STEPN is a web3 lifestyle app that rewards users for movement. It has recently gained massive traction on Solana and has drawn a lot of attention.
STEPN currently has the lion’s share of daily active users for Solana DEXs.
Yet it only accounts for about 1% of total trading volume on Solana and manages to capture less than 0.5% of trades on Jupiter, Solana’s largest DEX aggregator.
The reason for this disparity is straightforward: STEPN offers extremely uncompetitive prices on their DEX.
How uncompetitive?
Their pools charge a 1% trading fee, which is 3.3x larger than the competitor with the next highest fee (0.3%) and 125x higher than the competitor with the lowest fees (0.008%)!
But price is a function not just of fees but also liquidity, so to understand exactly how much worse swappers are doing on STEPN relative to other DEXs we need to directly compare the prices that swappers get for various trade sizes.
On 7/25 I recorded the prices offered on STEPN and Jupiter for USDC → SOL trades of various size to see how they compare. Here are the results:
It turns out STEPN not only has egregious fees but also poor liquidity, resulting in much higher slippage than other DEXs. The difference in the amount of SOL received ranges from 1.6% at the low end up to nearly 10% for $100k trades.
What does this mean for users, practically speaking? A user swapping on Jupiter will on average save between $16 to $100 compared to swapping on STEPN. That’s a lot!
STEPN used to have Orca, the largest Uniswap v3 style DEX on Solana, integrated into their frontend. They later created their own DEX and removed Orca entirely. This resulted in shallower liquidity and higher fees with no improvements in UX. This was a conscious decision by STEPN to generate more yield at the cost of making their users pay more for swaps, extracting more value from their user base.
There are other DEXs on Solana that employ a similar strategy – integrating their DEX on various apps to avoid having to compete with other DEXs on pricing. Personally, I think relying on the ignorance of your users is not a sustainable strategy, and I expect reason to win out in the long run as users learn to do what’s best for their wallets. The flow of users is unidirectional; people will switch from STEPN (or more generally, using a single DEX) to using aggregators such as Jupiter because it offers them better prices, but no one will ever switch from Jupiter to STEPN.
Meanwhile, Jupiter’s routing just keeps getting better…
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