launched 3 weeks ago and here’s how it’s faring against Terraswap.
Defining Trading activity
Here are the areas that I’ll cover when it comes to trading activity.
Number of transactions and participants > volume transacted.
A lot of emphasis has been put in volume but I’d argue that number of transactions and participants are of equal importance if not more. Crypto is a game of whales and retail and these are best represented through count of transactions & participants rather than sheer volume.
Perhaps a combination of this with median volume would be best but this would not be covered here today.
bLUNA-LUNA pair deep dive
the big promise that Astroport offers is the ability to have stableswaps. In the traditional xy=k model, when one swaps bLuna to Luna, it almost always result in a net loss of Luna. With a stableswap model, this loss is significantly minimized. During launch, it is known that bLuna-Luna pair on Astroport will not be a stableswap but will behave very closely like one. So it would be interesting to see how the community has reacted to this based on their swaps.
With this also comes the efficiency of the 1:1 bluna-luna swaps. We’ll explore how close swaps on both dexes have been for this pair to the 1:1 ratio.
Stableswaps are also cheaper on Astroport - 0.05% fee as compared to 0.3% fee on Terraswap. We’ll take a look into how this affected APR for liquidity providers.
Part 1: Number of transactions and participants
Swap count and dominance:
First, we can look at the total swap count across both dexes.
In December 2021, Terraswap has a daily activity of 10k - 25k swaps. When Astroport launched late December, you can see daily swap count for Terraswap has dipped to at most 10k with an exception on Jan 10. On the other hand, swap activity on Astroport caught up and is on par with Terraswap.
To get a better view on this, we can plot a ‘market share’ dominance chart, essentially taking the total swap activity by each dex denominated in percentage.
Astroport is visibly taking a significant market share of all swap activity at a consistent 45 - 50% market dominance since launch. It is interesting to see that shortly after launch, Astroport managed to catch up to Terraswap. If we were to compare Uniswap vs Sushiswap in the early days of Sushiswap’s launch, there was high trading activity on Sushi for the first few weeks before losing out to Uniswap.
Whether or not history repeats itself here I think would depend on several factors. Given that both has the about the same amount of liquidity, here are some potential drivers where the swap dominance might tip towards one dex.
one dex provides significantly better experiences when swapping (clearer fees breakdown or automatically source pools with lower slippages)
innovate on other verticals like LP-ing - all in the effort to foster user platform stickiness (I had a good experience swapping here, I’ll LP here as well and I’ll do my future swaps here too)
Swap count breakdown
We know Astroport is up there with Terraswap in terms of the numbers, but what exactly are people swapping on these dexes?
For easier viewing, I’ve broken down the swap count into 3 categories - Luna-UST, bLUNA-LUNA and other pairs. I’m also comparing swap count for both dexes in the same time range, that is from when Astroport’s dex launch.
The first graph below is the swap count for Terraswap based on swap pairs.
Luna-UST takes up up a huge chunk at 82.6% of all swap count while the bLUNA-LUNA pair sits at 14%. From this, one can also see how ‘unpopular’ other non native Terra assets (Terra alts) are given the low swap trading activity.
We can compare this to the next chart of Astroport in the same time frame.
Immediately, we can see a huge difference in the pairs that were swapped in both dexes. For Astroport, swaps for ‘other pairs’ constitute 40% of all swaps!
Surprisingly, the bLUNA-LUNA pair shares about the same swap count percentage at 15% when compared to Terraswap. I would have expected this pair in Astroport would receive significantly more swap counts given how Astroport is positioned to offer better swap rates for bluna-luna.
Investigating the ‘other pair’ tells us that the huge swap count came from Astro-UST swaps!
Astro-UST swaps contributed 47.6% of all ‘other swaps’ which is about 27k swap transactions. Given that most Terra alts eventually lose its hype over time, the trading activity for Astro potentially will decrease and when this happens, if all things are equal, the swap dominance for Astroport will decrease. We’ll have to see if the stable swap mechanic of bLuna-Luna pair would be enough to support the current swap dominance.
