Matcha’s trade volume grew for the third consecutive quarter, up 13% QoQ to $1.8 billion.
Total trades and unique traders on Matcha increased 23% and 2% QoQ, respectively.
Base passed Arbitrum to become the second-ranked chain on Matcha by volume share (8.8%) and passed both Ethereum and Arbitrum to become first by number of trades (39.8%).
Matcha had a record-low daily average rate of failed trades (revert rate) of 5.4% in Q1. It was effectively maintained, with a revert rate of 5.7% in Q2.
Matcha integrated Coinbase’s Smart Wallet, which is intended to onboard new users onchain via an easier user experience.
Primer
Matcha is a decentralized exchange (DEX) aggregator launched by 0x in June 2020. As a DEX aggregator, Matcha aims to deliver users the best prices on DeFi trades. Using the 0x Swap API, Matcha finds the best-executed price from over 130 onchain (i.e., AMMs) and offchain (i.e., 0x proprietary RFQ) liquidity sources. This approach enhances price efficiency and optimizes gas costs for users, rendering it a more economical choice than direct trading on platforms. Matcha supports the trading of over 6 million tokens on nine blockchains, including Ethereum, BNB Smart Chain (BSC), Polygon, Avalanche, Optimism, Fantom, Celo, Arbitrum, and Base.
Matcha also offers a range of core features that enhance the trading experience with Matcha Auto, the protocol’s premium offering that charges a 0.05% fee on stablecoin-to-stablecoin trades and a 0.25% fee on other pairs. With Matcha Auto, Gas fees are conveniently embedded into trades to cover re-submission costs, alleviating concerns over failed transactions and eliminating the need for users to hold native gas tokens. Matcha Auto also provides MEV (Maximal Extractable Value) protection, powered by 0x Swap APIs, to prevent slippage and MEV attacks. Ethereum, Polygon, Arbitrum, Optimism, and Base users that route trades through RFQ also avoid MEV attacks. Additionally, Matcha supports limit orders on Ethereum, Polygon, and BSC, as well as cross-chain trading across seven different networks.
Total trades on Matcha increased 23% as trade volume grew for the third consecutive quarter, reaching $1.8 billion, up 13% QoQ. Daily trades peaked at over 15,000 on April 10, 2024, following two promotions announced the previous day:
Users that swapped more than $5 using Matcha Auto could claim 69 DEGEN via a frame drop on Warpcast.
Following Matcha social channels and swapping more than $5 using Matcha Auto made users eligible to claim an NFT and automatically entered their wallet address in a raffle to win $100 in ETH.
Total volume peaked on June 27, 2024, at $111 million following the maturity of Pendle pools on that day. Trade volume also spiked to $73 million on May 20, 2024, following an SEC request for prospective ETH exchange-traded funds to update 19b-4 filings, with applications subsequently approved on May 23.
The average daily percentage of MEV-protected trades from RFQ routing declined to 13% and volume fell to 11% QoQ. Additionally, fee changes were implemented in Q2 to Matcha Auto, the protocol’s premium offering powered by 0x Swap APIs. Matcha Auto also protects trades from harmful MEV, introduces gasless swaps, and prevents slippage. Beginning May 15, 2024, fees for non-stable pairs on Matcha Auto increased from 0.15% to 0.25%, while fees on stablecoin pairs were reduced to 0.05%. In its announcement, the Matcha team stated the change in fee structure was to “accelerate product development.”
In Q2 2024, Base passed Arbitrum to become the second-ranked chain on Matcha by volume share (8.8%). It also passed both Ethereum and Arbitrum to become first by trade share (39.8%). During the peak of this activity, Ethereum experienced its lowest share of volume on Matcha throughout the year, dropping below 70% in both early April and early May. Despite this, Ethereum’s Q2 volume share was 81.2%, slightly surpassing its Q1 volume share of 79.9%. This dynamic is largely explained by three factors. First, Ethereum’s volume share steadily recovered from its low in early April to above 90% at the end of Q2. Second, Base’s volume share concurrently declined from its peak of more than 20% in early April to below 3% at the end of Q2, and lastly, Arbitrum’s volume share also declined by 40% in Q2.
