Why can't every Web3 project escape DEX?
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Why can't every Web3 project escape DEX?
The future of DEX may not lie in trading itself, but in how it allows us to redefine the way we collaborate.
Navigating Web3 tides with focused insightsAuthor: Tessa, Nomos Labs
1. DEX, Never Truly Understood
Within the entire crypto financial system, DEX has always been a curious entity.
It appears to be perpetually online—never down, never censored, never fleeing—but it has long remained on the fringes: complex interfaces, insufficient liquidity, and lacking narrative appeal. It's neither the center of KOL attention nor the top destination for trending projects. During DeFi booms, it serves as a "substitute" for CEX; when bear markets return, it rebrands itself as a "legacy of the DeFi era" emphasizing "security and self-custody." As the industry increasingly focuses on narratives like public chains, AI, RWA, and inscriptions, DEX seems to have faded into obscurity.
Yet, when we extend our timeline and unpack the structure, we find that DEX has quietly grown and begun to shake the foundational logic of on-chain finance.
Just as Uniswap was once all the rage but is now merely a historical node, Curve, Balancer, Raydium, and Velodrome are only its derivative forms. Behind every evolution of AMMs, aggregators, and L2 DEXs lies a shared force: an ongoing process of self-evolution within decentralized finance.
Therefore, I aim to move beyond product comparisons and sector trends, returning to the long-term historical arc to clarify the structural evolution:
This is the evolutionary history of DEX—a structural observation of decentralization’s functional spillover, and a full unfolding of a historical path. In doing so, I also attempt to answer a question that grows harder to ignore:
"When we talk about Web3, why does every project today inevitably pass through DEX?"
2. A Five-Year Brief History of DEX: From Marginal Role to Narrative Center
1. First-Generation DEX: Expression Against Centralization (The EtherDelta Era)
Around 2017, while centralized exchanges were thriving, a group of crypto enthusiasts quietly launched a peculiar experiment on-chain: EtherDelta.
Compared with contemporaries like Binance and OKEx, EtherDelta offered what could almost be described as a disastrous trading experience: users had to manually input complex on-chain data, interactions suffered high latency, and the interface resembled a primitive web page from decades past—effectively deterring ordinary traders.
But EtherDelta was never meant to be convenient from day one; its purpose was to completely break free from "centralized trust": assets fully controlled by users, order matching executed entirely on Ethereum, no custodial intermediaries, no third-party trust required. Even Vitalik Buterin, Ethereum's founder, publicly expressed hope for this model, seeing decentralized on-chain trading as one of blockchain’s true application directions.
Though EtherDelta eventually faded due to technical and UX limitations, it left an indelible mark in blockchain history: DEX ceased being just a trading tool and became a practical expression of resistance against centralization.
It may not have been the market favorite at the time, but it planted genetic seeds for future platforms like Uniswap, Balancer, and Raydium—user asset control, on-chain order matching, no custodial trust—these very traits would become the foundational framework upon which DEX continuously evolved, diversified, and expanded.
2. Second-Generation DEX: A Paradigm Shift in Technology (The Rise of AMM)
If EtherDelta represented the "first principles" of decentralized trading, then the emergence of Uniswap marked the first scalable realization of that ideal.
In 2018, Uniswap launched v1 and introduced the Automated Market Maker (AMM) mechanism on-chain for the first time, shattering the constraints of traditional order book models. Its underlying logic was simple yet revolutionary—x * y = k. This formula was Uniswap’s core innovation, enabling liquidity pools to price assets automatically without counterparties or order books. By depositing one asset into the pool, you could automatically receive another according to the constant product curve. No counterparty, no orders, no matching—trading behavior itself equaled pricing behavior.
The breakthrough here wasn’t just solving the chicken-and-egg problem of early DEXs (“no one lists, so no trades”), but fundamentally changing the source of on-chain liquidity: anyone could become a liquidity provider (LP), injecting capital into markets and earning fees in return.
Uniswap’s success sparked further innovations in AMM variants:
Balancer introduced multi-asset pools with customizable weights, allowing projects to set their own asset distributions;
Curve optimized curves specifically for stablecoins to reduce slippage and lower swap costs;
SushiSwap added token incentives and governance mechanisms atop Uniswap, launching the narrative of “liquidity mining + community sovereignty.”
These variants collectively pushed AMM-based DEXs into a stage of “protocol productization.” Unlike first-gen DEXs driven primarily by ideology and crude design, second-gen DEXs began exhibiting clear product logic and closed user behavior loops. They weren’t just for trading—they formed structural foundations for asset circulation, entry points for user participation in liquidity, and even integral components for launching project ecosystems.
From Uniswap onward, DEX became a real “product”—usable, capable of growth, able to accumulate users and capital—not merely a conceptual afterthought, but a builder of infrastructure itself.
