This article analyzes the current status of liquidity pools on major cryptocurrency chains and questions the claim that Solana’s trading volume surpasses that of Ethereum and other EVM chains. The article is sourced from jpn memelord and is curated and translated by Deep Tide TechFlow.
(Background:
Ethereum OG loyalists open fire: Five reasons why Solana is unlikely to become a global mainstream blockchain.
)
Recently, there has been much discussion about Solana surpassing all EVM chains in terms of trading volume. I decided to delve into the quality of liquidity pools on top-tier blockchains to determine whether this is a temporary trend or a true disruption to existing chains. Join me in exploring this in-depth.
The methodology for this analysis is based on the standards for stock inclusion in major stock indices.
The three main criteria are:
1. Established trading history
2. High liquidity
3. Sustained trading volume
These criteria are also applied to liquidity pools.
Methodology construction:
The following methodology summary is for reference purposes only. For complete and detailed information, please refer to the methodology document in SP Global.
Applicable scope:
All constituent stocks must be US companies.
Market value eligibility:
To be included, a company must have an unadjusted market value of at least $14.5 billion, and its free-float market capitalization must be at least 50% of the unadjusted minimum market value threshold.
Public ownership:
Companies must have a minimum investability weight factor (IWF) of 0.10.
Financial feasibility:
Companies must have positive earnings in the most recent quarter and the past four quarters (sum).
Adequate liquidity and reasonable price:
Using a composite pricing and trading volume, the ratio of annual trading volume (defined as the average closing price multiplied by historical trading volume) to free-float market capitalization should be at least 0.75, and the monthly trading volume of the stock in the six months prior to the evaluation date should be at least 250,000 shares.
Industry representation:
Industry representation is measured by comparing the weight of each GICS® industry in the index to its weight in the S&P Total Market Index, taking into consideration the company selection within the relevant market capitalization range.
Company type:
All eligible U.S. common stocks listed on qualified U.S. exchanges are eligible for inclusion. Real estate investment trusts (REITs) are also eligible for inclusion. Closed-end funds, ETFs, ADRs, ADSs, and certain other types of securities are not eligible for inclusion.
Are there stocks traded that are not in major indices? The answer is yes.
However, these stocks constitute the “blue-chip stocks” of the traditional financial world, and finding analogs in DeFi can help us assess the targets that traditional finance may focus on when entering the DeFi space.
I collected trading volume data for all liquidity pools on Ethereum, Solana, BSC, @arbitrum, and @base, and calculated the total trading volume over the past 30 days.
Next, I weighted the pools established in the past 30 days to lower their rankings, in order to meet the “established history” criterion.
Finally, I weighted the trading volume and total value locked (TVL) for each pool to meet the other two criteria. The specific formula is: Ln (TVL)/Ln (MAX (TVL)) * TVL_weight.
This scaling method has little impact on pools with better liquidity but lowers the rankings of pools with smaller TVL.
Here are the “new high-quality” top 20 rankings based on this weighted method.
It is worth noting that Ethereum, Solana, Arbitrum, and Base each have a representative pool in the top 4!
These pools are the “major” pools that trade their respective chain’s native tokens with USDC.
Another notable feature is that Ethereum still dominates and occupies half of the top positions in this ranking. Its high TVL combined with sustained trading volume makes it stand out among all chains.
I strongly suspect this is also part of the reason why Blackrock chose to deploy on Ethereum.
In-depth analysis, the first two pools are particularly noteworthy:
The slipstream WETH-USDC pool by @AerodromeFi has the highest trading volume, and the v3 WETH-USDC pool on @Uniswap on Ethereum has the highest TVL.
Dune data link:
On most blockchains, the 0.05% fee-rate pools are the top pools, but on the BNB chain, the 0.01% pools are surprisingly the top pools.
Furthermore, USDC is used in more top pools than USDT, which is unexpected.
How many pools are there on each chain?
Ethereum: 10
Base: 5
Arbitrum: 2
BSC: 2
Solana: 1
In this analysis, all other Solana pools did not make it to the top due to insufficient TVL. Although the trading volume is significant, these trades occur in a situation where liquidity is significantly lower than other chains.
Without considering TVL, Solana has a significant trading volume among the top 150 pools, but it is not close to surpassing all EVM chains, even though it is very close to Ethereum.
The top 20 assets traded in all pools include:
Stablecoins: USDC, USDT, DAI, pyUSD
Major cryptocurrencies: ETH, BNB, SOL, cbBTC, WBTC, and wsETH
Others: AERO
Surprisingly, Aero is the only token that is neither a stablecoin nor among the top five cryptocurrencies by market capitalization.
TVL for the top 25 pools on each chain:
Ethereum: $1.04 billion
Base: $310 million
BNB: $194 million
Solana: $181 million
Arb: $155 million
Clearly, Ethereum is still the winner, but Base is emerging as a strong challenger in other chains, as it has the highest trading volume pool.
This kind of attention is not necessarily a bad thing, but I believe that mature investors looking to delve into DeFi are more concerned about the sustained economic activity from deep liquidity pools rather than which memecoin is popular this week or today.
There are many aspects of this analysis that can be further explored and improved:
Calculating automated TVL indicators
Considering not only TVL but also liquidity depth (capital efficiency of CL pools is very high)
Considering pool fee levels
I will be launching Part 2 of this analysis in the coming weeks.
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