While Base’s share of volume steadily declined from its early April peak, trades held more steady. Base flipped Ethereum to become the chain with the most trades on Matcha in March of Q1. This trend was maintained throughout Q2, even after trades on Base peaked in April.
Previously, Base activity appeared to be driven in part by anticipation of Coinbase’s Smart Wallet, which launched on June 5. Smart Wallet uses device passkeys rather than a seed phrase, and biometrics like Face ID or fingerprints to access funds and sign transactions. The features make for an easier user experience, particularly for new crypto users. Upon its launch, Matcha integrated Smart Wallet into its application so that users can access an existing wallet, or create a new Smart Wallet to make standard swaps and cross-chain trades (Matcha Auto and limit orders are not yet available).
Volume share of ETH/ETH pairs grew 84% QoQ to 26%, while the volume share of ETH/Stable, Stable/Stable, and Other pairs all declined QoQ. These movements reflected the increasing relative relevance of ETH liquid staking tokens (LSTs) and liquid restaking tokens (LRTs) in the run up to the launch of ETH ETFs in the United States. For example, LRT yield speculation remained heightened on platforms like Pendle during Q2.
Additionally, Matcha rapidly lists new assets and currently supports over 6 million, leading to the trading of many new and popular pairs on its supported chains. Q1 2024 trended toward ETH/ETH pairs taking a significant portion of trade volume. In Q2, the ETH/ETH category accounted for 26% of the trade volume and ended the quarter with a seven-day moving average of 59% of the volume. The plurality of Q2 trading volume coming from ETH/ETH trading pairs from June 19 onwards is likely due to the maturation of a number of LRT Pendle pools on June 27, as well as the related arbitrage opportunities.
Other pairs accounted for 17% of Q2 volume share, while Stable/Stable pairs accounted for 19%. Both categories ended the quarter with significant declines in volume share. Pairs in the Other category ended the quarter with a seven-day moving average of 7% of the volume, while Stable/Stable pairs ended at 7.5%. The fall in Other pairs volume may indicate some exhaustion in memecoin trading, which was a significant trend in Q1. The decline in Stable/Stable volume may signal that traders found relatively greater arbitrage opportunities in ETH/ETH pairs.
Unique Traders
Matcha had a record quarter serving 55,000 unique trading addresses throughout Q2, up 2% QoQ. The increase in new wallet addresses using Matcha can potentially be explained by a promotion run in April where wallet addresses that swapped more than $5 of crypto could claim 69 DEGEN ($2.60 at the time). Additionally, Matcha implemented a number of updates in Q2 to enhance the user experience for traders. Dynamic URLs to share, link, and bookmark trade sizes and pairs were launched in May, as was the ability to enter trade amounts in USD terms. Following the close of Q2, Matcha became the first application to make the 0x V2 pricing engine available to all of its users. As bull market catalysts continue to provide opportunities for traders, Matcha’s ability to offer its users the best price via the 0x V2 pricing engine will be essential to attract and retain users.
Notable features of the 0x V2 pricing engine include splitting trades across multiple liquidity sources (multiplex); identifying intermediate trading pairs in a swap to access deeper liquidity (multihop); and single-use, amount-based signatures for each transaction (Permit2). Notably, Permit2 removes all outstanding approvals from the protocol, thereby eliminating the theft of funds via those approvals in the event of an exploit.
Revert Rate
Matcha uses the 0x Swap API and 0x Protocol for its backend processes. The 0x Swap API aggregates liquidity across all supply sources (onchain and offchain), helping traders fill orders with the best prices. This process requires orders to be stored offchain while trade settlement occurs onchain. 0x Protocol ensures all parts of the trade are satisfied before executing the swap; if not, the trade is reverted. The revert rate is useful for determining the reliability of the protocol.
