Why can't every Web3 project escape DEX? A five-year development history tells you the answer

Author: Tessa, Nomos Labs

1. DEX, never really understood

DEX has always been an intriguing role throughout the crypto financial system.

It seems to be online forever - no downtime, no censorship, no runaway, but it has also been on the edge for a long time: the interface is complex, insufficient liquidity, and lack of storylines . It is neither the center of KOL topics nor the first choice for hot projects to settle in. When DeFi exploded, it was the "flat replacement" of CEX. After the return of the bear market, it became the "old legacy of the DeFi era" focusing on "safety and self-hosting" - as if DEX had long lost its presence when the industry was paying more attention to new narratives such as public chains, AI, RWA , and inscriptions.

But when we extend the time and spread the structure, we will find that DEX has been growing quietly and begins to shake the underlying logic of finance on the chain.

Just like Uniswap, which was once a hot topic, is just a historical node, and Curve, Balancer, Raydium, and Velodrome derived from the torrent of history are just its deformations. And what we see behind all the evolution and evolution of AMMs, aggregators, and L2 DEXs is actually a self-evolution process at the bottom of distributed finance.

So I tried to break away from the perspective of "product comparison" and "track trend" and return to the long-term historical line to clarify its structural evolution logic :

• How does DEX go from a tool to a structural evolution logic on a chain ;

• How it absorbs financial mechanisms and ecological goals from different eras;

• And why, when we talk about Launch, project cold start, and community self-organization today, DEX is still the one that cannot be avoided.

This is the evolutionary history of DEX, a structural observation about the "functional spillover" of decentralized, and a paving of a whole historical path, so I also try to answer a question that is increasingly difficult to avoid now:

"When we're talking about Web3, why can't every project escape DEX today?"

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2. Five-year DEX brief history: From marginal roles to narrative center

1. The first generation of DEX: the expression of anti-centeredness

(EtherDelta era)

Around 2017, when centralized exchanges were at their peak, a group of crypto geeks silently launched a strange experiment on the chain: EtherDelta .

Compared with CEXs such as Binance and OKEx at the same time, EtherDelta can almost be said to be a disaster-level trading experience: transactions require manual input of complex on-chain data, extremely high interaction delay, and the user interface is comparable to the original web pages of the last century, which almost discourages ordinary traders.

However, the birth of EtherDelta has not only been for the sake of easy use since the first day, but also to completely get rid of "centralized trust": transaction assets are completely controlled by users themselves, and order matching is completely completed on the Ethereum chain, without intermediary custody, and without trusting third parties. Ethereum founder Vitalik Buterin even publicly expressed his expectations for this model, believing that on-chain decentralized transactions are one of the directions for blockchain to be truly implemented.

Although EtherDelta itself eventually faded out of sight due to the dilemma of technology and user experience, it left a path that cannot be ignored in the history of blockchain: DEX has since begun to no longer just a transaction tool, but has become a practical expression against centralization .

It may not be the darling of the market at that time, but it planted genetic seeds for future Uniswap, Balancer, and Raydium: user assets are self-held, order matching chain, and no custody trust is required - it is these characteristics that have become the basic framework for DEX to continue to evolve, derivate and expand in the future.

2. Second-generation DEX: Transformation of technological paradigm

(Arrival of AMM)

If EtherDelta represents the "first principle" of decentralized transactions, then the birth of Uniswap is to give this ideal a scaled implementation path for the first time.

In 2018, Uniswap released v1 and introduced the automated market maker (AMM) mechanism on the chain for the first time, completely breaking the limitations of the traditional order book matching model. Its underlying trading logic is simple but revolutionary - x * y = k: The formula is the core innovation of Uniswap, allowing liquidity pools to be automatically priced without counterparties or pending orders. As long as you put one asset into the pool, you can automatically obtain another asset according to the constant product curve. No need for counterparty, no need to place orders, no need to match, trading behavior is equivalent to pricing behavior.

The breakthrough of this model is that it not only solves the problem of the early DEX "no one puts an order" and cannot trade, but also completely changes the source of liquidity for on-chain transactions: anyone can become a liquidity provider (LP), inject assets into the market and earn handling fees.

