WOO Network - An Asymmetric Bet on the Growth of the DEX and CEX Sector

Disclaimer: The information provided in this research piece does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the content in this publication as such. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.

Table of Contents

1. Introduction

2. Overview of the WOO Network Ecosystem

3. WOOX, the best execution Centralised Exchange

4. WOOFi, the DeFi Powerhouse

5. Tokenomics of WOO

6. The bullish case for WOO

7. Upcoming Catalysts for tokens and ecosystem

8. Risks - Things that would keep me up at night

9. Concluding Thoughts

10. Introduction

In the dynamic world of crypto, the relentless pursuit of two key objectives echoes through the minds of every crypto enthusiast and is considered a north star—increasing mainstream adoption and successfully onboarding institutions. This collective ambition propels the entire space forward.

When dissecting the landscape, one sector emerges as the crucial threshold for onboarding the investors into the crypto fold. This is none other than crypto exchanges. The past few bull markets have been pretty evidently showing a clear outperformance of tokens of top exchanges from the beginning of the bull markets. They tend to not outperform the shiny new narrative coins but they are a safe bet at the early innings of crypto cycles.

For those stepping into the crypto arena for the first time, popular exchange tokens often chart the course along the low to mid curve iq spectrum, along with BTC, ETH and undoubtedly meme coins. This is a phenomenon echoed in the success stories of tokens of decentralized exchanges like Uniswap, where user base and adoption take precedence over immediate revenue streams for token holders.

While overlooked in the initial phases of bull markets, exchange tokens tend to do extremely well just due to the sheer user traction, volumes and reputation. In that regard, I believe WOO network, an ecosystem consisting of innovative CEX and DEX products is set to do well over the long term.

I first wrote on WOO Network about 2 years ago in a short analysis here. WOO Network's vision was still crystallizing, and the team had only a handful of products to showcase. Over this bear market, the team has created an absolute behemoth of products across centralised and decentralised avenues and I find it a intriguing asymmetric bet on both domains.

Given the everchanging market conditions, I have recently found solace in articulating my investment thoughts in writing, to constantly reconsider positions every few months. It really keeps my head at the right place and keeps my thesis stronger than ever.

Considering WOO's role in my portfolio, I find value in sharing a comprehensive long-tail thesis publicly. This not only benefits those closely tracking WOO's trajectory but also serves as a valuable resource for those yet to discover this ecosystem play.

1. Overview of the WOO Network

At first glance, Woo Network looks like a normal tier 2 or tier 3 centralised exchange that is trying to stay relevant. But in reality, the project is a behemoth spanning across both CeFi and DeFi venues.

Starting with having the most liquid centralised exchange in comparison to its peers, WOOs CEX has one of the best superior trading venues for traders.

Meanwhile, WOO Network’s DeFi product has the most efficient pricing among DEXs, and constantly hits top 5 most used dapps in DappRadar with surpassing 280,000 monthly active users.

Woo Network was incubated in 2019 by Kronos Research, a lower profile but largely well known multi-strategy crypto trading firm that specializes in market making, arbitrage, CTA, and high-frequency trading (HFT). Kronos research does trade volumes of between $10-$15 billion daily. The team at Kronos started WOO Network to solve the issues of lack of liquidity in crypto markets.

Woo has two core products catering to diverse crypto audiences:

• WOOX, a centralised exchange with the best liquidity and execution at low fees

• WOOFi, a decentralised non-custodial cross chain DEX and omnichain perp order book

Since so much of the products being built is so innovative and revolutionary, this research piece will be focusing on the basics of the centralised exchange and the decentralised exchange, followed by the tokenomics and my catalysts for the next bull market.

1. WOOX, the Centralised Exchange

Woo network began with their centralised exchange WOOX in 2021.

WOOX is a spot and futures centralised KYC crypto exchange offering over **130 **trading pairs. The exchange has rapidly carved its niche in an ocean of thousands exchanges, achieving daily volumes exceeding $200 million.

WOOX however is not like your usual shitcoin trading/gambling exchanges like Binance, OKX, Kucoin offering spot and perps. It isnt also just another player in the market vying for a silver attention among all these giants.

WOOX has a major advantage across the Centralised Exchange landscape which makes it extremely attractive for crypto traders. WOOX excels in providing unparalleled liquidity, narrow spreads, and exceptionally competitive fees—in many pairs even offering zero fees.