In Q2, revert rates moderated at 5.7%, near Q1’s 5.4%, which marked the quarterly low in the past year. This stability follows Matcha’s integration of 0x’s Gasless API in January 2024, which led to an 85% reduction in trade failures. In contrast, the market average revert rate was 9.5% in Q2. For six months now, Matcha’s DEX aggregator built using 0x’s infrastructure has consistently outperformed the market average revert rate.
Qualitative Analysis
Matcha Auto Fee Change
Beginning May 15, 2024, fees for non-stable pairs on Matcha Auto increased from 0.15% to 0.25% (equivalent to Uniswap’s 0.25% base rate for regular trades), while fees on stablecoin pairs were reduced to 0.05%. In its announcement, the Matcha team stated the change in fee structure was to “accelerate product development.” Part of Matcha Auto’s appeal is that it is powered by 0x Swap APIs to prevent slippage and MEV attacks. It also provides users with gasless swaps. By disabling Matcha auto, users gain access to 0% fee trading.
Matcha Upgrades
On July 15, 2024, Matcha became the first application to make the 0x V2 pricing engine available to all of its users. Notable features include splitting trades across multiple liquidity sources (multiplex); identifying intermediate trading pairs in a swap to access deeper liquidity (multihop); and single-use, amount-based signatures for each transaction (Permit2). Notably, Permit2 removes all outstanding approvals from the protocol, thereby eliminating the theft of funds via those approvals in the event of an exploit.
Additionally, Matcha implemented a series of upgrades in Q2, adding new features and improving functionality.
Increased token coverage to over 6 million tokens, up from 5 million in Q1 2024.
Integrated Coinbase’s Smart Wallet. Users can access an existing wallet, or create a new Smart Wallet to make standard swaps and cross-chain trades (Matcha Auto and limit orders are not yet available).
Introduced dynamic URLs to share, link and bookmark trade sizes and pairs, as well as adding the ability to enter trade amounts in USD terms.
Business Development
In addition to the Matcha product upgrades made in Q2, a number of new initiatives began.
Matcha became the official DEX to trade DEGEN, a memecoin token created to reward Farcaster users. Matcha had previously partnered with the project to reward DEGEN to its users.
Matcha became the official DEX partner of Nouns Esports, a community-owned and crypto-funded Esports team focused on gaming competitions in Dota 2, Counter-Strike 2, Super Smash Bros. Melee, and Street Fighter. A notable component of this partnership is the Matcha Cup, a Super Smash tournament that so far has been held in May, June, and July.
Closing Summary
In Q2, Matcha built on its growth in Q1, with trades, volume, and traders growing by 23%, 13%, and 2.0% QoQ, respectively. Additionally, Matcha effectively maintained Q1’s record low revert rate of 5.4% following its integration of 0x’s Gasless API in January 2024, ending Q2 with a revert rate of 5.7%. Matcha also launched two features to improve the user trading experience, introducing dynamic URLs to share, link, and bookmark trade sizes and pairs, as well as trade sizing in USD. On top of this, Matcha integrated Coinbase’s Smart Wallet, which is intended to onboard new onchain users onchain via an easier user experience. Finally, Matcha’s token coverage increased to over 6 million tokens, up from 5 million in Q1 2024. The close of Q2 marks Matcha’s fourth year and the beginning of another quarter to continue its streak of capturing increased usage and adoption.
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Matt is a Research Manager at Messari for the Protocol Reporting team. A generalist at heart, who's curious about anything and everything, and ultimately, on an adventure to find out what's true. He was an investigative reporter and multifamily/senior housing development associate before joining Messari in 2022.
Matt is a Research Manager at Messari for the Protocol Reporting team. A generalist at heart, who's curious about anything and everything, and ultimately, on an adventure to find out what's true. He was an investigative reporter and multifamily/senior housing development associate before joining Messari in 2022.