Uniswap's success also inspired variant innovations in other AMM mechanisms:

Balancer introduces multi-asset + custom weight pools, allowing projects to set their own asset weights and distributions;

Curve designed an optimization curve to achieve lower cost asset exchange in response to the high slippage of stablecoins;

SushiSwap has added token incentive and governance mechanisms based on Uniswap, opening up the narrative of "liquidity mining + community sovereignty";

Together, these variants pushed AMM DEX into the "protocol productization" stage. Unlike the first generation of DEX, which is mainly driven by concepts and rough shapes, the second generation of DEX has begun to show a clear closed loop of product logic and user behavior: they are not only able to trade, but also the structural basis of asset circulation, the entrance to user participation in liquidity, and even a link in the project ecology launch.

It can be said that since Uniswap, DEX has truly become a "product" that can be used, grown, and accumulated users and capital for the first time - it is no longer an appendix to the implementation of the concept, but has begun to become the structure builder itself.

3. Third-generation DEX: From tools to hubs, functional expansion and

ecological integration

After entering 2021, the evolution of DEX began to depart from a single trading scenario and entered the "integration stage" of functional spillover and ecological integration . At this stage, DEX is no longer just a "coin exchange place", but gradually grows into the liquidity core in the financial system on the chain, the entrance to cold start of projects, and even the scheduler of the ecological structure.

One of the most representative paradigm changes during this period was the emergence of Raydium .

Raydium was born on the Solana chain and is the first DEX to try to deeply integrate the AMM mechanism with the on-chain order book . It not only provides a liquidity pool based on a constant product, but also synchronizes transactions to Serum's on-chain order book to form a liquidity structure that coexists with "automatic market making + passive order pending". This model combines the simplicity of AMM with the visible price level of the order book, which greatly enhances capital efficiency and liquidity utilization while maintaining on-chain autonomy.

The structural significance of Raydium is that it is not just "AMM optimization", but DEX is trying to introduce distributed reconstruction of "CEX experience" on the chain for the first time. For new projects in the Solana ecosystem, Raydium is not just a trading place, but also a launch place

• from initial liquidity to token distribution, order depth, and project exposure, it is a linkage hub between primary issuance and secondary transactions .

At this stage, the burst of functions is much more than Raydium:

• SushiSwap has added transaction mining, governance tokens, community governance and "Onsen" incubation pools to the Uniswap model, forming a governance-oriented DEX ecosystem ;

• PancakeSwap combines functions such as chain games, NFT markets and on-chain lottery to complete the DEX platform operation on BNB Chain ;

• Velodrome (Optimism) introduces "inter-protocol liquidity scheduling" based on the veToken model, making DEX a coordinator between protocols rather than just serving users;

• Jupiter connects multiple DEXs and asset paths through the path aggregator role in the Solana ecosystem , becoming a true "on-chain cross-protocol aggregator".

The common feature of this stage is that DEX is no longer the end point of the protocol, but a relay network connecting assets, projects, users and protocols.

It not only undertakes the "terminal interaction" of user transactions, but also needs to embed the "initial drainage" of project issuance, and also needs to connect with a complete set of on-chain behavior systems such as governance, incentives, pricing, and aggregation.

DEX has since broken away from its identity as the "island protocol" and has become a hub primitive in the DeFi world - a highly adaptable and composable on-chain consensus component.

4. Fourth generation DEX: Deformation growth in multi-chain torrent,

which is polymerization, L2 and cross-chain experiments

If the evolution of the first two generations of DEXs is a mutation of the technical paradigm and the third stage of Raydium is an attempt to splice functional modules, then starting from 2021, DEX has entered a more difficult stage to classify: it is no longer a team leading the "version upgrade", but the entire chain structure forces it to make adaptive deformations.

The first thing to feel this change is the DEX deployed on Layer 2.

After the Arbitrum and Optimism main networks were launched, high Gas costs on Ethereum were no longer the only option, and the Rollup structure began to become the soil for the growth of the new generation of DEXs. GMX adopts oracle pricing + perpetual contract model on Arbitrum, and responds to the problem of "AMM is not enough to solve the depth" with minimalist paths and LP pool-free structure. On Optimism, Velodrome uses the veToken model to try to establish a governance coordination mechanism for liquidity incentives between protocols. These DEXs no longer pursue universality, but are rooted in specific chains in the form of "ecological supporting facilities".

