Why can't every Web3 project escape DEX?

Author: Tessa, Nomos Labs Source: mirror

1. DEX, never really understood

DEX has always been an intriguing character in the entire crypto-financial system.

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 a lack of storytelling. It is neither the center of KOL topics nor the first choice for hot projects to rush to settle in. When DeFi broke out, it was a "substitute" for CEX. After the bear market returned, it became the "old legacy of the DeFi era" with the main focus on "security and self-custody" - as if when the industry paid more attention to new narratives such as public chains, AI, RWA, and inscriptions, DEX had already lost its sense of existence.

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

Just as 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:

This is an evolutionary history of DEX, a structural observation on the "functional spillover" of decentralization, and an unfolding of an entire historical path, so I also tried to answer a question that is becoming increasingly difficult to avoid:

"When we talk about Web3, why can't every project escape DEX today?"

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

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

2017 Around 2017, when centralized exchanges were in full swing, a group of crypto geeks quietly launched a strange experiment on the chain: EtherDelta.

Compared with CEXs such as Binance and OKEx at the same time, 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 original web pages of the last century, which almost makes ordinary traders discouraged.

But the birth of EtherDelta, from the first day, was not just for 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 and trust in third parties. 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 has since ceased to be just a trading tool, but has become 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 Uniswap, Balancer, and Raydium in the future: user assets are self-held, order matching is on-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 (the 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 implementation path.

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. The underlying trading logic is simple but revolutionary - x * y = k: The formula is Uniswap's core innovation, allowing liquidity pools to be automatically priced without the need for counterparties or orders. As long as you put one asset into the pool, you can automatically get another asset according to the constant product curve. No counterparties, no orders, no 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 that "no one places orders" and cannot trade, 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 the innovation of other variants of AMM mechanisms:

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

Curve designed an optimization curve to achieve lower-cost asset exchange in response to the high slippage problem of stablecoins;

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 DEX, which was mainly driven by concepts and had a rough form, the second-generation DEX has begun to show a clear product logic and user behavior closed loop: they can not only trade, but also are 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 with 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 of the concept landing, but has begun to become the structure builder itself.

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

After entering 2021, the evolution of DEX began to move away from a single trading scenario and entered the "integration 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 in this period is 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 Serum's 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 distributed reconstruction of DEX to introduce "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 function explosion is far more than Raydium:

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 must undertake the "terminal interaction" of user transactions, and the "initial drainage" of project issuance, and it also needs to connect to a complete set of on-chain behavior systems such as governance, incentives, pricing, and aggregation.

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

4. The fourth generation of DEX: deformation and growth in the multi-chain torrent, aggregation, L2 and cross-chain experiments

If the evolution of the first two generations of DEX is a mutation of the technical paradigm, and the third-stage Raydium is an attempt to splice functional modules, then starting in 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 deformation.

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

After the launch of the mainnet of Arbitrum and Optimism, 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 is also taking shape: aggregators.

When DEXs become more, 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. Jupiter, in particular, has risen rapidly on the Solana chain because it accurately fills the gaps in path depth, asset jumps, and trading experience.

However, the structural evolution of DEX has not stopped at in-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 not be on the same chain at all, and can also complete the exchange? 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 evolutionary path of DEX has been separated from a certain public chain and is moving towards the era of inter-chain protocol collaboration.

DEX at this stage is difficult to classify by "type": it may be a liquidity entrance (1inch), it may be a protocol coordinator (Velodrome), or it may be an inter-chain swap mechanism (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 network structure changes, cross-chain asset jumps, and incentive games between protocols. It is no longer a "product update", but a manifestation of "structural evolution".

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

Looking back at the development path 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, 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 certain chain, it is more like a "default adaptation layer" after the change of the chain structure. Whether it is a project that wants to incentivize, a protocol that wants to attract traffic, or a cross-chain that wants to aggregate, DEX has played more and more roles in "scheduling" and "coordination".

