This report aims to provide an overview of the current status of the ParaSwap protocol and its DAO. Additionally, it seeks to initiate a discussion for the DAO, in collaboration with the Foundation and the core team of ParaSwap, to actively participate and collaborate in efforts to ensure the success of the protocol.
Call to action: ParaSwapDAO as a Driver of Protocol Success
The landscape we’re about to present is a call to action for the community, particularly for the DAO and all interested parties in ParaSwapDAO. The DAO must be a driver of the protocol’s success, in coordination with the Foundation, Laita, and the core team, to capture market share and users, addressing current challenges and contributing to the future of ParaSwap.
To achieve this, we need to pursue initiatives that encourage delegate participation and attract top talent from the ecosystem to the DAO. We know this is not an easy task, but we are committed to helping ParaSwapDAO become a vibrant, talented, and participatory community that proposes and advances a vision for ParaSwap.
We recognize that it currently lacks a mission and vision, but these can be shaped as time goes on and participant activity grows. We believe it is important to start with initiatives necessary to increase participation, voice, and debate—cornerstones of governance in Web3—such as establishing the minimum operating structure of the DAO and a governance framework, and setting up mechanisms to improve token performance, among others.
We have a series of gradual proposals in mind in that direction, including:
- Establishing a delegate framework that aims to turn the de facto activation of the snapshot delegation system into a truly active delegation system in the community, whereby this framework should regulate delegate activities, including the application process, how they carry out their tasks, the expected rate of participation, and the methods and timelines for reporting and justifying their participation.
- We would also like to see the role of the Governance Facilitator, because while the work that the team does is very valuable, we understand that having a dedicated team scoped to ensure transparency, monitoring, strategic comms and overall community guidance is necessary in order to maintain governance flowing in a structured and efficient manner.
- Other discussions that we would like to have in the future when conditions and community participation are appropriate and allow it, include:
- Grants program
- Ecosystem actors & structure
- Treasury management
- Governance framework & proposal lifecycle upgrade
We think these issues are important to tackle in the short term before starting to think more about the long term. We welcome any feedback from the DAO, whether here or via DM.
Introduction
Launched in 2019, ParaSwap was one of the first aggregators in the emerging DeFi ecosystem, which was then in its early stages of development, innovation, and adoption. Since then, it has positioned itself among the leading aggregators in terms of transaction volume. In November 2021, ParaSwap launched the $PSP token to scale and govern the protocol, leading to the creation of the DAO.
As is common in DAOs, participation in governance has declined over time, both on Snapshot and in the forum, despite the efforts of the Foundation and various contributors. Several initiatives have attempted to reactivate participation, including:
- The restructuring of the tokenomics with PSP 2.0.
- Expansion to other layer 1 (L1) and layer 2 (L2) chains.
- The introduction and subsequent update of the Governance Committee.
- The launch of the ParaTroopers program.
- The implementation of Shutter, among others.
Despite these efforts, the DAO has faced challenges in maintaining stable activity.
The chart shows how the number of voters has decreased from the first vote to the most recent vote. Source: ParaSwap DAO Analytics, created by us.
However, ParaSwap remains one of the leading aggregators in the DeFi ecosystem. According to DeFiLlama, it ranks among the top three aggregators by volume on networks such as Arbitrum, Optimism, Base, Avalanche, Polygon, and BNB Chain, and is in the top five on Ethereum. This year also saw the launch of ParaSwap V6.2 in June, which introduced key improvements to the central contract, facilitating more integrations and reducing costs for users. Additionally, in August, the launch of ParaSwap Delta was announced, built on the Portikus infrastructure, a Network Solver Intents.
In such a volatile and dynamic market, where it’s easy to fall behind, it’s a positive signal for the community that ParaSwap continues to innovate and remain relevant.
So… what’s the point here?
We believe that ParaSwap could further consolidate its market position if governance had a greater presence and, together with the Foundation and the core team, acted as a true driving force for the protocol.
To achieve this goal, it’s important to have an overview of the current situation. In the following sections, we will delve deeper into this analysis and explore possible strategies to revitalize DAO participation.
Current Status of the ParaSwap Protocol
In this section, we will analyze the current state of ParaSwap in the market, providing the DAO with a more comprehensive and strategic perspective of the protocol.
From the perspective of aggregators, the most relevant metric for measuring performance is trading volume. Unlike most DEXs, which focus on accumulating TVL, aggregators like ParaSwap aim to offer users the best available route for token swaps. With this in mind, let’s examine some metrics for ParaSwap.