At the same time, another type of structural patch is also being formed synchronously: the aggregator.

When DEXs become more and the problem of liquidity fragmentation is quickly amplified, and users' "where to trade" on the chain gradually becomes a new decision-making burden. From 1inch that was launched in 2020 to later Matcha and Jupiter, aggregators assume a new role: they are not DEXs, but they coordinate the liquidity paths of all DEXs. Jupiter, in particular, has risen rapidly on the Solana chain because it accurately fills the gaps in path depth, asset jumps and trading experience.

However, the structural evolution of DEX has not stopped in chain adaptation. After 2021, ThorChain , Router Protocol and other projects have been launched one after another, posing a more radical proposition: Can the two parties to the transaction be not on the same chain at all, and can the exchange be completed? This type of "cross-chain DEX" has begun to try to solve the problem of inter-chain asset circulation through self-built verification layers, message relays or virtual liquidity pools. Although the protocol structure is much more complex than single-chain DEX, their appearance sends out a signal: the evolutionary path of DEX has departed from a certain public chain and is heading towards an era of inter-chain protocol collaboration.

It is difficult to classify DEX at this stage by "type": it may be a liquidity entry (1inch), a protocol coordinator (Velodrome), or a inter-chain interchange mechanism (ThorChain). They are not "designed" like the previous generation, but more like "squeezed out by structure".

At this point, DEX is no longer not only a tool, but also an environmental reaction - an adaptive product used to undertake network structure changes, asset cross-chain jumps, and incentive game between protocols. It is no longer a "product update", but a reflection of "structural evolution".

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3. When pricing, liquidity and narrative meet: How DEX "goes into"

Launch

Looking back at the development paths of the previous four generations of DEXs, it is not difficult to find one thing: the reason why they continue to evolve has never been because a certain function is designed more flawlessly, but because they are constantly responding to the real needs on the chain -from matchmaking, market making, to aggregation, and cross-chain, every transformation of DEX is a natural filling of a structural vacancy.

At this stage, DEX is no longer a "function point" on a certain chain, it is more like the "default adaptation layer" after the structure changes on the chain. Whether it is a project that wants to incentivize, a protocol that wants to attract traffic, or aggregate cross-chain, DEX plays more and more roles of "scheduling" and "coordination".

But as it assumes more and more roles, DEX inevitably encounters another structural dilemma that has long existed but has always been missing:

To go to CEX, you need to list coins, talk about resources, and attract communities; to go online, you need to build pools, find liquidity, and attract discovery of the circulation of goods. These seemingly scattered questions eventually converge into a core problem: Who will provide the project with a startup structure for the cold start of a new project?

You should know that in the early crypto markets, Launch was often a resource operation dominated by centralized exchanges: the pace of currency listing, price guidance, user distribution, and publicity nodes, all controlled by the platform. Although this model is efficient, it also brings problems such as high entry threshold, insufficient transparency, and excessive centralized power.

When DEX gradually mastered the pricing, liquidity, user mobilization and community mechanisms, it began to have the ability to take over all the elements required for Launch in structure - and all this was not because DEX wanted to do Launch, but because it naturally grew the shape of Launch in its functional and ecological evolution .

It has never "announced" to enter the primary market financing scenario, but at a certain stage of history, DEX naturally undertakes the three core structures of the project's cold start: liquidity, pricing, and community.

This is not a product strategy, but a spillover result of structural logic .

After Uniswap introduced AMM, we saw the first price discovery mechanism without placing orders or matching parties. In other words, DEX turns "market consensus" into "on-chain function", and price formation no longer depends on matchmaking, but is directly determined by the supply and demand relationship of the asset pool. This pricing structure is precisely one of the most difficult problems to solve in cold start of the project: when a token is first launched, has no liquidity, and does not have secondary trading depth, what it needs most is an automatic, license-free price discovery mechanism.