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

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

You must know that in the early crypto market, Launch is often a resource operation dominated by centralized exchanges: the rhythm of listing coins, price guidance, user distribution, and publicity nodes are 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.

When DEX gradually mastered pricing, liquidity, user mobilization and community mechanisms, it began to have the ability to undertake all the elements required for Launch in terms of structure - and all this was not because DEX wanted to do Launch, but because it naturally grew into the shape of Launch in the evolution of functions and ecology.

It has never "announced" that it would enter the primary market financing scene, but at a certain stage in history, DEX naturally took over the three core structures of the project 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 depends 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 injects tokens and mainstream assets (such as ETH, USDC) into the pool, uses the depth of the pool to support early price stability, and guides 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".

Take 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 the 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 pace of listing, and even no mandatory KYC threshold. Everyone can subscribe to shares in advance through Raydium, preemptively trade, 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 launch, the project has been in an environment where the community and trading mechanism are intertwined, and the issuance of coins has become a social release.

Therefore, DEX is no longer a "distribution channel" or "back-chain tool" in the primary market, but has taken over all the key paths of Launch from the root structure. It does not rely on custody, 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, DEX naturally becomes the landing point of the primary market when it is used in the early stage of the project.

Fourth, from distribution to design: on-chain rewriting of the 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 user's 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 and information gap on the chain.

This mechanism greatly releases the freedom of token issuance, but 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 the problems are exposed, some projects have begun 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 preemption.

In theory, it makes prices more rational and gives users more equal opportunities to participate. But in actual operation, LPB's 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 solution is the Fair Launch model, such as the model practiced by Camelot on Arbitrum.

The idea of ​​Fair Launch is: ** No longer set a preset price, but use an open and participatory deposit window period to raise funds + set prices + distribute. ** How much USDC you invest will determine how many tokens you will get in proportion. Everyone can participate, and the proportional distribution and no rush to buy sound more "fair".

But the real challenge is: "fair" to whom? For retail investors, there is still a risk of participation due to the lack of price anchors and no exit mechanism; for project parties, the fundraising efficiency is unstable and the market depth is uncontrollable, which may not be better than traditional IDO. Fair Launch is more of an expression of a "governance philosophy" rather than an improvement in structural efficiency.

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

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

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 buy, 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 "God's perspective" the designer has, and the less the user 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", it also implies the basic methodology of how projects organize governance, allocate liquidity, and guide user minds.

V. Future speculation on DEX: Iterative evolution from liquidity facilities to consensus launchers

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

The natural growth of the Launch mechanism has turned 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 being spawned.

The on-chain identity system, especially the reputation mechanism built on ZK (zero-knowledge proof) technology, has become a possible answer. Unlike traditional KYC, which requires privacy exposure, 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 go", but will evolve into a new model of on-chain qualification proof + structured participation distribution.  The tokens for the initial cold start may only be issued to those who truly meet the standards of a specific community.

Furthermore, DEX may even develop a kind of "on-chain YC" structure.

YC (Y Combinator) plays the role of screening, investing, and incubating early projects in the Web2 world. In the field of DEX, when the pricing mechanism, liquidity distribution, user screening, and incentive guidance components gradually mature, DEX is entirely likely to become an integrated platform for the cold start of Web3 projects - not only a capital pool, but also a community entrance, and even 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 internalize the Launch function as an ecological standard configuration, it will inevitably bring about new red ocean competition:

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

At that time, we may need to ask the question again:

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

VI. Conclusion: From "self-custody" to "co-creation of financial structure", DEX returns to freedom

When we re-examine the path of DEX, 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.

Nowadays, when we see that DEX can carry project cold start, liquidity governance, cross-chain routing, Launch structure, and even become the user's cognitive financial entrance, 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 in AMM, aggregator, ZK identity, and governance binding, it has gradually turned itself into a connector and starter 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 jump, 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 the fact that users can freely participate, collaborate, and shape their own financial order on the chain.

So when we ask again: "Why can't every project escape DEX?" Maybe the answer is not "must", but there is no better starting point.

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