ParaSwap in Numbers
The accumulated volume of ParaSwap has reached $79.5 billion, distributed across nine EVM-compatible chains, of which four are L2 (Optimism, Arbitrum, Base, and ZkEVM Polygon). The cumulative volume by chain is:
- Ethereum: $45.8 billion (the chain with the highest volume)
- Polygon: $12.04 billion
- Avalanche: $7.01 billion
- Arbitrum: $7 billion
- BNB Chain: $3.97 billion
- Optimism: $1.37 billion, despite being the only L2 where the PSP 2.0 system is implemented
- Base: $1.12 billion
Performance in 2024
So far in 2024, ParaSwap has accumulated a volume of $22.15 billion, with a monthly average of $2.4 billion:
- January: $2.46 billion
- February: $1.95 billion
- March: $3.25 billion
- April: $2.27 billion
- May: $2.37 billion
- June: $2.19 billion
- July: $2.46 billion
- August: $3.17 billion
- September: $1.98 billion
These figures reflect a solid performance in terms of trading volume.
Weekly Analysis and Trends
According to weekly metrics:
- Ethereum continues to lead with a volume of $241 million.
- This is followed by Arbitrum with $94 million, Base with $39 million, Polygon with $36 million, Optimism with $24 million, Avalanche with $21 million, and BNB Chain with $9 million.
This data positions ParaSwap among the top five aggregators by weekly volume.
Current trends show a shift in volume toward L2 solutions. Arbitrum has gained prominence with increasing trading volume, while Base is showing steady growth. This has resulted in Polygon and Avalanche dropping in the rankings, although they remain important platforms for ParaSwap. This change is consistent with the advanced maturation of rollups and the adoption of L2 solutions in the DeFi ecosystem.
Active users and Growth
Although Ethereum maintains the highest monthly volume, Polygon recorded the greatest number of users in the last month, followed by Arbitrum, Base, Ethereum, Optimism, BNB Chain, and Avalanche.
- Daily New Users: Approximately 62,000 new addresses across all chains, with an average of 2,150 new users daily.
- Total Daily Active Users: About 238,100 users, with a daily average of 8,200 active users.
These metrics indicate healthy growth in the user base and consistent activity across multiple chains.
ParaSwap vs. Competition
Currently, ParaSwap captures 8.8% of the market volume in Ethereum, positioning it as the third most significant aggregator in the market. Source: DEX Aggregators Comparison.
Although ParaSwap’s metrics are solid, it is essential to compare its market position with that of its competitors to better understand its performance. We will use data from DeFiLlama, focusing on weekly volume as it provides a more up-to-date perspective.
Weekly Volume on Ethereum
Position of ParaSwap: 3th place. (Note: CowSwap also uses aggregators such as 1inch and ParaSwap as its underlying solvers, therefore in the number provided by DefiLlama there is double counting).
Surpassed by:
- KyberSwap: By just $1 million in volume (considering that KyberSwap operates on more chains).
- 1inch: With approximately 3.4 times the volume of ParaSwap
Performance on Arbitrum
Position of ParaSwap: Improved to 3rd place.
Surpassed by:
- 1inch: With double the volume.
- ODOS: With 2.5 times the volume of ParaSwap.
Performance on Base
Position of ParaSwap: Maintains 3rd place.
Surpassed by:
- 1inch: With 3.2 times more volume.
- ODOS: With 6.5 times more volume.
Performance on Optimism
Position of ParaSwap: Maintains 3rd place.
Surpassed by:
- 1inch: By just $8 million in volume.
- ODOS: With 1.8 times more volume.
Performance on Polygon
Position of ParaSwap: Holds 1st place.
Surpassed:
- 1inch: By $2 million in volume.
- ODOS: With 2.5 times more volume than this competitor (x2.5).
Note: We observe that in accumulated volume, ParaSwap significantly surpasses its competitors on this chain.
Performance on BNB Chain
Position of ParaSwap: Drops to 4th place.
Surpassed by:
- ODOS: By nearly $4 million in volume.
- 1inch: With 12.6 times more volume.
- uDEX: With 15.9 times more volume.
Performance on Avalanche
Position of ParaSwap: Holds 3rd place.
Surpassed by:
- ODOS: With 2.45 times more volume.
- 1inch: With 3 times more volume.
Compared to other competitors like 1inch and ODOS, ParaSwap maintains a strong position on the most popular chains. This is a very positive indicator, as it demonstrates that the protocol has managed to remain among the most successful aggregators.
Revenue
The protocol has generated a total of $12 million in revenue and over $53.8 million in fees to date. So far in 2024, it has generated $1.7 million in revenue. It is important to note that the fees are collected in the native token of each chain. Source: ParaSwap 2024 YTD Stats.
Fee Distribution
The revenue generated from the protocol’s fees is distributed as follows:
- Stakers: 80%
- DAO Treasury: 20%
Based on the DAO wallets tracking, to date, a total of around 1,450 WETH has been accumulated in revenue since 2023, distributed as follows:
- 1,160 WETH (approximate) has been allocated to stakers.
