Why can’t every Web3 project escape DEX? A five-year history of development tells you the answer

DEX, never really understood

In the entire تشفير-financial system, DEX has always been an intriguing role.

It seems to be always online – no downtime, no censorship, no running away, but it has also been on the edge for a long time: the interface is complex, liquidity is insufficient, and there is no story. It is neither the center of KOL topics nor the first choice for hot projects to settle in. When DeFi broke out, it was a substitute for CEX. After the bear market returned, it became an old legacy of the DeFi era with the main features of security and self-custody – as if DEX had already lost its presence when the industry paid more attention to new narratives such as public chains, AI, RWA, and inscriptions.

But when we extend the time and expand the structure, we will find that DEX has been growing quietly and beginning to shake the underlying logic of on-chain finance.

Just like the once popular Uniswap is just a historical node, and Curve, Balancer, Raydium, and Velodrome derived from the historical torrent are just its deformations. And when we see the evolution of all AMMs, aggregators, and L2 DEXs, what is jointly promoted behind them is actually a self-evolution process of the underlying distributed finance.

So I tried to get rid of the perspective of product comparison and track trend and return to the long history to explain its structural evolution logic:

• How DEX has evolved from a tool to a structural evolution logic on the chain;

• how it has absorbed financial mechanisms and ecological goals from different eras;

• And why, when we talk about Launch, project cold start, and community self-organization today, we cannot avoid DEX.

This is a history of the evolution of DEX, a structural observation of the “functional spillover” of decentralization, and the unfolding of an entire historical path, so I also try to answer a question that is becoming increasingly difficult to avoid:

When we talk about Web3, why cant every project escape DEX today?

1. A brief history of DEX in the past five years: from marginal roles to narrative hubs

1. The first generation of DEX: the expression of anti-centralization (EtherDelta era)

Around 2017, when centralized exchanges were at their peak, a group of crypto geeks quietly launched a strange experiment on the chain: EtherDelta.

Compared with CEXs such as Binance and OKEx of the same period, EtherDelta can almost be said to be a disastrous trading experience: transactions require manual input of complex on-chain data, the interaction delay is extremely high, and the user interface is comparable to the primitive web pages of the last century, which almost discourages ordinary traders.

However, the birth of EtherDelta from the first day was not just for the sake of ease of use, but to completely get rid of centralized trust: trading assets are completely controlled by users themselves, and order matching is completed entirely on the Ethereum chain, without the need for intermediary custody or trust in a third party. Ethereum founder Vitalik Buterin even publicly expressed his expectations for this model, believing that decentralized transactions on the chain are one of the directions for the real application of blockchain.

Although EtherDelta itself eventually faded out of sight due to technical and user experience difficulties, it left an important path in the history of blockchain: DEX is no longer just a trading tool, but a practical expression of opposition to centralization.

It may not have been the darling of the market at the time, but it laid the genetic seeds for future Uniswap, Balancer, and Raydium: users hold their own assets, orders are matched on the chain, and no custody trust is required – it is these characteristics that have become the basic framework for the continuous evolution, derivation, and expansion of DEX in the future.

2. Second-generation DEX: Technological paradigm shift (emergence of AMM)

If EtherDelta represents the first principle of decentralized trading, then the birth of Uniswap is the first time that this ideal has a scalable path to realization.

In 2018, Uniswap released v1 and introduced the automated market maker (AMM) mechanism on the chain for the first time, completely breaking the limitations of the traditional order book matching model. Its underlying trading logic is simple but revolutionary – x * y = k: The formula is the core innovation of Uniswap, allowing liquidity pools to automatically price without counterparties or pending orders. As long as you put an asset into the pool, you can automatically get another asset according to the constant product curve. There is no need for counterparties, pending orders, or matching. Trading behavior is equal to pricing behavior.

The breakthrough of this model is that it not only solves the chicken-and-egg problem of early DEXs where trading could not be done if no one placed an order, but also completely changes the source of liquidity for on-chain transactions: anyone can become a liquidity provider (LP), inject assets into the market and earn fees.

The success of Uniswap has also inspired innovations in other AMM mechanisms:

Balancer introduced multi-asset + custom weight pool, allowing projects to set their own asset weights and distribution;

Curve has designed an optimized curve to address the high slippage problem of stablecoins, achieving lower-cost asset exchange;

SushiSwap added token incentives and governance mechanisms based on Uniswap, opening up the narrative of liquidity mining + community sovereignty;

These variants have jointly pushed AMM DEX into the protocol productization stage. Unlike the first generation of DEX, which was mainly driven by concepts and had a rough form, the second generation of DEX has begun to show a clear product logic and user behavior closed loop: they are not only capable of trading, but also the structural basis for asset circulation, the entry point for users to participate in liquidity, and even a part of the project ecosystem launch.

