From BitShares to Uniswap: A Decentralized Exchange Journey by a Dex Pioneer
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From BitShares to Uniswap: A Decentralized Exchange Journey by a Dex Pioneer
Uniswap's emergence marked the first time a decentralized exchange on-chain gained the capability to rival centralized exchanges.
Navigating Web3 tides with focused insightsEvery newborn child sees the world as it is and naturally assumes that this is how things should be—just like children born after 2010 take for granted that every family owns a car and enjoys air-conditioned bedrooms.
Likewise, for newcomers who entered the crypto space only in the past two years, it feels completely normal to create an Ethereum account via MetaMask, trade meme coins on Uniswap, and easily switch between multiple Layer 2 networks to farm airdrops—all considered routine practices among seasoned crypto veterans. What they don’t realize is that entrepreneurs spent nearly seven years building the infrastructure that now allows people to interact freely on-chain. Take decentralized exchanges (DEXs), for example: their evolution began with BitShares (BTS) as an early pioneer, followed by the dramatic exit of EtherDelta, improvements in efficiency through 0x’s off-chain order book model, Bancor’s invention of Automated Market Makers (AMM), Kyber’s further refinements to AMM, and finally culminated in Uniswap—a DEX powerful enough to truly compete with centralized exchanges. Even Uniswap itself has undergone four major iterations. For those of us who lived through this entire journey, the final product—Uniswap—is deeply cherished.
Newcomers dissatisfied with recent actions taken by Uniswap Labs can easily decide in their minds to just sell their holdings. But for me, having deeply engaged with each DEX along the way, encountering Uniswap was the hard-won result of a long search. Unless there's a truly serious issue, I find it difficult to abandon this diamond-like achievement forged over two market cycles.
My Personal Journey Through DEX Evolution
(1) The Industry’s First Decentralized Exchange—BitShares (BTS)
BitShares introduced many innovations—decentralized trading, stablecoins like USD and CNY, asset clearing mechanisms, and more. It could be considered the ancestor of DeFi, with numerous DeFi breakthroughs tracing back to its design. Vitalik Buterin and Rune from MakerDAO were both once active members of the BTS community; Rune conceived the idea of stablecoins only after his experience with BitShares, which led him to found MakerDAO. Today, BitShares has completely faded into obscurity. The reason is simple: the entire industry’s ecosystem gravitated toward Ethereum, leaving non-Ethereum projects like BTS without users or meaningful on-chain assets—without valuable assets, there can be no real trading activity. BTS used an order book model, but due to shallow order depth, even at its peak, only BTS tokens had minor liquidity within its internal market. All other mapped-in assets had negligible buy/sell orders. I was a loyal BTS holder and user back in 2017, and even ran a clearing business on the BTS internal exchange.
In summary, BTS failed for two key reasons:
1. BTS lacked smart contract functionality, so no valuable assets emerged within its ecosystem, resulting in no real demand for trading.
2. Simply copying the centralized exchange order book model didn’t work on-chain. It failed to bring about a paradigm shift and couldn’t overcome the first-mover advantage already established by centralized exchanges.
(2) Ethereum’s First Exchange—EtherDelta
Someone realized Ethereum needed a decentralized exchange similar to BitShares, so EtherDelta was born. EtherDelta was essentially identical to BTS—same order book model, same requirement to post orders, buy, and sell directly on-chain (consuming gas). The difference? Performing these on-chain operations on Ethereum was actually slower than on BTS. Yet EtherDelta held hidden value: the concept of hunting for low-cap “meme coins” originated here. As early as 2017, savvy traders figured out they could purchase promising tokens on EtherDelta before they listed on centralized exchanges and profit handsomely afterward. MANA was one such case. When MANA launched, it was only available on EtherDelta. A friend bought MANA there and shortly after it listed on centralized exchanges, made a 10x return overnight.
Ultimately, EtherDelta failed due to three fatal flaws: slow transaction speeds, high costs, and the fundamental impracticality of the order book model on-chain.
(3) On-chain Meets Off-chain—0x
EtherDelta showed promise for building exchanges on Ethereum, but also exposed clear limitations. The 0x team proposed a hybrid solution: keeping order books off-chain while settling trades on-chain. 0x functioned as a liquidity protocol—anyone could use it as backend infrastructure to build their own frontends. DDEX was one such project, responsible for over half of 0x’s total trading volume at its peak. Two years later, DDEX boldly forked 0x in an attempt to go independent. Unfortunately, they discovered that acquiring frontend users wasn’t the hardest part—the real challenge was attracting deep order books (liquidity). DDEX eventually failed and quietly disappeared. Still, 0x sparked a small wave of innovation and became one of the few tokens to reach new highs during the previous bear market. However, it never solved the core problem: on-chain liquidity remained far behind centralized exchanges. That’s when I realized something crucial—unless a decentralized product brings transformative change, slogans about decentralization (“no dark pools”) and improved asset security alone won’t drive a paradigm shift. At its peak in 2018–2019, the entire 0x ecosystem saw only 100–200 daily active traders.