3. Third-Generation DEX: From Tool to Hub, Functional Expansion and Ecosystem Integration
After 2021, DEX evolution moved beyond single-use transaction scenarios into a phase of functional spillover and ecosystem integration. In this stage, DEX ceased to be merely a “place to swap tokens” and gradually evolved into the liquidity nucleus of the on-chain financial system, a launchpad for new projects, and even a scheduler of ecosystem architecture.
One of the most representative shifts during this period was the emergence of Raydium.
Born on Solana, Raydium was the first DEX to deeply integrate AMM mechanisms with on-chain order books. It provided not only constant-product liquidity pools but also synchronized trades with Serum’s on-chain order book, creating a hybrid liquidity structure combining “automated market making” with “passive limit orders.” This model merged the simplicity of AMMs with the visible price tiers of order books, significantly enhancing capital efficiency and liquidity utilization while preserving on-chain autonomy.
The structural significance of Raydium lies not just in AMM optimization, but in being the first on-chain attempt to reconstruct CEX-like experiences in a decentralized way. For new projects within the Solana ecosystem, Raydium isn’t just a trading venue—it’s a launch platform. From initial liquidity and token distribution to order depth and visibility, it functions as a hub linking primary issuance with secondary trading.
Functional explosion extended far beyond Raydium:
A common trait of this era was that DEX was no longer the endpoint of a protocol, but a relay network connecting assets, projects, users, and other protocols.
It must serve as the “terminal interface” for user transactions, embed “initial traffic generation” for project launches, and integrate with systems governing incentives, pricing, governance, aggregation, and more.
Thus, DEX shed its identity as an isolated “island protocol” and emerged as a hub primitive in the DeFi world—an adaptable, composable consensus component on-chain.
4. Fourth-Generation DEX: Adaptive Growth Amidst Multi-Chain Floods—Aggregation, L2, and Cross-Chain Experiments
If the evolution of the first two generations represented technological paradigm shifts, and third-gen efforts like Raydium were attempts at modular integration, then starting in 2021, DEX entered a harder-to-classify phase: no longer defined by team-led “version upgrades,” but shaped reactively by the broader structural pressures of the on-chain environment.
The first to feel this shift were DEXs deployed on Layer 2.
With Arbitrum and Optimism going live, high gas fees on Ethereum were no longer the only option—Rollup architectures became fertile ground for next-gen DEXs. GMX on Arbitrum adopted oracle-based pricing and perpetual contracts, using a minimalist approach without LP pools to address the issue that “AMM alone cannot achieve sufficient depth.” On Optimism, Velodrome leveraged the veToken model to build cross-protocol coordination for liquidity incentives. These DEXs no longer pursued universality, instead rooting themselves as specialized “ecosystem infrastructure” on specific chains.
Meanwhile, another form of structural patch emerged in parallel: aggregators.
As DEXs multiplied, fragmented liquidity became a growing problem. Users faced increasing decision fatigue over where to trade. Aggregators like 1inch (launched in 2020), Matcha, and Jupiter took on a new role: not DEXs themselves, yet orchestrating liquidity paths across all DEXs. Jupiter’s rapid rise on Solana succeeded precisely because it filled critical gaps in route depth, asset routing, and user experience.
But DEX evolution didn’t stop at intra-chain adaptation. After 2021, projects like ThorChain and Router Protocol went further, posing a radical question: can two parties on different blockchains directly exchange assets? These “cross-chain DEXs” experimented with custom validator sets, message relays, or virtual liquidity pools to solve inter-chain asset transfers. Though structurally far more complex than single-chain DEXs, their emergence signaled a shift: DEX evolution was moving beyond individual chains toward an era of cross-chain protocol coordination.
This generation defies easy categorization: it might be a liquidity gateway (1inch), a protocol coordinator (Velodrome), or a cross-chain swap engine (ThorChain). These weren’t designed so much as “structurally squeezed” into existence.
By this point, DEX was no longer just a tool—it was an environmental response: an adaptive artifact absorbing changes in network topology, cross-chain asset movement, and incentive games between protocols. Not a “product update,” but a manifestation of structural evolution.
3. Where Pricing, Liquidity, and Narrative Converge: How DEX “Entered” Launch
Looking back at the development of these four DEX generations, one thing stands out: their continuous evolution wasn’t driven by clever feature designs, but by responding to real on-chain needs—from matching and market-making to aggregation and cross-chain swaps. Each transformation naturally filled a structural gap.
At this stage, DEX is no longer just a “functional node” on a chain. It has become the default adaptation layer following structural change. Whether projects seek incentives, protocols need traffic, or cross-chain systems require aggregation, DEX plays an increasingly central role in “orchestration” and “coordination.”
