Comprehensive interpretation of the current status of the largest DEX in the Solana ecosystem, Raydium

Raydium is the Decentralizationexchange in the Solana ecosystem, leading the market with its Liquidity and volume, which has had a profound impact on the development of Decentralized Finance. This article originated from an article written by 0xkyle and was compiled by PANews. (Synopsis: Solana really goes beyond the Ethereum EVM chain? Public chain competition pattern from the quality of Liquidity pool) (Background supplement: Inventory of the top 10 gold-absorbing protocols: Ethereumon-chain is still the most profitable, pump.fun revenue explosion rise) So far, the 2024 cycle has witnessed the dominance of Solana, and the main narrative of this cycle, Memecoins, is generated on Solana. In terms of price, Solana is also the best performing L1 blockchain, up about 680% so far this year. While memecoin and Solana are deeply intertwined, Solana as an ecosystem has generally ignited interest since its recovery in 2023, and its ecosystem is thriving, with protocols such as Drift (Perp-DEX), Jito (Liquid stake), Jupiter (DEX-Aggregator) and others all owning tokens valued at billions of dollars, Solana of active addresses and daily transactions exceed all other chains. The Solana ecosystem, first and foremost, DEX Raydium, is at the heart of this thriving ecosystem. The old saying "In the gold rush, sell shovels" perfectly exemplifies Raydium's position: to power the Liquidity and trading that fueled the memecoin craze. Benefiting from the flow of memecoin transactions and broader Decentralized Finance activity, Raydium has solidified its position as a vital infrastructure in the Solana ecosystem. The purpose of this article is to use a data-driven approach to break down Raydium's place in the Solana ecosystem using a first-principles approach. Launched in 2021, Raydium is a Solana-based Automated Market Maker (AMM) that enables permissionless pool building, lightning-fast transaction speeds, and ways to earn money. The key differentiator for Raydium is the structure: Raydium was the first AMM on Solana and the first order-compatible hybrid AMM at Decentralized Finance. When Raydium launched, a hybrid AMM model was adopted, allowing idle pool Liquidity to be shared with central limit orders, whereas the average DEX at the time could only access Liquidity in its own pool. This means that Raydium's Liquidity also creates a marketplace for OpenBook that can be traded on any OpenBook DEX GUI. While this was the main difference in the early days, the feature was later turned off. Raydium currently offers three different types of pools, namely: Standard AMM Pool (AMM v4), formally known as Hybrid AMM Constant Product Exchange Pool (CPMM), supports Token 2022 Centralized Liquidity Pool (CLMM) For each redemption that occurs on Raydium, a small fee is charged based on the specific pool type and pool fee level. The fee was split into two parts, one for the Liquidity provider, one for the RAY buyback and one for the vault. The transaction fees, mining pool setup fees, and protocol fees for the different Mining Pools on Raydium are recorded below. Here's a brief description of what each term means and its respective fee level: Trading fee: The fee charged to traders in Swap trading Repo fee: The percentage of Money Underlying required to buy back Raydium Token Money Management Fee: A percentage of the transaction fee allocated to money management Pool establishment fee: A fee levied when a pool is created to stop pool spam. The pool setup fee is controlled by protocolMulti-signature and reserved for protocol infrastructure costs. Overview of Solana Ecosystem DEX Figure 2: Solana's TVL in DEX The above mainly analyzes how Raydium works, and the following evaluates Raydium's position in the Solana DEX field. Needless to say, Solana has managed to rank among the top L1s in the 2024 cycle. Solana's TVL ranked third, behind Tron (second) and Ethereum (first). Figure 3: Daily Active Address, Daily Volume, TVL, and DEXvolume Solana continue to dominate user activity metrics such as Daily Active Address, Daily Volume, and DEX volume. The increase in activity and TokenLiquidity on Solana can be attributed to several factors: the memecoin boom on Solana. Solana's fast and low-cost settlement, coupled with the smooth user experience of DApps, has fueled the rise and prosperity of on-chain transactions. With tokens like $BONK and $WIF reaching multibillion-dollar market caps, and the advent of Pump.fun. As a memecoin release platform, Solana has actually become a stronghold for memecoin trading. Solana is currently the most used L1 in this cycle and continues to dominate in terms of trading activity. Being a direct beneficiary of increased activity means that the DEX on Solana is doing a great job – more traders mean more fees and more protocol income. However, even in DEXs, Raydium managed to capture a sizable market share, as shown in the chart below: Figure 4: Solana Ecosystem DEXvolume Market Share by DEX Raydium ranks first in Solana DEX, the highest volume of all Solana DEXs, accounting for 60.7% of the total volume of Solana DEXs. That's because Raydium allows all kinds of activities on it — from memecoin to Stable Coin. One way Raydium achieves this is by providing multiple options for pool creators and Liquidity providers when it comes to establishing new markets. Users can choose to choose a fixed product pool for price discovery at the time of initial release, or they can choose a narrower range for LP in a centralized Liquidity pool: allowing initial price discovery on Raydium while remaining competitive in SOL-USDC, Stable Coin, LST and other markets. Figure 5: Solana DEXLiquidity Most importantly, Raydium is still the most liquid DEX. It's worth noting that trading is often an issue of economies of scale, as traders flock to Liquidity's largest exchange to avoid Slippage in trades. Liquidity gives rise to Liquidity: when the largest DEX gets the most traders, it becomes a positive flywheel, attracting LPs, allowing them to make money from commissions, thereby attracting more traders eager to avoid Slippage. When comparing DEXs, the stream...