WOOX was founded with a primary objective: to give traders edge in crypto markets. What exactly is edge in markets you may ask.

For traders, it mostly comes from having trading setups with proper experience in technical analysis and lots of year’s of just staring at charts till you get it.

Despite having these edge and no matter how good a traders setups are, traders need edge in their trading venues. Edge in trading venues is usually associated with 3 main factors: Execution, Transparency and Trading Tools.

**3.1. Execution of trades: **Good execution, low slippage when placing trades, low fees are all the indirect edge that a trader requires.

Through the large liquidity aggregation and zero fees zone, WOOX is able to provide the best execution among all exchanges.

At $1 million, the exchange is able to provide the best executions that competes with Binance and outperforms other exchanges easily as shown below.

WOOX Execution vs other Major Exchanges with volumes greater than $1 million

In simpler terms, traders are paying less fees, and getting the best prices for orders - making it the best venue if you are a regular trader and often trade with size.

WOOX is able to accomplish such good execution as its model operates on a mix of aggregated liquidity from top trading venues and exchanges through Kronos research and other Designated Market Makers that hedge positions in other exchanges.

**3.2. Transparancy: **WOOX is one of the more transparent exchanges out there in the CEX space. Centralised custody comes at a large cost when you are trading on exchanges in the form of risk.

Users have to take the word of the exchange that they have your funds and have not siphoned off funds to a terribly managed personal piggy bank.

WOOX was the first exchanges to fully integrate a live balance sheet and it is one of the few exchanges that uses merkle tree for proof of reserves.

3.3. Trading Tools: WOOX boasts unparalleled trading tool customizability within the market. Among the myriad exchanges available, it stands out as one of the select few that grants traders the unique ability to personalize their workstations, setting it apart as a platform that prioritizes and accommodates individual preferences.

WOOX’s Customizable Trading Interface for Professional Traders

All these factors place a major role in trading and by outperforming all the other exchanges WOOX is the go-to exchange for professional traders and institutions trading in size.

Crypto trading chads CryptoCred and Duck from technical roundup wrote an extensive piece on the benefits and superior trading avenue WOOX provides to traders and why the platform is worth the plunge for most traders. If you have been in the crypto trading space for a while, you know these guys are the most credible traders in the space. Highly recommended read if you would like to understand the platform from a traders perspective.

Lack of awareness about WOOX

I get it, you're probably wondering: if WOOX is supposedly the superior platform for trading, why isn't it the most popular, and why haven't I heard much about it?

A lot of it comes down to the business model WOOX operates in.

WOOXs model previously revolved mostly around zero fees, drastically impounding the exchange making large noises like other exchanges did. WOO was also utilising 50% of its revenues to buy back and burn the WOOX tokens. All of this combined meant very little outreach and little marketing to get the name out. This meant, a large part of the last bull market for WOO was spent building a great product instead of marketing.

It is unquestionable that having a great revenue stream and strong model really can get exchanges to places. Think lots of the marketing, trader partnerships and even slapping the exchanges branding on F1 cars and Basketball Stadiums. These are how exchanges increase their mindshare in the space.

WOOX since then has drastically changed its revenue model to enable a higher growth trajectory. Woo has shifted its approach, discontinuing the practice of using platform revenues for token buybacks and burns and has revamped its zero fee from all pairs to only 60+ pairs.

This extra revenue means more money for marketing, more partnerships and more mindshare for the exchange. With a solid platform that is the best in the market, i believe the WOOX name will be increasing its mind share among the trading community and institutions.

In fact, the team has already started partnering with the largest and most reputed traders in the space. In the last 4-5 months, over 100+ top traders have partnered with WOOX as the primary crypto exchange of choice.

Here’s a list of the biggest traders that you might recognize that WOOX is in partnerships with, out of the few hundreds.

Traders partnered with WOOX

These partnerships are only set to increase as we approach towards the bull market and with the solid offerings, i believe WOOX will become a highly recognisable exchange.

1. WOOFi, the DeFi Powerhouse

WOOFi is WOO network's decentralised offering that offers superior defi trading and cross chain swaps across over 11 evm chains. Since its inception in 2022, WOOFi has facilitated an impressive $7 billion in swapping volumes, establishing itself as a frontrunner in the DeFi realm.

WOOFi ranks among the top 15 DEXs by volume across all chains and clinches a spot in the top 4 DEXs spot on Optimism, Polygon, ZKsync, BSC, and Avalanche. Over the last few months WOOFi has been a generating over $200 million in volumes monthly.