- 290 WETH (approximate) has been designated for the DAO treasury.
PSP Staking
There are currently 388M total PSPs in staking, distributed 353.6M on Ethereum and 34.3M on Optimism. (Source: ParaSwap PSP 2.0 General Metrics)
A steady increase in PSP in staking is observed in both Ethereum and Optimism, which is a very good sign. On both Ethereum and Optimism there is a steady increase in PSP staked. On Ethereum, from Epoch 5 to 22, the increase was from 182M to 353.6M, i.e. around 195%, while on OptimismOptimsim the increase from Epoch 8 to 22 was from 2.7M to 34.3M, i.e. around 1,270%. The total increase in PSP staking from Epoch 5 to 22, both networks combined, has been from 182M to 388M, an increase of 213%.
Unique holders also show a steady increase, which, while decreasing slightly in Ethereum, increases significantly in Optimism, with the total number of unique holders increasing over time. On Ethereum, from Epoch 5 to 22,unique holders went from 2,782 to 2,303, a decrease of about 17%, while on OptimismOptimsim the increase from Epoch 8 to 22 was from 755 to 2533, an increase of 335%. The total increase in unique holders from Epoch 5 to 22, both networks combined, has been from 2,782 to 4,836, i.e. around 174%.
All this shows that there is interest on the part of holders in the long term, benefiting from the incentives established.
Initial Conclusions
ParaSwap has demonstrated outstanding performance not only on Ethereum, its primary chain, but also on other major networks. The metrics indicate significant user traffic, reinforcing its competitive position in the DeFi market.
Currently, ParaSwap ranks among the top aggregators on key networks such as Ethereum, Arbitrum, Base, Optimism, Avalanche, and BNB Chain, and leads the market on Polygon. Its direct competitors include well-known aggregators like 1inch and ODOS.
Through fee distribution, ParaSwap generates revenue for both stakers and the DAO treasury. Increasing this revenue could strengthen the protocol’s ecosystem and boost user interest in staking with PSP.
Current Status of ParaSwapDAO
DAOs face significant challenges, such as lack of participation, apathy among token holders, organizational difficulties, and the tendency to become slow and inefficient structures, and ParaSwapDAO is no exception. Currently, the Foundation and the core team are the main drivers of the protocol. However, the question arises: How can we, as a community, strengthen the DAO to become an equally key force? To address this issue, we must have a broad overview of the state of the DAO.
ParaSwapDAO in Numbers
We have prepared a historical tracking of the proposals voted on in the DAO and an analytical dashboard from which interesting data can be extracted:
Proposals: Since the inception of the DAO to date, a total of 68 proposals have been voted on over approximately three years, averaging 1.8 proposals per month, consistent with the scale of ParaSwap:
- 2021: 11 proposals
- 2022: 22 proposals
- 2023: 29 proposals (the year with the highest activity)
- 2024: 6 proposals to date
Voters: The number of individual voters (addresses) has steadily declined since the inception of the DAO:
- Historical average: 321 addresses per vote
- First 10 votes: Average of 708 addresses
- Last 10 votes: Average of 160 addresses
- Current participation: Only 23% of the addresses that participated at the beginning remain active.
VP (Voting Power - PSP Voter): The amount of tokens used for voting has increased over time. Since the implementation of the PSP 2.0 system in February 2023:
- First 10 votes: Average voting power of nearly 76 million PSP
- Last 10 votes: Average voting power of nearly 139 million PSP
- Increase: More than 80% in the total PSP used for voting since February 2023.
Unique Voters: This indicates that the number of unique voters has significantly declined over time:
From the last three combined charts, we observe that starting in May 2023, the voting power used in each vote increased significantly, while the number of voters decreased.
Concentration of Voting Power: This indicates that voting power has become concentrated among fewer individuals:
- 271 voters without voting power
- 1,831 voters with voting power between 1,001 and 10,000 PSP
- 977 voters between 10,001 and 100,000 PSP
- 65 voters with more than 1 million PSP, representing 83% of the total voting power of the DAO.
Organization of the DAO
Organizations like Arbitrum and Optimism must manage not only their internal processes but also those of an entire ecosystem, which entails a wide range of responsibilities that require large and bureaucratic structures. In contrast, ParaSwap benefits from having a more specific and defined scope, allowing for more flexible, less complex, and less bureaucratic structures. Therefore, it is essential to consider not only the different types of organizational structures but also which one best fits the needs of ParaSwapDAO.
In this context, discussions were initiated in the forum in May and July 2023 to:
- Promote delegation within the DAO.
- Develop a framework and code of conduct.
