- We compare trading ETH and BTC on Uniswap and Kwenta
- The results indicate even at a 1 ETH or 1 BTC sized trade, Kwenta can save users money.
- At larger trade sizes, Kwenta's advantage becomes more significant where thousands to hundreds of thousands of dollars can be found in savings.
- Overtime, these savings would seem to have a significant impact on the performance of portfolios, both large and small.
Kwenta has a unique quality that is still not very well known: Infinite liquidity.
The result of having infinite liquidity is that all Synth-to-Synth trades incur 0% slippage. This means that when you trade on Kwenta, you completely bypass the normal rules of the traditional order book model and the automated market maker model (AMM) where if a trade is too large, it increases the price by buying up available liquidity at the initial trade price and is then forced to pay a higher price for the remainder of the trade.
On the most popular decentralized exchange (DEX), Uniswap, slippage varies on each token pair depending on how much has been pooled by liquidity providers. A popular token will have minimal slippage for a small trade but significant slippage at larger trade sizes. Below is an example of trading 1 LINK for DAI on Uniswap compared to trading 10,000 LINK for DAI. Over 1% of the trades value is lost to slippage.
Kwenta solves this problem by using the Synthetix protocol.
With Synthetix, users leverage a peer-to-contract trading model. The contract, in this scenario, is the Synthetix debt pool which backs the value of a synthetic asset (Synth) supported by the protocol. The price of each Synth is dictated by a decentralized Chainlink oracle network. As the price of a Synth fluctuates, the Synthetix debt takes on the gains or losses as the counter-party, offering a reliable method of exchange that has no impact on the underlying market the Synth represents. Once a Synth is minted, it can be directly exchanged for any other Synth for a one-to-one ratio at the market value of the trade. A single sBTC trade suffers as much slippage as a 100 sBTC trade: 0.00%.
Therefore, there are significant price savings that can be captured on Kwenta and other services built on the Synthetix protocol when compared to popular exchanges. To demonstrate how much money users can save by using Kwenta, we’ve conducted a simple experiment.
In this experiment, we compared similar trades on Uniswap and Kwenta and analyzed their results.
Experiment 1: ETH/DAI on Uniswap vs. sETH/sUSD on Kwenta
Experiment 2: WBTC/DAI on Uniswap vs. sBTC/sUSD on Kwenta
The results, at first, seem to favour large traders due to the dramatic impact on the savings at larger trades.
A 1000 ETH trade resulted in 7000.10 more USD in savings generated on Kwenta. A 100 BTC trade resulted in 28,767.32 USD being captured on Kwenta. For large traders to not trade on Kwenta would appear to be a massive disadvantage.
Conversely, smaller traders capture less in savings but would still be at an advantage to use Kwenta. Even for a single ETH, Kwenta captured 6.30 USD in additional value. For a single BTC, Kwenta was able to capture 113.77 USD in additional value. Although these values are small in comparison to whale-sized trades, the advantage of using Kwenta becomes apparent when contextualized. A trader exchanging a smaller quantity in trades would trade at a higher frequency than a whale.
Let’s evaluate a hypothetical scenario where both small and large traders were to use Kwenta over a period of one week and one year, assuming that small traders would engage in more active management of their portfolio.
Experiment 3: ETH trades over time on Kwenta
Experiment 4: BTC Trades over time on Kwenta
Over time it is easy to see that even at smaller trades, significant savings can be found on Kwenta versus the leading the DEX, Uniswap, for even the most popular tokens, ETH and BTC.
The chart below shows the savings of the 1 BTC trader from the chart above over the course of one year. By the end of the year, the 1 BTC trader saved just under 60,000 USD.
A note on fees
Uniswap and Kwenta both share the same fee for BTC and ETH trades, 0.3%.
The savings available on Kwenta and other projects building on Synthetix offer a massive advantage. Significant savings can captured even by small traders. At large quantities, Kwenta shines with substantial improvements in trading returns due to the increasing impact slippage has as trades get larger.
With advanced charting, futures, limit orders, and much more on the way for Kwenta, we believe we will soon offer what could be the most competitive landscape across the market for professional traders and new traders looking to step up their trading capabilities.
Start saving big on slippage at Kwenta.io.