From Messari by Micah Casella

Key Insights

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 5 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.  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 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 utilize Matcha Auto or route trades through RFQ also avoid MEV attacks. Additionally, Matcha supports limit orders as well as cross-chain trading across seven different networks.

Website / X (Twitter) / Discord / Warpcast

Key Metrics

Performance Analysis

Volume and Trades

Total trades on Matcha increased 26% as trade volume grew for the second consecutive quarter, reaching $1.6 billion, up 30% QoQ. Usage of Matcha features, such as RFQ routing and Matcha Auto, also grew. The average daily percentage of MEV-protected trades from RFQ routing grew to 24% and volume to 19%. Additionally, Matcha continuously implements new updates that make trading simpler for users such as revamping Matcha Auto, its gasless transaction interface. The update involves Matcha covering gas costs using the token the user intends to sell. Matcha Auto also removes the barrier of requiring users to hold native assets, enabling them to trade with any asset in their wallets. Matcha’s new and existing trade features have compounded the effects of an optimistic market, contributing to its strong QoQ growth.

Q1 2024 was defined by activity on Base. Throughout the quarter, Base jumped to become the third-ranked chain for Matcha volume (4%) and trades (19%), only behind Ethereum and Arbitrum. As a result, Ethereum experienced its lowest level in volume throughout the year, dropping to 79%. Base ended the quarter with the most competitive stats of any other non-Ethereum chain yet, taking 38% of Matcha’s volume share and accounting for 57% of all trades in the final week of the quarter.

Increased Base activity appeared to be driven by a resurgence in memecoin trading and anticipation of Coinbase’s Smart Wallet. Once launched, the wallet will make interacting with Base and crypto easier for users. Additionally, Matcha’s December launch of cross-chain swaps enabled users of other chains to take advantage of bridging liquidity and trading on Base.

Movement into Other pairs (trading pairs outside the top five) may reflect the memecoin season that kicked off on Base in Q1. Additionally, Matcha rapidly lists new assets and currently supports over 5 million, leading to the trading of many new and popular pairs on its supported chains. Q1 2024 trended toward Other pairs taking a significant portion of trade volume. At the end of the quarter, the Other category accounted for 19% of the trade volume in Q1 and ended the quarter with 33% of the volume in the final week.

Simultaneously, Stable/Stable trading accounted for 23% of the Q1 trade share. It ended the quarter with a record-low 4% volume in the final week. The fall in Stable/Stable trading may indicate that traders sought more speculation-based opportunities versus low-yield arbitrage in Q1, with volume flowing into ETH/Stable and Other pairs. ETH/Stable trading ended the quarter at a yearly high of 62% in the final week of Q1. A potential catalyst for moving assets into ETH may have come from the Ethereum ETF approval speculation — with even JP Morgan anticipating that the SEC will approve Ethereum ETFs.

Unique Traders

Matcha set a record quarter serving 54,000 unique trading addresses throughout Q1, up 17% QoQ. The increase in Matcha's use by traders could be attributed not only to the bullish market sentiment but also to the platform's enhanced trading experience, thanks to new features introduced in the last two quarters. At the end of Q4, Matcha implemented multiple updates to its limit order product and added support for cross-chain trading. And in Q1, Matcha extended support for Matcha Auto gasless swaps to three new chains via the 0x Gasless API. As the market continues to appreciate, Matcha’s trading features will become increasingly important in attracting and retaining users.

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. The 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 Q1, Matcha set a record low for revert rates throughout the year at 5.4%. Meanwhile, the market average hovered around 8.4% for the quarter. On the development side, Matcha integrated 0x’s Gasless API, where activity routed through the API led to an 85% reduction in trade failures. Using 0x’s infrastructure, Matcha has built a robust DEX aggregator that frequently outperforms the market average in reliability.

Qualitative Analysis

Warpcast Presence

Matcha has built up the largest presence on Warpcast as a DEX aggregator. In addition to posting content, Matcha has also created multiple Warpcast Frames for users to interact with. Frames are applications embedded into Warpcast’s social media posts. In expanding its presence on Warpcast, Matcha partnered with Degen, a memecoin project created to reward Farcaster users. Farcaster is the decentralized protocol underlying Warpcast.

Matcha Upgrades

Matcha implemented a series of upgrades in Q1, adding new features and improving functionality.

Cross-Chain Swaps

Cross-chain swaps launched in early December 2023. Q1 2024 was the first full quarter in which users could trade assets on Matcha across seven different chains. In this quarter, Base grew its share of trades and volume heavily, other EVM-based chains grew modestly, and Ethereum lost share in both metrics. Cross-chain swaps effectively serve as a bridge, widely utilized by numerous users to transfer liquidity between chains, though typically from Ethereum to other chains. Key aspects of this product are listed below.

Closing Summary

Providing useful trading features and supporting activity on various blockchains has paid dividends for Matcha’s usage. In Q1, it saw trades, volume, and traders grow by 26%, 30%, and 17% QoQ, respectively. During the favorable market conditions in the past quarter, Matcha launched a series of features that improved the trading experience, such as cross-chain trading, limit order updates, Matcha Auto gasless swaps on new chains, and cosmetic updates to the interface. The protocol also added more liquidity sources and rapid support for emerging assets. Assuming Matcha maintains its current trajectory, it should continue to capture activity from emerging ecosystems like Base and should be an attractive option for onboarding new users into crypto trading.