Number of users
We know that the number of swaps between the 2 dexes are almost identical. In the graph below, a snapshot taken from Astroport’s launch until Jan 17, we see that there are about 10k more users on Terraswap as compared to Astroport. This tells us that Astroport users are doing more swaps (most likely Astro-UST swaps).
Both of these data points point towards a trend of decreased trading activity in Astroport in the coming weeks. When the swaps of Astro-UST slowly decreases, the number of users might eventually drop too.
The low number of overlap also tells us that traders who were already using Terraswap had no extra incentives to be swapping on Astroport. (perhaps a sign of dex stickiness?)
Besides this, we can also compare the age of the wallets that transacted in both dexes.
I divided the wallet age into 3 categories
before col 5 - the ‘OG’ lunatics
between col 5 and Astroport - users who were drawn in with what col 5 can potentially mean for the ecosystem
after Astroport’s launch - completely new users (presumably with no preference of dexes)
One noticeable difference between the two is that there are more new users using Terraswap as compared to Astroport. 17% of Astroport users are new users while 27% of Terraswap users are new wallets. Terraswap seems to be the more default dex for new entrants to the space - it’s been around longer hence had more coverage from articles/Twitter/Youtube on where to swap, etc.
Part 2: bLUNA-LUNA Pair Deep Dive
Almost a year ago, it’s common to see 7 - 10% premiums on the bLuna-Luna pair on Terraswap. If you had long term plans for Luna, the straight forward strategy would be to wait for a sudden price increase or decrease, swap Luna and instantly get 7 - 10% more in bLuna. Then, unbond the bLuna for 21 days to ultimately get the time-based arbitrage rewards. Nowadays though, even a 2 - 3% premium gets snatched up instantly.
While this is bad news for time-based arbitrageurs, users who want to swap their bluna to luna can rejoice. With the launch of Astroport, the bluna-luna pair will eventually be a stableswap pool, such that swaps of that pair would be 1:1. I thought it would be interesting to compare the metrics of this pair in both Terraswap & Astroport now that you can get better swap rates on Astroport.
Swap pool efficiency for bLuna to Luna
One of the important metrics we can look at is how efficient are the bluna to luna swaps. Note that this is only way because traditionally, swaps from bluna to luna would result in a net loss in luna terms. Swappers are paying a premium to overcome the 21 day unbonding process.
How the below graph is charted is by taking the hourly volume of luna received divided by hourly volume of bLuna swapped. Hence, a value of 1 on the y-axis means a perfect swap of bluna to luna without any luna loss. A value of 0.99 would mean if you had swapped 100 bluna to luna, you would have received 99 Luna, with a loss of 1 luna.
A higher value on the y-axis would mean a higher efficiency of the swap pool. As we can see, comparing both dexes, swappers are consistently getting better rates on Astroport as compared to Terraswap. While we see spikes of inefficiency on Terraswap, we don’t see that for Astroport. The takeaway here is, if you are swapping from bluna to luna, use Astroport!
Swap pool efficiency for Luna to bLuna
We can look at the other end of the trade - swaps from Luna to bLuna. Values above 1 means it’s worth it to swap from Luna to bLuna. A value of 1.02 on the y-axis would mean for every 100 Luna I’m swapping, I’m getting 102 bLuna back, earning essentially 2% premium in ‘Luna’.
As we can see, even premiums above 1% are hard to come by. There are higher spikes in the chart for Terraswap as compared to Astroport. This essentially means if you are swapping from Luna to bLuna, on most days there is very little difference, but you are more likely to find good deals on Terraswap.
Trading volume and swap count
Now that we know for luna → bluna, Terraswap is more likely ‘better’ while for bluna → luna, Astroport is better, how do actual swap activities compare?
Looks like the market caught on! About a week after launch, the number of swaps from bluna to luna on Astroport is way higher (about 3 - 4 times more swaps) than Terraswap.
And the same could be said about swap volume. On some days, Astroport (orange) recorded 10 times more swap volume in this pair direction as compared to Terraswap.
And perhaps this swap volume market share chart illustrates this better. In the recent days, 90% of the volume of bluna to luna swaps was traded on Astroport. The same trend is true for swap count - in the recent days, 70 - 80% of all bluna to luna swaps took place in Astroport.