It can be said that starting from Uniswap, DEX has truly become a product that can be used, grow, and accumulate users and capital for the first time – it is no longer an appendage for the implementation of concepts, but has begun to become the structure builder itself.

3. The third generation of DEX: from tool to hub, functional expansion and ecological integration

Since 2021, the evolution of DEX has begun to move away from a single trading scenario and entered a fusion stage where functional spillover and ecological integration are parallel. At this stage, DEX is no longer just a place to exchange coins, but has gradually grown into the liquidity core of the on-chain financial system, the entry point for project cold start, and even the scheduler of the ecological structure.

One of the most representative paradigm shifts during this period was the emergence of Raydium.

Raydium was born on the Solana chain and is the first DEX to attempt to deeply integrate the AMM mechanism with the on-chain order book. It not only provides a liquidity pool based on a constant product, but also synchronizes transactions to Serums on-chain order book, forming a liquidity structure where automatic market making + passive orders coexist. This model combines the simplicity of AMM with the visible price level of the order book, greatly enhancing capital efficiency and liquidity utilization while maintaining on-chain autonomy.

The structural significance of Raydium is that it is not just AMM optimization, but the first time that DEX has tried to introduce a distributed reconstruction of the CEX experience on the chain. For new projects in the Solana ecosystem, Raydium is not only a trading venue, but also a launching venue – from initial liquidity to token distribution, order depth, and project exposure, it is a linkage hub between primary issuance and secondary trading.

At this stage, the functionality explosion goes far beyond Raydium:

• SushiSwap has added transaction mining, governance tokens, community governance, and the Onsen incubation pool to the Uniswap model, forming a governance-based DEX ecosystem.

• PancakeSwap combines blockchain games, NFT markets, and on-chain lotteries to complete DEX platform operations on BNB Chain.

• Velodrome (Optimism) introduced “inter-protocol liquidity scheduling” based on the veرمز مميز model, allowing DEX to become a coordinator between protocols rather than just serving users;

• In the Solana ecosystem, Jupiter connects multiple DEXs and asset paths through the role of path aggregator, becoming a true on-chain cross-protocol aggregator.

The common feature of this stage is that DEX is no longer the end point of the protocol, but a relay network connecting assets, projects, users and protocols.

It not only has to undertake the terminal interaction of user transactions, but also has to embed the initial traffic of project issuance. At the same time, it also needs to connect to a complete set of on-chain behavioral systems such as governance, incentives, pricing, and aggregation.

DEX has since broken away from its identity as an “island protocol” and has become the hub primitive of the DeFi world—a highly adaptable and highly composable on-chain consensus component.

4. The fourth generation of DEX: Deformed growth in the multi-chain torrent, is a test of aggregation, L2 and cross-chain

If the evolution of the first two generations of DEX was a mutation of the technological paradigm, and the third-stage Raydium was an attempt to splice functional modules, then starting from 2021, DEX has entered a stage that is more difficult to classify: it is no longer a certain team that leads the version upgrade, but the entire on-chain structure forces it to make adaptive deformations.

The first to feel this change are DEXs deployed on Layer 2.

After the launch of Arbitrum and Optimism mainnet, the high gas cost of transactions on Ethereum is no longer the only option, and the Rollup structure has begun to become the soil for the growth of a new generation of DEX. GMX adopts the model of oracle pricing + perpetual contract on Arbitrum, responding to the problem of AMM is not enough to solve the depth with a minimalist path and a structure without LP pool. On Optimism, Velodrome uses the veToken model to try to establish a governance coordination mechanism for liquidity incentives between protocols. These DEXs no longer pursue universality, but are rooted in specific chains in the form of ecological supporting facilities.

At the same time, another type of structural patch was also taking shape: aggregators.

As the number of DEXs increases, the problem of liquidity fragmentation quickly magnifies, and users where to trade on the chain gradually becomes a new decision-making burden. From 1inch launched in 2020 to Matcha and Jupiter later, aggregators have assumed a new role: they are not DEXs, but they coordinate the liquidity paths of all DEXs. In particular, Jupiters rapid rise on the Solana chain is precisely because it accurately fills the gaps in path depth, asset jumps, and trading experience.