- Create a specific section in the forum.
Although these discussions were initially well-received, they did not generate enough community engagement and did not advance to concrete proposals.
We believe it is necessary to revisit and expand these conversations. The DAO should have a well-established minimum structure tailored to its needs so that:
- Any delegate or interested person wanting to join ParaSwapDAO can quickly understand the processes and rules of the DAO, facilitating their integration and active participation.
- Any team or individual wishing to contribute or seek a partnership or integration with ParaSwap finds a clear and effective point of contact within governance, promoting beneficial collaborations for the protocol.
In addition to having well-established frameworks and a minimum organization, ParaSwapDAO needs to define appropriate incentives to reward its delegates and keep them aligned with the protocol’s objectives. This can be one of the most challenging tasks for any DAO: how to effectively compensate delegates for their activity and contributions.
The goal is not merely to provide random incentives but to strengthen the protocol’s resilience from a social layer and minimize any risk of attacks on the DAO. A well-designed incentive system can:
- Encourage active and consistent participation from delegates.
- Align the interests of delegates with those of the community and the protocol.
- Improve governance and decision-making, ensuring that delegates are committed to the long-term well-being of ParaSwap.
- Attract new talent who wish to participate in ParaSwapDAO.
Therefore, we believe it is important for the DAO to explore and establish compensation mechanisms that not only reward the activity of delegates but also contribute to the strength and resilience of the protocol.
Activity, Debates, and Hot Topics
Participation in the debates and votes of ParaSwapDAO varies significantly depending on the topic. We have observed that some issues generate high activity from delegates, while others go virtually unnoticed. To increase activity in governance, an effective strategy is to address topics that are of direct interest to delegates.
A recurring example that sparks great interest in the DAO is the performance of the $PSP token. There have been debates, proposals, and votes aimed at improving its performance, which have seen a high level of community participation.
In January of this year, the community debated and approved a proposal to burn/revoke the vesting 200 million $PSP tokens planned for Year 3. This measure reduced the maximum supply of $PSP by 10%, from 2B to 1.8B. The stated goal was to “improve market perception and valuation.” However, this outcome was not achieved; the token price did not improve, and the DAO became undercapitalized. Although the proposal did not have the desired effect from the token holders’ perspective, the broad support from the community demonstrated the high interest in this topic.
Recently, @cryptoinvest presented a new proposal for discussion in the forum, pursuing the same goal of improving the token price but with a different and more promising approach. The initiative suggests implementing a buy-distribute or buy-burn mechanism by modifying the Fees Distribution from 100% ETH to 90% ETH / 10% PSP. This discussion has garnered valuable contributions from @julio, @monoronco, and @0xytocin.
Also getting a lot of attention was @Laita’s post ‘ParaBoost Retrospective - Analysing boost usage and effectiveness after 20 epochs’ to which was added a draft proposal by @cubionix to modify the ParaBoost system in order to incentivise long term staking.
Such debates are fundamental, and we must promote them to culminate in concrete and well-formulated proposals that benefit ParaSwap. They are clear examples of how the DAO can act as a driving force for the protocol. In the future, it is essential to encourage and foster these discussions to continue strengthening the community and the ecosystem.
Open Questions
We want to open the debate and leave some questions for discussion:
- Do you consider the mentioned topics relevant to ParaSwapDAO? Which one would you say is the most important?
- Besides the proposed topics, do you think there are other important aspects we haven’t mentioned?
- What is the reason why a well-performing protocol has a DAO with such a low participation?
- Reactivating the voting power (VP) is truly a challenging task. For inactive or intermittent voters, what limitations prevent them from actively participating in the DAO?
- Note: We have reviewed the governance of other aggregators and they are in similar or worse situations than ParaSwapDAO.
- Should we work on some mechanism to reactivate inactive VP (such as PSP staking)?
- Is it beneficial to maintain the DAO with minimal mechanisms to avoid excessive bureaucracy?
- Should there be a delegate framework? What are the characteristics?
- Improving token performance may be one of the biggest challenges. What approaches should we explore to propose a sustainable long-term improvement mechanism?
- The token burn voted on by the DAO did not work; is the new proposal presented a few weeks ago the way to go?
- Could a reduction, as proposed by @julio, of a small percentage of the commissions distributed to stakers be implemented, using those funds for regular voting in the DAO aimed at supporting the long-term development of the protocol?
- Should we simplify the ParaBoost system, which many consider too complex, as proposed by @Laita in this recent post?
- In order to incentivise long-term staking, the ParaBoost system should be modified in the way proposed by @cubionix?
There are surely more questions to answer and doubts to clarify. We invite all community members and delegates who may be reading to participate. If the debate progresses, we will call for a governance meeting to accelerate the process.