Immediately afterwards, liquidity pools became the distribution channel for early incentives. The project party injects tokens and mainstream assets (such as ETH and USDC) into the pool, using the depth of the pool to support early price stability, and at the same time guides users to join the liquidity provision through transaction fees and liquidity mining. Users are not "investors", but "participants"; projects are not "issuing coins", but "release pools".

Taking Raydium as an example, the logic of this "DEX, namely the Launch platform" is particularly direct. It is not only a liquidity protocol on Solana, but also embedded the AcceleRaytor module, allowing projects to be cold-started on-chain through liquidity pool + initial sale . There is no complex review process, no intermediary platform to control the pace of currency listing, and there is even no mandatory KYC threshold. Everyone can subscribe shares in advance, get ahead of the transaction through Raydium, and play in the first-level price changes.

AMM not only does liquidity and pricing, but also reconstructs community mobilization in a sense : DEX's trading logic is naturally composable, participateable, and co-constructable . This also means that since the first day of launch, the project has been in an environment where communities and transaction mechanisms are intertwined, and issuing coins has become a social release.

Therefore, DEX is no longer a "distribution channel" or "back-chain tool" for the primary market, but instead takes over all the key paths of Launch from the root structure . It does not rely on hosting, publicity, permission control, and just depends on the mechanism itself to create a closed loop of early issuance of a project.

Therefore, Launch is not a "functional module" of DEX, but more like a structural by-product it naturally grows. As a decentralized trading mechanism, when it is used in the early stages of the project, it naturally becomes the place of the primary market.

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4. From distribution to design: On-chain rewriting of the Launch

mechanism

The earliest Launch mode was actually very simple - as long as the pool was opened, the tokens were considered online.

The "free online" mechanism on Uniswap has spawned the earliest batch of IDO (Initial DEX Offering) projects: the project party injects tokens directly into the trading pair, forming a liquidity pool with ETH or USDC, and the user's rush to buy is a first-level issuance itself. There is no schedule, no qualification review, and no centralized control. The only threshold is the difference in on-chain speed and information.

This mechanism greatly releases the freedom of token issuance, and is accompanied by problems such as crazy slippage, rushing robots, and lack of price anchorage. The whole process is more like an open speculative sprint than a real financing design.

As the problem was exposed, some projects began to try more controllable mechanisms, such as Balancer LBP (Liquidity Bootstrapping Pool) .

The core logic of LBP is to artificially set extreme initial price weights (for example: 90% tokens/10% USDC) in the early stages of launch , and gradually adjust them to normal proportions as time goes by. Prices automatically declined under the mechanism design, intending to curb early FOMO and robots.

In theory, it makes prices more rational and gives users more equal opportunities to participate. However, in actual operation, the resistance to capture of LPB is still limited, and the price curve design is difficult, and the threshold for user education is not low. It's like a "programmable roadshow in the DEX era" but doesn't really solve the problem of "who should be involved".

Another type of solution is the Fair Launch pattern, such as the model that Camelot practices on Arbitrum.

Fair Launch’s idea is: **No longer preset prices, but instead raise funds + pricing + distribution in a public and participatory deposit window period. **How ​​much USDC you invest, you will eventually get a percentage of tokens. Everyone can participate, and proportional distribution without rushing to buy, it sounds more "fair".

But the real challenge is: to whom? For retail investors, there is still a risk of participation due to lack of price anchor points and no exit mechanism; for project parties, unstable financing efficiency and uncontrollable market depth may not be better than traditional IDOs. Fair Launch embodies more the expression of a “governance philosophy” than improvements in structural efficiency.

At the same time, in more radical DEXs such as Jupiter and Velodrome, we began to see some mechanisms deeply bound to the governance structure within the protocol:

• Jupiter's LFG activity introduces position thresholds and interaction pre-positions , turning "qualification" into a proof of on-chain behavior;

• Velodrome uses the veNFT + bribe mechanism to turn liquidity incentive rights into a process of inter-protocol voting and negotiation . The project launch is not just about issuing coins, but about "entering the liquidity governance game".

The common point of these mechanisms is that Launch is no longer an "issuance-purchase" action, but a reconstruction of structural relationships .

The project is launched, not just a signal of the beginning of the transaction, but a hierarchical consensus process of DEX's governance structure, user system, and liquidity distribution. You are not trading the coins you bought, but trading the network order you are about to join.