WOOFi is also one of the most used DeFi protocols in the markets with close to 285,000 monthly unique active wallets interacting with the protocol.

Monthly Volumes (Source: DefiLlama)

Monthly UAW Rankings (Source: DappRadar)

WOOFi has the following products:

• Cross chain Swap

• Earn

• Stake

• WOOFi Pro - order book perps

Similar to its niche positioning as the best execution in CeFi with WOOX, WOOFi has its own niche in DeFi markets, which is the best execution with capital efficency and one click cross chain swaps across L1 and L2 EVM chains.

The current DEXs do not provide efficient execution and have multiple trade-offs with pricing, slippage and depth. WOOFi was built by the Woo team to improve the liquidity and capital efficiency on-chain for traders and make trades as close to CeFi execution as they can be.

Cross Chain Swap and Earn Product

Unlike all the major DEX players in the space, WOOFi uses a unique algorithm for pricing called the Synthetic Proactive Market Maker (sPMM). This is as opposed to the AMM models used by current generations of spot DEXs.

WOOFi has built its own on-chain oracles that allow market makers to stimulate price, spread and depth of orderbooks on-chain that replicates off-chain pricing data. Mimicking the liquidity of centralized avenues allows WOOFi to outperform execution of trades with low liquidity.

sPMM Model Matches CEX depth on-chain

Liquidity providers provide single sided liquidity in single sided vaults under WOOFi earn and not equal liquidity on both sides of the pair. This single sided liquidity is locked up and is either deployed into low risk yield farming strategies or borrowed by professional market makers (ie Kronos Research) to manage liquidity in the pool.

The sPMM provides a good source of yield for the liquidity providers of the DEX without exposing them to any impermanent loss of their positions or need to actively manage concentrated liquidity positions.

Pool managers are able to borrow 90% of the deposits to conduct hedging.

Here is a good example of how WOOFi operates behind the scenes:

1. Liquidity Provider deposits single sided (eg ETH or USDC) into the earn vault

2. Assets are deployed into third party protocols or borrowed by pool manager

3. Trader A conducts a trade to convert USDC to ARB

4. WOOFi’s sPMM algorithm with custom oracles checks the bid/ask price of ARB/USDC at centralised exchanges and mimics the mid price of the CEX orderbook data. The algorithm also simulate market depth and slippage of centralized exchanges.

5. Trader A gets the best execution across all of DeFi with the most closest pricing

6. Pool manager takes a ARB position with USDC to maintain market neutrality either through spot or perp positions

By utilising this model, WOOFi has the best capital efficiency with the amount of volumes and TVL locked.

With close to just $10 million locked on the protocol, WOOFi is able to conduct $201 million in volumes in 7D. Using this design, WOOFi just obliterates its competition in volume/TVL metrics as shown below with just fraction of TVL and provides the best pricing in the markets.

Higher Volume/TVL indicates better capital efficiency (Source: DefiLlama)

WOOFi is such a powerhouse for conducting swaps and for liquidity providers. WOOFi is also connected to multiple defi brokers which are connected to the sPMM offering.

WOOFis broker partners 1inch, Paraswap, Yield Yak, Firebird, Openocean, DODO, Bitkeep, and ONTO wallet direct orders to WOOFis sPMM for best pricing and execution.

With such a good model, WOOFi does not necessarily have to expect users to come through the frontend and can allow other aggregators and apps to route transactions to it. Brokers also receive 20% of the trading fees incentivizing more front facing apps to integrate into WooFi for superior execution.

WOOFi’s other advantage is also that it is a completely cross chain protocol. WOOFi uses stargate technology allowing users can seamlessly conduct one cross chain swaps between 11 evm chains.

With the integration of Stargate and 1Inch, users can swap any token from any chain to another token to another chain. This means you can swap from Jizz coin in Arbitrum to Grokshiba coin on Polygon all in one click and in one transaction.

WOOFi swap with their unique sPMM model along with cross chain swaps will continue to grow as a unified DEX layer for all swapping actions on-chain across all large evm chains.

WOOFi’s swap, earn and other features are exciting to me but not as exciting as WooFi Pro, their perp orderbook.

