The unfolding MetaMask story reveals valuable insights on the emergent and ever-evolving Ethereum defi stack. In particular, aggregators, as well as underlying liquidity protocols.

With the rise of DEX aggregators, smart-order routing made it more efficient to trade on aggregator venues rather than going straight to the liquidity source (for the most part). The growth in both 1inch and Matcha (0x project) volume exemplifies this trend. DEX aggregators source liquidity, while AMMs/MMs must surface liquidity, and therefore, aggregators compete for flow, while AMMs compete for LP capital. Two different ball-games, but both still highly competitive incentive games. It is also interesting to think about who is the stickier customer between traders and LPs.

Unfortunately for DEX aggregators, they compete with wallets (MetaMask, Argent, etc.), portfolio management platforms (Zapper, Zerion), and hybrids (DeBank) who may be the ones that ‘control the end-user’ through their core and ancillary services. The AMM comparable here is strategy protocols (Alpha, Yearn, etc.), which have the strongest incentives to retain and direct liquidity to various venues, and in such, ‘owning’ LP capital.

MetaMask – the aggregator’s aggregator

While still early innings for Metmask’s swapper, which incurs a 0.875% fee on each trade, it has seen impressive growth over the past few months. MetaMask has amassed ~ 10M in fees, with 6.7M coming from January 2021 onwards. Annualizing Metmask’s 2021 fee revenue comes to about 59.5M.

It is essential to watch a) the sustainability of this fee extraction as there are many proponents of a ‘race to the bottom’ of fees (forking MetaMask and installing 0 fees), and b) the second-order effects on existing DEXs and DEX aggregators.

In our opinion, (a) seems quite unlikely as there is a cost to maintaining MetaMask and a general stickiness for users and protocols interacting with MetaMask. With that said, it is not out of the question. As for (b), DEX aggregators and AMMs that implement additional fees, as well as positive slippage (1inch), may begin to lose flow to venues that don’t (0x API).

Looking at where MetaMask sources liquidity, one can see that it heavily favors Uniswap and 0x over other aggregators and AMMs. The recent buzz around 0x seems justified as users wisen up on its growth and superior execution. With that said, I am not informed enough on the routing logic of Metmask to use its liquidity sourcing as a sole data point for the relative execution of DEXs and DEX aggregators. Regardless, it is an interesting data point indicating particular venues’ underlying health, especially if one subscribes to the thesis of value continuing to flow to MetaMask. In case you missed it, this is a fantastic thread that went viral on 0x. What’s interesting is the possible future collaboration between MetaMask and existing Dex Aggregators or MetaMask’s expansion into ancillary services. Would 1inch pay MetaMask for its flow via referral rewards? Would MetaMask implement a more comprehensive portfolio tracking dashboard? Uncertain as always, but exciting times in Defi…

Lastly, and h/t to Dogetoshi for spotting this, MetaMask’s Swap Router is consuming an impressive amount of gas. Is there a possible MetaMask token on the horizon? It is uncertain, but while gas and user numbers are down across the board – MetaMask remains in the green. It might be worth trying out MetaMasks’ Swapper in case a retroactive distribution is on the horizon.




Tom Schmidt – Dune Dashboard 

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