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MetaMask Revenues, DEX Fee Competition, and Aggregator Wars

Nov 18, 2021 · 3 min read

By Ashwath Balakrishnan

DeFi’s Secret Cash Flow Machine

  • In Sept. 2020, Metamask announced its native swapping feature that gets quotes from multiple DEX aggregators to give users the best execution prices available on-chain. With this move, Metamask became an aggregator of aggregators — or a “meta” aggregator (pun intended).
  • Metamask levies a 0.875% fee on each swap, which is exorbitant by DeFi standards. And this has resulted in over $200M in revenue over the last 11 months. The simple UX of swapping via the Metamask plug-in seems to trump the ludicrous fees the wallet charges for trades.

  • If you don’t think $200M in revenue over 11 months is a remarkable feat — which you should — compare Metamask’s revenue to that of two of the top DEXes on Ethereum: Sushiswap and Curve. Sushiswap has made just under $70M YTD, while Curve sits around $12M.
  • Now consider this: Metamask’s customer acquisition cost (CAC) is a big, fat zero. Metamask has no token incentives or emissions, so there’s virtually no cost to their revenue. Their profit margins are close to 100%. Imagine if they had a token.
The (Fee) Race to the Bottom

  • Uniswap’s market share among Ethereum spot DEXes hit a record high of 72%.
  • The introduction of a new low-fee tier was a recent catalyst. On November 13, Uniswap launched its new 0.01% fee tier, making Uniswap’s stablecoin quotes among the most competitive in DeFi. As observers have pointed out, this likely marks the beginning of a fee-centric race to the bottom.
  • On centralized exchanges, traders are always looking for ways to move into a lower fee bracket. Trading fees on Binance and FTX are far lower than on DEXes. As liquidity in the space grows and attracts serious players, DeFi’s evolution into a fee-competitive market is inevitable.
DEX Aggregator Wars

  • 1inch is still the leading DEX aggregator by a large margin. However, competitors such as Matcha and Paraswap are starting to eat into its market share.
  • 1inch had its second-best month ever in October, with $13.8B in volume. But Matcha and Paraswap — once-distant competitors — saw $3.5B and $2B in volume, respectively.
  • Aggregators are a crucial piece in enhancing the UX of using DeFi-native liquidity. Watching how this shapes up is likely to be a key theme going forward.
  • On the bright side, aggregator volume is back on the rise after a period of contraction in Q3. DEX volumes are on the same trajectory, and despite pathetic price action amongst DeFi majors, their fundamentals and usage are looking brighter than ever.
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