I wanted to cover swaps from Luna to bLuna but the results are very similar as well. Both swap count and volume are about 60 - 70% Astroport. Initially I thought this is odd given that you can potentially get higher rates on Terraswap for this swap direction. But looking at the pool efficiency, it does look like Astroport is very slightly better than Terraswap for this direction only in the recent days - by very slightly better, I mean 0.2% premium difference or less.
Swap fees received
Last week, I covered the liquidity removed from Astroport once users were able to withdraw their locked LP tokens.
In that thread, you’ll see that the bluna-luna LP token had the highest number of withdrawals. A hypothesis to this is that stableswap pools on Astroport only charge 0.05% swap fees as compared to Terraswap’s 0.3% (for all pools). Note that for Astro’s 0.05% - half of it goes to LP providers while the other goes to the Astral Assembly.
This means if you are an LP provider and if both dexes have equal amount of liquidity, and you have no stake in Astro’s governance, it makes sense to provide LP on Terraswap.
At the time of writing, the bluna-luna pool on Terraswap has 190M liquidity while Astroport’s bluna-luna pool has 480M liquidity (more than 2x the liquidity!).
With the low fees charged by Astroport, the hope is that transaction volume and count was large enough to make up for it.
As you can see, the swap fees earned by Astroport’s LP is very low compared to Terraswap. The fees only manage to catch up in the recent days where Astroport’s volume is higher than Terraswap.
Some napkin math on APRs for both dexes, taking the highest fees earned on a single day since Astroport’s launch:
Terraswap: 365 * 900 Luna (x2 for both swap directions) / 190M (/$85 per luna) * 100 = 29% APR
Astroport: 365 * 100 Luna (x2 for both swap directions) / 480M (/$85 per luna) * 100 = 1.3% APR
Of course, trading volume is not always at its highest everyday and volume may be more evenly spread out across the year, but just to get an idea of the APR earned as a liquidity provider in both platforms.
If you are liquidity provider for bLuna-Luna and simply don’t care about earning Astro, it just simply makes sense to provide that liquidity in Terraswap at this given time, especially with the high liquidity on Astroport and comparable swap fees earned between both dexes.
TLDR: How did Astroport do against Terraswap?
Swap count, market share & number of users
Astroport is maintaining a consistent 40 - 50% market share of swaps since launch
80% of all swaps in Terraswap is driven by the Luna-UST swap pair. Meanwhile, in Astroport, 20% of all swaps are Astro-UST swaps. Given the fate of Terra alts, I think the swap volume and count will gradually decrease over time and we might see Terraswap gaining back its market share.
There are about 10k more users on Terraswap as compared to Astroport since Astro’s launch. And a lot of new users are using Terraswap too - another supporting evidence for the possibility of Terraswap regaining market share.
bLuna-Luna pair deep dive
Astroport fulfilled its promise of the bluna-luna ‘stable swaps’ - you lose less Luna when you swap from bluna to luna on Astroport as compared to Terraswap.
On the other hand, you are more likely to find time based arb opportunities on Terraswap going from Luna to bLuna.
Both swap count and volume is clearly dominated by Astroport at the moment (about 70% Astroport, 30% Terraswap)
However, given the lower fees structure and high liquidity, liquidity providers on Astroport are earning significantly less on swap fees compared to their counterparts in Terraswap - would have to depend on Astro emissions to make up for the lower APR.
Although the bLuna-Luna stable swap promise was held up and the general market participants are quick to identify efficiencies, it’s not all sunny days ahead for Astroport.
Current swap dominance is driven primarily by astro-ust swaps and if that starts to decline, so will the number of users and ultimately market share swaps of Astroport in comparison to Terraswap.
I am still bullish on Astroport and the team on executing great ideas but until we see them implemented, I would expect to see Terraswap climbing back up the market dominance for swaps.
Dashboard for all charts:
This took me way too long to write but thanks for reading as always. 17 days into the new year, still not too late for a new year wish am I right. Happy new year folks!