Kwenta - Project Rating and Analysis
What Is Kwenta?
In the wake of the FTX bankruptcy, market concerns about the security of funds have gradually increased. Due to the transparency issues of centralized exchanges, users' demand for decentralized exchanges is gradually rising. Kwenta, the perpetual exchange launched by the Synthetix team, has caught the attention of a large number of traders.
Kwenta is a decentralized synthetic derivatives exchange developed by the Synthetix team and built on the Optimism Layer2 network. It currently supports spot swaps and perpetual futures trading.
Kwenta's primary product is perpetual futures, which currently supports margin trading with up to 25x leverage. The order types supported by Kwenta include market orders, limit orders and stop market orders.
Kwenta is based on the Synthetix protocol and the liquidity for its trades is provided by Synthetix's Synthetic Asset Debt Pool. In addition, the prices of Synthetix's synthetic assets are fed by the Chainlink oracle. Therefore, trades on Kwenta are executed with 0 slippages.
$KWENTA is the governance token of Kwenta. It is used to incentivize coordination and growth within the Kwenta DAO. The main functions of $KWENTA include staking and governance.
What Is TokenInsight's Rating For Kwenta?
TokenInsight has rated Kwenta's current performance with a B and a positive outlook.
The breakdown of the rating results is scored as follows.
- Underlying Technology & Security 53.6%
- Roadmap & Progress 66.3%
- Token Economics 49.47%
- Ecosystem Development 53.5%
- Token Performance 31.93%
- Team, Partners & Investors 61.33%
Underlying Technology & Security (53.6%)
Unlike traditional exchanges that use mechanisms such as order books and AMMs, Kwenta is based on the synthetic asset protocol, Synthetix, and its liquidity is provided by Synthetix's synthetic asset debt pool. Since its launch in October 2020, Kwenta has not experienced any security attacks or crisis events.
In addition, according to its disclosed smart contract audit report, Kwenta's smart contract code has one high, one medium, and three low-security issues. However, as summarized in the audit report, all of these issues have now been resolved.
Roadmap & Progress (66.3%)
In the document, Kwenta updated its development plans since July 2022 until the end of the year. According to the disclosed roadmap, in the 3rd quarter of 2022, Kwenta focused primarily on enriching its product offerings, going live with a Beta version of limit orders, stop-limit orders, and a full margin trading model. After that, Kwenta launched its native token, $KWENTA, on November 17. The following month, Kwenta plans to begin research and development on hybrid strategies. As of December 18, 2022, Kwenta has not yet released its plans for 2023.
Token Economics (49.47%)
$KWENTA is a governance token issued by Kwenta. According to the disclosure, it is primarily used to incentivize coordination and growth within the Kwenta DAO. Currently, $KWENTA can be used in staking and governance.
The initial supply of $KWENTA is 313,373. 14,463.37 inflation will be issued in the first week, with inflation dropping to approximately 200 per week (1% APY) at the end of 4th year (2026). The total supply at the end of 2026 is calculated to be 1,009,409.43.
According to the token distribution details disclosed by Kwenta, 15% of $KWENTA's initial supply is allocated to the core team, which is relatively decentralized. In addition, the initial supply of $KWENTA is only 30% of the total supply. And 80% of the inflationary rewards will be distributed to $KWENTA stakers. This provides a positive incentive for the long-term value of $KWENTA, and Kwenta also has a vesting lock-in mechanism to incentivize users to lock in their tokens over time.
Ecosystem Development (53.5%)
After Kwenta expanded its order types and went live with a new cross-margin trading model (all completed in September), its daily volume and number of traders increased. According to Kwenta's official statistics, Kwenta's trading volume on September 15 was approximately $89 million, the highest daily trading volume since its all-time high on April 20.
At the same time, according to Kwenta's official statistics, the number of daily trades and traders has jumped significantly since the second half of September and has not yet subsided. on December 14, Kwenta's daily trades and traders reached an all-time high of 4,937 and 2,213, respectively.
As of Dec. 8, Kwenta has official accounts and communities on Twitter, Discord and Medium. Twitter has the largest number of followers, with over 70,000.
Token Performance (31.93%)
$KWENTA is currently only traded on Uniswap (Optimism). $KWENTA has a 24 hour trading volume of $23,630 (on Dec. 19) and is relatively illiquid. Regarding on-chain data, Kwenta issued its native token, $KWENTA, on November 17. $KWENTA currently has 344 holders and 21,932 on-chain transactions. Due to its short launch date, its overall on-chain activity is relatively poor at this time.
In terms of price, $KWENTA initially traded at $257.82. On November 22, the price of $KWENTA dropped to a low of $70.65, but as of December 19, 2022, the price of $KWENTA has now recovered to approximately 70% of its initial price, at approximately $182.47.
Kwenta has attracted many users with its Synthetix-native team, liquidity mechanism based on the Synthetix lending pool, and zero slippage advantage. It is currently focused on diversifying its order types and trading products to enhance the user experience and attract more users. As you can see from our ratings, Kwenta is currently performing reasonably well in some modules such as its roadmap & progress, team, and token economics. However, its native token has just gone live, and there is a lack of on-chain activity and liquidity. This affects Kwenta's rating to some extent.
Based on the above information, TokenInsight gives Kwenta a rating of B with a positive outlook.