DEX adoption needs greater capital efficiency — PancakeSwap product lead

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The lack of options trading liquidity is one of the most pressing issues of current DeFi protocols.

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DEX adoption needs greater capital efficiency — PancakeSwap product lead

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Decentralized finance (DeFi) needs greater capital efficiency to increase the market share of decentralized exchanges (DEXs), according to PancakeSwap.

Chef Momo, the pseudonymous product manager of the DEX, told Cointelegraph:

“Such initiatives promoting capital efficiency and composability will be pivotal in expanding the market share of DEXs.”

PancakeSwap is a popular multichain DEX that launched concentrated liquidity automated market maker (CLAMM) options trading on Arbitrum on April 8 by merging the DEX platform with Stryke’s options trading protocol.

CLAMM options will introduce a new approach for building on-chain liquidity in DeFi, based on supply and demand mechanics, according to Chef Momo:

“The scarcity of options liquidity persists as a significant challenge not only in DeFi but CeFi [centralized finance] as well. DEXs serve as the fundamental liquidity infrastructure in DeFi. Leveraging this liquidity for option writing presents a substantial opportunity for bolstering on-chain options liquidity.”

The new options are live for the ARB/USDC, ETH/USDC, and wBTC/USDC trading pairs. CLAMM options aim to offer more intricate options trading features for crypto investors along with new opportunities for liquidity providers. According to Chef Momo:

“Liquidity Providers can capitalize on their existing liquidity in v3 pools on PancakeSwap to write options and earn premiums boosting their overall returns.”

PancakeSwap is currently the 10th-largest DEX, with a 3.37% market share on PancakeSwap V2 and a 2.92% market share on PancakeSwap v3, according to CoinMarketCap data.

Top DEXs by market share. Source: CoinMarketCap

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DeFi needs greater capital efficiency

Initiatives similar to CLAMM that promote greater capital efficiency and composability in DeFi will be pivotal in growing the market share of DEXs, according to Chef Momo.

“In TradFi, the options markets dominate the derivatives sector, but its presence in crypto is minimal, presenting considerable growth opportunities. Options bring significant value to DeFi, including hedging investment portfolios and generating income.”

DEXs are far outpaced by their centralized counterparts. Binance, the world’s largest CEX, currently boasts a daily trading volume of $26.4 billion.

In comparison, Uniswap only boasts $1.44 billion in 24-hour trading volume as the world’s largest DEX, according to CoinMarketCap.

Looking at individual traders, Binance averages over 21 million weekly visits, while Uniswap, the largest DEX, was only used by 733,930 unique active wallets during the past week, according to DappRadar.

Uniswap’s weekly volume of $25.5 billion is still short of Binance’s daily trading volume.

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