But this also brings more complex risks: robot arbitrage, community expectations manipulation, black box price design, liquidity-induced attacks and other problems emerge one after another. The more exquisite the mechanism, the more "God's perspective" the designer has, the less users can understand and control.

Launch is no longer an event, it is more like a dynamic system. It not only tells you how to issue coins, it also implies the basic methodology of how projects organize governance, allocate liquidity, and guide users' minds.

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V. DEX's future speculation: Iterative evolution from liquidity

facilities to consensus starters

If the early DEX was to make on-chain transactions possible, then after five years of evolution, DEX is slowly approaching another question: what else can it start besides trading?

The natural growth of the Launch mechanism has enabled DEX to shift from a platform that matches asset circulation to a hub that undertakes projects, guides liquidity, and reshapes early consensus. But because of this, as more and more projects choose to start on DEX, DEX itself is also facing new systemic challenges: Who should have the right to participate in Launch? How to filter real users? How to avoid liquidity fraud?

Under this pressure, a more fine-grained mechanism of participation seems to be being induced.

On-chain identity systems, especially reputation mechanisms built on ZK (zero knowledge proof) technology, become possible answers. Unlike traditional KYC, which requires privacy exposure, ZK identity allows users to prove that they meet certain conditions (such as holding time, on-chain interaction history, and certain protocol participation) without revealing specific information. Launch is no longer simply “grab”, but rather a screening process based on on-chain behavior and reputation.

If this structure is established, the future DEX Launch may no longer be "letting go, whoever gets faster, whoever gets on the road", but will evolve into a new model of on-chain qualification proof + structured participation in the allocation . Tokens that were initially cold-started may only be issued to those who truly meet the standards of a specific community.

To further speculate, DEX may even develop some kind of "on-chain YC"-type structure.

YC (Y Combinator) assumes the role of screening, investing and incubating early-stage projects in the Web2 world. In the DEX field, when the pricing mechanism, liquidity distribution, user screening, and incentive guidance gradually matures, DEX is completely possible to become an integrated platform for cold start of Web3 projects - it is not only a fund pool, but also a community entrance, and a liquid market.

By then, DEX may not be just a trading platform or a simple Launchpad, but the starting point of the entire on-chain project incubation system: a on-chain consensus launcher (consensus launcher) .

Of course, this path is not simple.

When DEX internalizes Launch functions into ecological standard configurations, it will inevitably bring about new competition in the red ocean:

• Who can select the best quality projects?

• Who can form the closest user community?

• Who can provide the most effective liquidity guidance and follow-up support?

Launch changed from a project's own cold start question to a life-and-death question that DEX must answer.

At that time, we may need to ask again:

If every DEX becomes a Launch platform, will Launch itself lose the early trust it once represented?

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6. Conclusion: From "self-custody" to "co-creating financial structure",

DEX returns to freedom

As we revisit the path of DEX, it is easy to forget how it was originally born—not so practical, less lively, less “market”. It was a small experiment led by geeks, just to prove that asset exchange can also be free from custody, platform, or trust.

Nowadays, when we see that DEX can carry project cold start, liquidity governance, cross-link routing, Launch structure, and even become a user-cognitive financial portal, we should look back and see clearly: all this is not the great design result of a project, but the product of the self-evolution of the entire chain structure.

DEX does not "actively upgrade", it just constantly responds to changes in the surrounding systems and constantly undertakes structural vacancy. It neither wrote a good plan nor drew a clear boundary, but in the AMM, aggregator, ZK identity, and governance binding, it turned itself into an ecological connector and launcher step by step.

It has never left trading, but it has long been more than just for trading. It never exits the center, but slowly retreats into the structure.

The evolution of DEX is never a completed functional jump, but a continued protocol reconstruction.

In this process, what it really defends is actually the first thing: it is not a Token, not a Gas Fee, nor a slippage, but a user can freely participate, collaborate, and shape his own financial order on the chain.

So when we ask again, "Why can't every project escape DEX?" Perhaps the answer is not "must", but - other than that, there is no better starting point.

The future of DEX, perhaps not in the transaction itself, but in the way it allows us to redefine the way we collaborate.