1/ How should investors assess the performance of AMMs?

2/ Successful marketplace businesses unlock money to their supply-side participants.

For AMMs, this means that LPs expect to get back more than their initial deposit.

To determine the long-term viability of an AMM, we need tools that tell us how likely that is to happen.

3/ Quantifying & comparing the performance of AMMs:

In our new AMM dashboard,​ ​we’ve initially settled on two simple performance indicators that tell us about an AMMs

a) capital efficiency
b) financial performance https://terminal.tokenterminal.com/dashboard/AMMs 

4/ Liquidity turnover ratio (LTR):

What is the trading volume generated per $ of liquidity provisioned?

Calculation: daily GMV / daily average TVL.

The higher the LTR, the better the capital efficiency.

5/ Return on investment (ROI):

What is the gross rate of return generated per $ of liquidity provisioned?

Calculation: (daily Revenue / daily average TVL) * 365.

The higher the ROI, the better the financial performance.

6/ Definitions:

TVL = liquidity provisioned
GMV = trading volume generated
Revenue = total trading fees paid

7/ Cumulative GMV & Revenue figures for AMMs:

Uniswap is a clear leader in terms of absolute GMV and Revenue.

8/ Latest LTR & ROI figures for AMMs:

DODO performs well on both LTR and ROI, although at a much lower scale than its competitors.

9/ Uniswap’s historical LTR and ROI figures:

- Latest LTR: 0.32x
- Latest ROI: 34.53%

Uniswap has been able to consistently maintain a high LTR and ROI.

10/ SushiSwap’s historical LTR and ROI figures:

- Latest LTR: 0.15x
- Latest ROI: 16.78%

SushiSwap is at a clear second place after Uniswap, when accounting for scale.

11/ Balancer’s historical LTR and ROI figures:

- Latest LTR: 0.05x
- Latest ROI: 6.37%

Balancer has not been able to reach similar levels of utilization and returns as its competitors.

12/ Curve’s historical LTR and ROI figures:

- Latest LTR: 0.04x
- Latest ROI: 0.55%

Curve has not been able to reach similar levels of utilization and returns as its competitors.

13/ DODO’s historical LTR and ROI figures:

- Latest LTR: 0.77x
- Latest ROI: 31.50%

DODO performs well on both utilization and returns, although at a much lower scale than its competitors.

14/ Caveats for using LTR & ROI:

Token incentives may temporarily increase volumes and fees --> the above performance indicators should be viewed on a long-term basis.

Ratios should be evaluated against absolute figures, it's often harder to maintain performance at scale.

15/ For readers who want to learn more about the ​net returns​ of AMM deposits, we recommend checking out:

https://research.paradigm.xyz/uniswaps-alchemy​.

16/ Check out our newsletter for more DeFi-related insights: https://tokenterminal.substack.com/p/how-should-investors-assess-the-performance

fin/ To learn more about the metrics we use at Token Terminal, check out: https://docs.tokenterminal.com/