However, the structural evolution of DEX has not stopped at on-chain adaptation. After 2021, projects such as ThorChain and Router Protocol have been launched one after another, proposing a more radical proposition: Can the two parties of the transaction be swapped even if they are not on the same chain at all? This type of cross-chain DEX has begun to try to solve the problem of inter-chain asset circulation by building its own verification layer, message relay or virtual liquidity pool. Although the protocol structure is much more complex than that of a single-chain DEX, their emergence sends a signal: the evolution path of DEX has departed from a public chain and is moving towards an era of inter-chain protocol collaboration.

It is difficult to categorize DEXs at this stage by “type”: they may be liquidity portals (1inch), protocol coordinators (Velodrome), or even interchain swap mechanisms (ThorChain). They are not “designed” like the previous generation, but more like “squeezed out by the structure”.

At this point, DEX is not only a tool, but also an environmental response – an adaptive product used to undertake changes in network structure, cross-chain asset transfers, and incentive games between protocols. It is no longer a product update but a manifestation of structural evolution.

2. When pricing, liquidity and narrative intersect: How DEX enters Launch

Looking back at the development paths of the first four generations of DEX, it is not difficult to find one thing: the reason why they continue to evolve is never because a certain function is designed more cleverly, but because they are constantly responding to the real needs of the chain – from matching, market making, to aggregation, and cross-chain, every transformation of DEX is a natural filling of a structural gap.

At this stage, DEX is no longer a functional point on a chain, but more like a default adaptation layer after the chain structure changes. Whether it is a project that wants to provide incentives, a protocol that wants to attract traffic, or a cross-chain aggregation, DEX plays an increasingly important role in scheduling and coordination.

But as it assumes more and more roles, DEX inevitably encounters another structural dilemma that has long existed but has always been absent:

To be listed on CEX, you need to list coins, negotiate resources, and build a community; to be listed on the chain, you need to build a pool, find liquidity, and introduce spot circulation. These seemingly scattered issues eventually converge into a core problem: who will provide the project with a startup structure for the cold start of a new project?

It should be noted that in the early crypto market, launch was often a resource operation dominated by centralized exchanges: the coin listing rhythm, price guidance, user distribution, and publicity nodes were all controlled by the platform. Although this model is efficient, it also brings problems such as high entry barriers, lack of transparency, and excessive centralized power.

As DEX gradually mastered pricing, liquidity, user mobilization and community mechanisms, it began to have the structural ability to undertake all the elements required for Launch – and all this was not because DEX wanted to be Launch, but because it naturally grew into the shape of Launch in the evolution of its functions and ecology.

It has never announced that it will enter the primary market financing scenario, but at a certain stage in history, DEX has naturally taken over the three core structures of a projects cold start: liquidity, pricing, and community.

This is not a product strategy, but an overflow result of structural logic.

After Uniswap introduced AMM, we saw for the first time a price discovery mechanism that does not require orders or matchmakers. In other words, DEX turns market consensus into an on-chain function, and price formation no longer relies on matching, but is directly determined by the supply and demand relationship of the asset pool. This pricing structure is precisely one of the most difficult problems to solve for a cold start of a project: when a token is just launched, has no liquidity, and has no secondary trading depth, what it needs most is an automatic, permissionless price discovery mechanism.

Then, the liquidity pool became the distribution channel for early incentives. The project party injected tokens and mainstream assets (such as ETH, USDC) into the pool, using the depth of the pool to support early price stability, and at the same time مرشدd users to join the liquidity provision through transaction fees and liquidity mining. Users are not investors but participants; projects are not issuing coins but releasing pools.

Taking Raydium as an example, the logic of DEX is Launch platform is particularly direct. It is not only a liquidity protocol on Solana, but also embedded with AcceleRaytor module, allowing projects to cold start on the chain through liquidity pool + initial offering. There is no complicated review process, no intermediary platform to control the rhythm of listing, and even no mandatory KYC threshold. Everyone can subscribe for shares in advance through Raydium, preempt transactions, and gamble in the primary price changes.

AMM not only provides liquidity and pricing, but also reconstructs community mobilization in a sense: the trading logic of DEX is naturally combinable, participatory, and co-constructible. This also means that from the first day of the projects launch, it has been in an environment where the community and trading mechanisms are intertwined, and the issuance of coins has become a social release.

Therefore, DEX is no longer a distribution channel or back-chain tool for the primary market, but has taken over all the key paths of Launch from the root structure. It does not rely on hosting, publicity, or permission control, but only on the mechanism itself to create a closed loop for the early issuance of a project.

Therefore, Launch is not a functional module of DEX, but more like a structural byproduct that grows naturally from it. As a decentralized trading mechanism, when DEX is used in the early stages of a project, it naturally becomes a landing point for the primary market.

