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As we anticipate advanced infrastructure like rollups and faster Layer 1s and 2s, we expect more app launches. This raises the question of why some apps, like Uniswap, dYdX, and Lido, succeeded where others did not.
While pinpointing their exact success factors is challenging, our analysis provides insights into why these apps thrived in a competitive landscape, offering valuable lessons for future developers.
Uniswap
Launched by Hayden Adams in November 2018, Uniswap is a decentralized exchange (DEX) that has established itself as a market leader. Boasting over $5 billion in liquidity, $1 billion in daily volumes, and more than 100,000 daily active users, Uniswap is the foremost spot for DEX.
Uniswap’s success is often credited to its advanced technology and mechanism design, yet these aspects were not unique to Uniswap. The concept of automated market makers (AMMs) that forms the backbone of Uniswap was initially conceptualized by Alan Lu from Gnosis Safe and influenced by Vitalik Buterin’s writings.
Despite the existence of other AMMs with more intricate designs, they failed to garner significant user attention and adoption, highlighting that Uniswap’s triumph stemmed from factors beyond technology alone. These included superior user experience, active community engagement, and strategic execution.
Design and Branding
At the time Uniswap launched, EtherDelta was one of the few DEXs with significant user engagement. However, EtherDelta’s interface was notoriously difficult for retail users, who were often unfamiliar with trading via order books.
Uniswap, on the other hand, was designed to be user-friendly from the outset, catering to both liquidity providers and traders. Buyers didn’t have to worry about limit prices or order books and liquidity providers could deposit tokens with a single click, resulting in a broad selection of assets on Uniswap.
Uniswap also boasted a memorable brand: the pink unicorn. This whimsical and iconic symbol resonated with the playful culture of the crypto community. A recognizable brand is invaluable, especially when selling a product that is easy for competitors to replicate. A strong brand instantly sets you apart from similar products.
Remarkably, Uniswap’s core interface has remained largely unchanged since its initial demo in 2018. This consistency underscores the effectiveness of its user experience design, which has proven to be both rare and enduring.
Distribution
One key insight we’ve gathered about Uniswap is that having an outstanding product isn’t sufficient—you also need to ensure it reaches the right audience and gains traction.
This often-overlooked point is crucial: Hayden Adams worked tirelessly to expand his network within the crypto community and to introduce Uniswap to the right people early on. He attended conferences and collaborated with well-known teams like Balance and Maker, showcasing Uniswap in person. This relentless effort helped establish Uniswap’s presence. Notably, it was during this period that Hayden met Vitalik Buterin, who not only coined Uniswap’s catchy name but also became a significant early advocate for the platform.
In addition to demonstrating Uniswap, Hayden enlisted his network to help bootstrap liquidity. As a result, Uniswap attracted approximately $30,000 in deposits on its first day, which was sufficient to facilitate small trades of around $100.
With the initial liquidity in place, early supporters began to generate buzz as they recognized the profitability of providing liquidity, thanks to fees from constant arbitrage opportunities. This enthusiasm attracted more liquidity providers, further enhancing Uniswap’s growth.
Lido
Lido is a liquid staking protocol established in 2020 by Konstantin Lomashuk, Vasiliy Shapovalov, and Jordan Fish. Its liquid staking token, stETH, enables users to earn staking yields while maintaining liquidity. With $29 billion in deposits, Lido currently stands as the largest DeFi protocol by total value locked (TVL).
While many attribute Lido’s success to its first-mover advantage, it is important to note that Lido was not the only liquid staking option available when Ethereum first enabled staking. Interestingly, they were not even the only solution using “stETH” as a ticker. Despite these factors, Lido managed to achieve significant adoption and emerge as a leader in the market.
Bias for Action
Lido’s proactive approach led them to make strategic trade-offs that enabled them to launch a simple product quickly and enter the market ahead of their competitors.
When Lido launched, Ethereum lacked support for 0x01 withdrawal credentials. This meant validators couldn’t assign a smart contract as a withdrawal address, essential for managing assets securely in a multi-signature setup like Lido’s. To overcome this hurdle, Lido introduced a temporary solution: a distributed threshold encryption scheme to simulate multi-signature functionality for withdrawal addresses. This innovation enabled them to progress without awaiting the availability of 0x01 credentials.
Collaborations and Integrations
Lido was exceptionally proactive in forming key partnerships and integrations to enhance utility and liquidity from the outset.
Lido’s stETH token quickly became easy to find and acquire, thanks to integrations with popular wallets like Argent and reputable brands like Ledger. These collaborations significantly boosted Lido’s distribution and brand recognition.
Additionally, Lido forged numerous integrations with prominent DeFi protocols, further accelerating its growth. For instance, Lido bolstered stETH liquidity by incentivizing the stETH/ETH pair on Curve, allowing users to swap between the two with minimal slippage—crucial at a time when Ethereum had not yet enabled staking withdrawals. Due to its deep liquidity, stETH became the first liquid staking token accepted as collateral on both Maker and Aave, enhancing its utility even further.
Final Words
Reflecting on Uniswap, dYdX, and Lido’s early successes offers insights into developing thriving on-chain applications. It’s not just about technology or being first; success demands understanding user needs, creating exceptional products, building trust, and making strategic decisions. These teams provide a valuable blueprint for aspiring creators of leading on-chain applications.
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