(4) First-Generation AMMs—Bancor & Kyber
Around the time 0x entered the market, another on-chain trading protocol launched following a successful 2017 ICO. This was a star-studded project—with a renowned team and prominent investors—it raised a staggering $150 million. Bancor adopted an AMM-based liquidity pool model using BNT as a central intermediary token, enabling system-determined pricing instead of relying on an order book. Despite its strong backing, Bancor struggled to gain traction. The primary reason was its insistence on using BNT as the mandatory intermediary, which increased trading friction. Additionally, listing new tokens required explicit approval from the Bancor team. After two years on the platform, only 13 tokens had been listed. Around the same time, Kyber also launched with a similar direct-swap trading model. By late 2019, Kyber pulled ahead because it supported more tokens, better met market demands, and reduced trading friction by using ETH as the base currency.
(5) The Emergence of Uniswap
This marks a turning point. Starting in late 2019, a new project caught my attention. Initially, I dismissed it—I was still holding onto BTS and BNT, both of which I’d sold in disappointment, ultimately choosing ZRX (0x) and KNC (Kyber) as my preferred investments. As a competing project, I naturally supported my existing holdings over Uniswap. But by early 2020, reality set in—Uniswap’s growth was simply too fast to ignore. It started slowly, obscure and lacking liquidity, but the x*y=k pricing formula combined with permissionless token listings gradually unleashed explosive potential. With the release of v2, growing on-chain assets, and rising popularity of meme coin projects, Uniswap surged from $300k in daily volume to over $1 million in less than two months—surpassing both Kyber and 0x. Within another month, it hit $3 million, then tens of millions, then hundreds of millions. When UNI dropped below $2 after its September 2020 launch, I admitted defeat and swapped half of my ZRX holdings for UNI (I had earlier converted KNC to ETH in May 2020 due to uncertainty). From November 2020 onward, I officially began holding UNI as a long-term position (though I did receive a small UNI airdrop, the amount was negligible).
The Real Turning Point
Uniswap marked the first time a truly competitive on-chain exchange emerged—one capable of going head-to-head with centralized exchanges. It addressed many shortcomings of its predecessors and pioneered a new paradigm for capturing market share from centralized platforms. Its x*y=k pricing mechanism and LP incentive model solved the on-chain liquidity problem, while permissionless listing gave it a distinct edge over centralized exchanges—offering users a compelling reason to choose it. After Uniswap arrived, two monumental achievements stood out:
1. Solving the on-chain liquidity challenge
2. Discovering a unique advantage of decentralization—something centralized exchanges couldn’t replicate (permissionless token listings)
Understanding the difficult history behind DEX development explains why, despite not holding a large position, my emotional connection runs so deep. I’ve personally lived through the entire evolution—from nothingness to emergence to eventual maturity. I’ve stepped into every pitfall (and held every single token), which is why my feelings toward this space run stronger than most.
The Relationship Between Uniswap and Uniswap Labs
Last week’s events involving Uniswap are well known. Uniswap Labs stated that the official website and wallet belong to Labs as corporate assets, whereas only the Uniswap protocol belongs to the community (UNI holders). Many people objected, arguing that token holders believe they own equity in Labs—that everything built by Uniswap Labs should belong collectively to the community. After the incident, I read through all of Uniswap Labs’ blog posts and came to understand their perspective. They argue that Uniswap V1, V2, V3, V4, and the upcoming aggregated trading protocol Uniswap X—all exist as on-chain smart contracts and therefore belong to the community. In contrast, the Uniswap website and Uniswap Wallet are frontend interfaces hosted on centralized servers and not deployed on-chain, making them the property of Uniswap Labs. In reality, Uniswap Labs is merely a company leveraging the Uniswap protocol to generate revenue, albeit one that played a leading role in developing the protocol during its early stages.
My View
The incident triggered widespread discussion. At this moment, your mental model of Uniswap becomes critically important—because unless you find a rationale that aligns with your beliefs, holding through volatility will be difficult. Personally, viewing UNI as equity in Uniswap Labs may offer short-term benefits, given that Labs operates the wallet and collects fees from the frontend. But long-term, treating UNI as representing ownership rights over the open-source Uniswap protocol feels more secure. Even if Uniswap Labs fails due to poor management in the future, the Uniswap protocol will endure as public infrastructure on the blockchain.
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