3. From Distribution to Design: On-chain Rewriting of Launch Mechanism

The earliest launch model is actually very simple – as long as the pool is opened, the token is online.

The free listing mechanism on Uniswap gave birth to the earliest batch of IDO (Initial DEX Offering) projects: the project party directly injected the tokens into the trading pair, forming a liquidity pool with ETH or USDC, and the users rush to buy was itself a primary issuance. There is no scheduling, no qualification review, no centralized control, and the only threshold is the speed on the chain and the information gap.

This mechanism greatly releases the freedom of token issuance, but it is also accompanied by problems such as crazy slippage, preemptive robots, and lack of price anchoring. The whole process is more like an open speculative sprint rather than a real financing design.

As problems emerged, some projects began to try more controllable mechanisms, such as Balancer LBP (Liquidity Bootstrapping Pool).

The core logic of LBP is to artificially set an extreme initial price weight (for example: 90% tokens/10% USDC) at the beginning of the launch, and gradually adjust it to a normal ratio over time. The price automatically goes down under the mechanism design, intending to suppress early FOMO and robot rush.

In theory, it makes prices more rational and gives users more equal opportunities to participate. But in practice, LPBs anti-capture ability is still limited, and the price curve design is difficult, and the threshold for user education is not low. It is like a programmable roadshow in the DEX era, but it does not really solve the problem of who should participate.

Another type of solution is the Fair Launch model, such as the one implemented by Camelot on Arbitrum.

The idea of Fair Launch is: no longer pre-set prices, but to raise funds + set prices + distribute in an open, participatory deposit window. How much USDC you invest will determine how many tokens you will receive in proportion. Everyone can participate, and the proportionate distribution and no rush to buy make it sound more fair.

But the real challenge is: who is fair to? For retail investors, the lack of price anchors and exit mechanisms still poses risks; for project owners, the fundraising efficiency is unstable and the market depth is uncontrollable, which may not be better than traditional IDOs. Fair Launch is more of an expression of governance philosophy rather than an improvement in structural efficiency.

At the same time, in more radical DEXs such as Jupiter and Velodrome, we are beginning to see some mechanisms that are deeply tied to the governance structure within the protocol:

• Jupiters LFG activity introduced holding thresholds and interaction preconditions, turning qualification into a proof of on-chain behavior;

• Velodrome uses the veNFT + bribe mechanism to turn liquidity incentive rights into a process of voting and negotiation between protocols. The launch of a project is not just about issuing coins, but about entering the liquidity governance game.

The common point of these mechanisms is that Launch is no longer an “issue-purchase” action, but a reconstruction of structural relationships.

The launch of a project is not just a signal for the start of trading, but a hierarchical consensus process for entering the governance structure, user system, and liquidity distribution of DEX. You are not trading the coins you bought, but the network order you are about to join.

But this also brings more complex risks: robot arbitrage, community expectation manipulation, black box price design, liquidity-induced attacks and other problems emerge in an endless stream. The more sophisticated the mechanism, the more Gods perspective the designer has, and the less users can understand and control.

Launch is no longer an event, but more like a dynamic system. It not only tells you “how to issue coins”, but also implies the basic methodology of how projects organize governance, allocate liquidity, and guide user minds.

IV. Future speculation on DEX: Iterative evolution from liquidity facilities to consensus initiators

If the early DEX was designed to make on-chain transactions possible, then today, after five years of evolution, DEX is slowly approaching another question: what else can it enable besides transactions?

The natural growth of the Launch mechanism has transformed DEX from a platform for matching asset circulation to a hub for undertaking projects, guiding liquidity, and reshaping initial consensus. But because of this, as more and more projects choose to start on DEX, DEX itself is also facing new systemic challenges: Who should have the right to participate in Launch? How to screen real users? How to avoid liquidity fraud?

Under this pressure, a more fine-grained participation mechanism seems to be emerging.

The on-chain identity system, especially the reputation mechanism built on ZK (zero-knowledge proof) technology, becomes a possible answer. Unlike traditional KYC, which requires exposing privacy, ZK identity allows users to prove that they meet certain conditions (such as holding time, on-chain interaction history, and participation in a certain protocol) without revealing specific information. Launch is no longer a simple grab, but a screening process based on on-chain behavior and reputation.

If this structure is established, the future DEX Launch may no longer be open the door, whoever is faster will get in, but will evolve into a new model of on-chain qualification certification + structured participation distribution. The initial cold-start tokens may only be issued to those who truly meet the specific community standards.

Going a step further, DEX may even develop some kind of on-chain YC type structure.