But as its responsibilities grow, DEX inevitably confronts another long-standing structural void:
Listing on CEX requires negotiations, resource allocation, and community building; launching on-chain demands pool creation, liquidity sourcing, and spot circulation. These seemingly scattered challenges converge into a core dilemma: who provides the launch infrastructure for new projects?
In early crypto markets, Launch was largely controlled by centralized exchanges: listing schedules, price guidance, user distribution, and promotional timing—all dictated by the platform. While efficient, this model brought high barriers to entry, low transparency, and excessive centralization of power.
Now, as DEX gains control over pricing, liquidity, user mobilization, and community mechanisms, it structurally acquires the capacity to fulfill all essential elements of Launch—not because DEX wants to do Launch, but because through functional and ecological evolution, it organically grows into the shape of a Launch platform.
DEX never formally “announced” its entry into the primary financing space, yet at a certain historical juncture, it naturally assumed three core structures for project cold starts: liquidity, pricing, and community.
This is not a product strategy, but a structural spillover effect.
After Uniswap introduced AMM, we saw for the first time a permissionless price discovery mechanism that required no order books or counterparties. In other words, DEX turned “market consensus” into “on-chain functions.” Price formation no longer depended on matching engines but directly reflected supply-demand dynamics within liquidity pools. This very pricing structure addresses one of the hardest problems in project launches: when a token first goes live with zero liquidity or trading depth, what it needs most is exactly such an automatic, permissionless price discovery mechanism.
Next, liquidity pools became channels for early-stage incentive distribution. Projects inject their tokens alongside major assets (e.g., ETH, USDC) into pools, using pool depth to stabilize early prices while guiding users to provide liquidity via trading fees and liquidity mining rewards. Users aren’t just “investors”—they’re “participants”; projects don’t just “issue tokens”—they “release pools.”
Raydium exemplifies this “DEX-as-Launch-platform” logic most clearly. On Solana, it’s not only a liquidity protocol but also includes the AcceleRaytor module, enabling projects to conduct on-chain cold starts via liquidity pools and initial offerings. No complex review processes, no intermediary platforms controlling timelines, not even mandatory KYC. Anyone can pre-subscribe shares, trade early, and speculate on initial price movements.
AMM doesn’t just handle liquidity and pricing—it reconstructs community mobilization in a fundamental way. The inherent composability, participatory nature, and co-creation logic of DEX mean that from day one, projects exist in an environment where community and trading mechanisms are intertwined. Token issuance becomes a social release.
Thus, DEX is no longer a mere “distribution channel” or “post-deployment tool” for primary markets, but structurally assumes all key pathways of Launch. Without custody, without marketing, without access controls, purely through mechanism design, it closes the loop on early-stage project funding.
Hence, Launch is not a “feature module” of DEX, but rather a natural structural byproduct. As a decentralized trading mechanism, when applied to early-stage projects, DEX inherently becomes the landing point for primary markets.
4. From Distribution to Design: Re-Writing Launch Mechanisms On-Chain
The earliest Launch models were extremely simple—once the pool opens, the token is live.
Uniswap’s “free listing” mechanism gave birth to the first wave of IDO (Initial DEX Offering) projects: teams directly inject tokens into trading pairs with ETH or USDC to form liquidity pools; user buying activity itself constitutes primary issuance. No scheduling, no eligibility checks, no centralized control—the only barrier is on-chain speed and information asymmetry.
This mechanism greatly expanded the freedom of token issuance, but came with rampant slippage, front-running bots, and lack of price anchoring. The whole process resembled an open speculative sprint rather than a genuine fundraising design.
As issues surfaced, some projects began experimenting with more controllable mechanisms, such as Balancer’s LBP (Liquidity Bootstrapping Pool).
LBP’s core idea is to set extreme initial price weights (e.g., 90% token / 10% USDC) at launch and gradually adjust toward balanced ratios over time. Prices automatically decline under this mechanism, aiming to curb early FOMO and bot sniping.
Theoretically, it promotes rational pricing and fairer participation. But in practice, LBPs still offer limited resistance to capture, and designing price curves is difficult, with high user education barriers. It resembles a “programmable roadshow for the DEX era,” but fails to truly resolve the question of “who should participate.”
Another solution is the Fair Launch model, exemplified by Camelot’s implementation on Arbitrum.
Fair Launch proposes: **no preset price, but instead a public, participatory deposit window for fundraising, pricing, and distribution.** You contribute X amount of USDC, and receive Y amount of tokens proportionally. Open to all, proportional allocation, no rush needed—sounds more “fair.”
