Uniswap V2 vs V3 : By the numbers
The release of Uniswap V2 on May 05, 2020 kickstarted the growth of decentralized finance on Ethereum. It’s key feature enabled users to create trading pools between any ERC20 token, including a long tail of assets that were unavailable on any other exchange at the time. The release was a wild success and set the stage for Uniswap to become a dominant leader in the decentralized exchange space for the foreseeable future.
The much anticipated launch of Uniswap V3 occurred on May 5th, 2021. The key breakthrough was concentrated liquidity which allowed liquidity providers to control the range in which their assets traded. These tightly bounded ranges offered better capital efficiency compared to V2 pools.
Another very forward thinking feature in V3 was the introduction of different fee tier levels across trading pairs ( 0.05%, 0.30%, and 1.00%).
Typically, an updated version of existing protocol would lead to a migration away from the prior release, but for Uniswap this is not the case.
I analyzed the data beginning in Q4 of 2021, nearly five months after the V3 release.
V2 has dominated the overall number of trades, accounting for 68% of the total trade quantity.
The V2 dominance in trading quantity goes back to it’s original game changing feature of providing a platform for long tail assets. Trading pairs that exist exclusively on V2 (not on V3) account for 40.4% of the overall trading quantity while common pairs between both version trade in nearly identical quantities.
And this trend does not appear to be stopping. Exclusive trading pairs continue to pop-up on V2, accounting for over 62K different trading pair combinations.
While V2 has dominated in trading quantity, V3 has dominated in the overall trading volume (USD), accounting for 78% of the total volume since Q4 2021.
Where this trading volume dominance is heavily reflected is in the stable coin (i.e. USDC/USDT) trading space.
When looking at stable coin pairs, V3 is accounting for over 98% of the overall volume and 77% of the trading quantity.
Much of the success of V3 in the stable coin space, was the introduction of a 0.01% fee tier in November 2021, which undercut the major players in the stable coin space such as Curve Finance. This is heavily reflected when viewing stable coin trading volume by day, with post Nov 2021 seeing daily spikes upwards of 600M USD in a single day.
It is clear from the data that both V2 and V3 of Uniswap have developed a product market fit, but in separate use cases.
V2 remains a major player for users looking to trade new and exotic pairs, while V3 has become a force to reckon with in the stable coin trading market.
A dashboard containing all visualizations and queries can be found here.
Thank you to Dune Analytics for making the analysis possible.