YC (Y Combinator) plays the role of screening, investing, and incubating early projects in the Web2 world. In the DEX field, when the pricing mechanism, liquidity distribution, user screening, and incentive guidance components gradually mature, DEX is likely to become an integrated platform for cold start of Web3 projects – not only a capital pool, but also a community entrance and a liquidity market.

By then, DEX may not only be a trading platform, nor a simple Launchpad, but the starting point of the entire on-chain project incubation system: an on-chain consensus launcher.

Of course, this road will not be easy.

When DEXs integrate the Launch function into the ecosystem standard configuration, it will inevitably bring about new red ocean competition:

• Who can screen out the best projects?

• Who can form the most tight-knit user community?

• Who can provide the most effective liquidity guidance and follow-up support?

Launch has transformed from a cold start problem for the project to a life and death issue that DEX itself must answer.

At that point, we may need to re-ask the question:

If every DEX becomes a Launch platform, will Launch itself lose the early trust it once represented?

5. Conclusion: From “self-custody” to “co-creation of financial structure”, DEX returns to freedom

When we re-examine the DEX path, it is easy to forget how it was originally born – not so practical, not so lively, not so market. It was a small experiment led by geeks, just to prove that asset exchange can also be non-custodial, non-platform-dependent, and non-trust-dependent.

Today, when we see that DEX can support project cold start, liquidity governance, cross-chain routing, launch structure, and even become the users entry point for financial cognition, we should look back and see clearly: all this is not the result of a great design of a certain project, but the product of the self-evolution of the entire on-chain structure.

DEX has not actively upgraded, it just keeps responding to changes in the surrounding system and constantly taking on structural gaps. It has neither written a plan nor drawn clear boundaries, but through AMM, aggregator, ZK identity, and governance binding, it has gradually turned itself into a connector and initiator of the ecosystem.

It has never left the transaction, but it has long been more than just for the transaction. It has never left the center, but has slowly retreated into the structure.

The evolution of DEX has never been a completed functional leap, but an ongoing protocol reconstruction.

In this process, what it really guards is actually the original thing: not the token, not the gas fee, nor the slippage, but that users can freely participate, collaborate, and shape their own financial order on the chain.

So when we ask again: Why cant every project escape DEX? Perhaps the answer is not must, but – there is no better starting point than this.

The future of DEX may not lie in the transaction itself, but in the way it allows us to reتحديne collaboration.

مراجع

[ 1 ] EtherDelta. A decentralized peer-to-peer cryptocurrency exchange built on Ethereum.

[2] Vitalik Buterin. On Decentralized تبادلs and the Future of Trustless Finance.

[ 3 ] Uniswap Team. Uniswap V2 Whitepaper, 2020.

[ 4 ] Balancer Labs. Balancer Whitepaper: Automated Portfolio Manager and Trading Platform.

[5] Curve Finance. Technical Documentation, Curve DAO, 2020.

[ 6 ] SushiSwap. SushiSwap Migration Plan Governance Model, Sushi Community, 2020.

[ 7 ] Raydium. Raydium Protocol AcceleRaytor Overview, Solana Ecosystem, 2021.

[8] Velodrome.ve(3, 3) Governance and Liquidity Routing on Optimism.

[ 9 ] Jupiter Aggregator. Solana DEX Aggregator: Routing and Token Swap Engine, 2022.

[ 10 ] PancakeSwap. Multifunctional DEX Platform on BNB Chain, 2021.

[ 11 ] GMX. Decentralized Perpetual Exchange on Arbitrum and Avalanche, GMX Docs.

[ 12 ] 1inch Network. 1inch Aggregation Protocol Whitepaper, 2021.

[ 13 ] Matcha (0x Project). User-friendly Trade Aggregator Interface.

[ 14 ] ThorChain. Cross-chain Liquidity Protocol for Native Assets, 2021.

[ 15 ] Router Protocol. Cross-chain Liquidity Routing Infrastructure.

[16] Balancer Labs. Liquidity Bootstrapping Pool (LBP) Mechanism.

[ 17 ] Camelot DEX. Fair Launch and Ecosystem Design on Arbitrum.

[ 18 ] Jupiter. LFG: Launch Farming Guide for Solana Projects.

[ 19 ] Velodrome. veNFT Bribe System and Governance Liquidity Wars.

[20] Sismo. ZK-based Privacy-preserving Identity and Reputation System, 2023.

[ 21 ] Gitcoin. Gitcoin Passport: Composable Web3 Identity Layer, 2023.

[ 22 ] Y Combinator. Startup Incubation Framework for Seed-stage Projects, Referenced for conceptual analogy.

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