But real challenges remain: fair to whom? For retail users, missing price anchors and exit mechanisms still pose risks. For project teams, fundraising efficiency is unstable, and market depth is uncontrollable—offering no clear advantage over traditional IDOs. Fair Launch expresses more of a “governance philosophy” than delivering structural efficiency improvements.
Meanwhile, in more aggressive DEXs like Jupiter and Velodrome, we begin to see launch mechanisms deeply integrated with internal governance structures:
A common thread among these approaches is that Launch is no longer a simple “issue-purchase” action, but a restructuring of relational dynamics.
Project launches are no longer just signals of trading commencement, but layered consensus processes involving integration into the DEX’s governance structure, user system, and liquidity distribution. You’re not just trading the coin you bought—you’re trading your entry into a network order.
But this brings greater complexity and risk: bot arbitrage, community expectation manipulation, black-box pricing designs, liquidity baiting attacks—the list goes on. The more sophisticated the mechanism, the more “God-mode” power the designer holds, and the less understandable and controllable it becomes for users.
Launch is no longer an event—it’s a dynamic system. It doesn’t just tell you “how to issue a token,” but implicitly encodes methodologies for how projects organize governance, allocate liquidity, and guide user perception.
5. Future Outlook for DEX: Evolving from Liquidity Infrastructure to Consensus Initiator
If early DEXs existed to make on-chain trading possible, five years of evolution later, DEX is now approaching another question: beyond trading, what else can it initiate?
The organic growth of Launch mechanisms has already transformed DEX from a platform for facilitating asset exchange into a hub for hosting projects, guiding liquidity, and reshaping early consensus. Yet precisely because so many projects now choose to start on DEX, DEX itself faces new systemic challenges: Who should have the right to participate in Launch? How do we filter genuine users? How can we prevent liquidity fraud?
Under this pressure, a finer-grained participation mechanism appears to be emerging.
On-chain identity systems—especially reputation frameworks built on ZK (zero-knowledge proof) technology—are becoming viable solutions. Unlike traditional KYC, which exposes privacy, ZK identities allow users to prove they meet certain criteria (e.g., holding duration, on-chain interaction history, protocol participation) without revealing specifics. Launch ceases to be a simple race—it becomes a filtering process based on on-chain behavior and reputation.
If this structure takes hold, future DEX Launches may evolve from “open gate, fastest wins” to a new model of on-chain credential verification and structured participation. Early-stage tokens might only go to those who genuinely meet specific community standards.
Taking it further, DEX might even develop something akin to an “on-chain YC” structure.
In Web2, Y Combinator screens, funds, and incubates early-stage startups. In the DEX space, as pricing mechanisms, liquidity distribution, user filtering, and incentive guidance mature, DEX could fully evolve into an integrated launch platform for Web3 projects—serving simultaneously as capital pool, community gateway, and liquidity market.
Then, DEX may cease to be merely a trading platform or simple Launchpad, becoming instead the starting point of the entire on-chain project incubation ecosystem—a consensus launcher.
Of course, this path won’t be easy.
As DEXs increasingly internalize Launch functionality as standard ecosystem features, fierce red-ocean competition will inevitably follow.
Launch shifts from being a project’s cold-start challenge to a life-or-death question each DEX must answer.
At that point, perhaps we need to reframe the question:
If every DEX becomes a Launch platform, will Launch itself lose the very early trust it once represented?
6. Conclusion: From “Self-Custody” to “Co-Created Financial Structures,” DEX Returns to Freedom
When we revisit the journey of DEX, it’s easy to forget its origins—impractical, quiet, far from “market-ready.” It began as a small experiment led by hackers, simply trying to prove that asset exchange could happen without custody, without reliance on platforms, without trust.
Today, as we see DEX supporting project launches, liquidity governance, cross-chain routing, Launch frameworks, and even serving as users’ gateway to finance, we should look back and recognize: none of this stems from any grand design by a single project, but from the self-evolution of the entire on-chain structure.
DEX didn’t “upgrade intentionally.” It merely kept responding to changes in its surrounding systems, filling structural voids as they appeared. It had no roadmap, no clear boundaries, yet through AMMs, aggregators, ZK identities, and governance integrations, it gradually transformed itself into the connector and initiator of ecosystems.
It never left trading—but it long ago became about more than just trading. It never stepped into the spotlight, yet slowly embedded itself into the fabric of the structure.
The evolution of DEX has never been a single leap in functionality, but an ongoing process of protocol reconstruction.
Throughout this journey, what it has truly preserved is still that original spark—not tokens, not gas fees, not slippage, but the fact that users can freely participate, collaborate, and shape their own financial order on-chain.
So when we ask again: “Why does every project today inevitably go through DEX?” perhaps the answer isn’t “must,” but rather—there is simply no better starting point.
The future of DEX may not lie in trading itself, but in how it allows us to redefine the way we collaborate.
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