WOOFi Pro - Perp Orderbook DEX

A year ago, Woo Network and Near Protocol joined forces to incubate an order book perp DEX called Orderly Network. The mission behind the initiative was to create a decentralised orderbook liquidity infrastructure as a whitelabel solution that would perform largely like a CEX on-chain. Orderly network raised $20 million at a valuation of $200 million.

In simple terms, Orderly is a liquidity infra that allows projects and other dexes to build on top of professional trading infrastructure and deep liquidity. Orderly network uses a unique style of liquidity provisioning using an off chain matching engine. All the custody and settlement occurs on-chain while execution happens off chain.

Orderly network launched its perp version on Near which got some mild traction. The team has been working on an EVM Omnichain Centralised Limit orderbook (Clob) with V2 and launched on Arbitrum recently. The V2 version is an absolute gamechanger and will be the first omnichain orderbook. Here’s why the current market sucks and needs a solution like Orderly Network:

• Currently, dex’s all stick on to a particular chain and are siloed. Users have to go through hoops and bounds to get to the different chains and to trade on the best orderbook exchanges. Case in point, let us look at the top 5 orderbook dexs based on volumes and see the chains they are present in.

• Fragmented Liquidity and capital chasing rewards. We’ve all seen this before - a whole new perp dex hitting the top spot on defillama. Chance are that they are just attracting volumes with airdrop points and rewards. The problem of fragmented liquidity across chains remains a point that is hardly even solved currently. Orderly is creating a perp dex that is accessible from any evm chain with shared liquidity across chains.

• Current evolution of decentralised exchanges suck except for DYDX. Professional traders are not using GMX or any other current perps DEXs to make their trades. Execution matters significantly and an offchain orderbook and matching engines are the most effective model for professional traders.

Orderly is building the ultimate trading logo solving these issues mentioned above with a CeFi level experience. Their trading lego allows users to deposit and withdraw assets from EVM compatible blockchain such as Arbitrum, Optimism, Linea, Polygon, Scroll, and Avalanche.

The network uses a shared liquidity layer across all these chains. Meaning if you are a trader on Optimism, you can trade against traders on other connected chains like Linea, Arbitrum, Polygon and many other evm chains. All of this powered by LayerZero.

Orderly provides B2B services to any Dapp that needs access to the liquidity. Given the fact that Orderly was incubated by WOO, WOOFi will be the main interface and be the flagship product for Orderly network. Called WooFi Pro, the perp omnichain orderbook went live very recently.

WooFi pro will have:

• Omnichain access - across linea and all major EVM chains

• CeFi like experience in UI/UX and performance

• Perfect execution with little latency

My prediction is that WooFi Pro, utilizing the Orderly Stack, will closely compete with platforms such as DYDX and other widely-used decentralized exchange orderbooks.

More on how WOOFi Pro compares with other defi orderbook exchanges and valuations in my future research piece that I’m working on.

Token Distribution

Usually, even with fundamentals being extremely great, tokens don’t do much well in the market due to multiple reasons. One of the biggest that is definitely the FDV of the tokens compared to current mcap.

Depending on the circulating supply and remaining unlocks in the next few years, projects have to grow in multiple to maintain their prices or even to outgrow.

WOOs tokenomics is one of clear examples of a good tokenomics and the right time to invest. Over 78% of the total tokens are circulating, with the rest of the tokens allocated for the team and future funding rounds.

The team did a massive burn at the beginning of this year, bringing down the entire supply by 24%. Additionally, no large emission in the next few years just makes me extremely comfortable holding positions.

Token Utility

The WOO token is at the intersection of all the great products that the team pushes out. The platform places considerable emphasis on utility derived from token staking, employing a well-crafted strategy to enhance the volume of staked tokens

• Staking on WOOX for lower fees and other benefits

  Traders can stake tokens on their centralised exchange to get access for fee discounts to 0% maker and taker fees, one of the only exchanges that offers this feature. The staking component presents a ideal solution to high volume traders that are trading in the millions daily. Stakers also get free withdrawals, referral bonuses etc.

  WOO token staking tiers on WOOX

• Staking on WOOFi for real yield

  80% of the revenue the protocol receives from trading fees across swaps and perps are distributed to WOO stakers weekly. Unlike token inflation rewards, stakers are given real yield in the form of USDC weekly. The average yield on WooFi is around 5% and users can increase their staking multiplier points (similar to GMX MPs) to gain more yield.

Over 25% of the current circulation supply is staked on WOOX and WOOFi and I expect staked supply to all increase gradually as both venues sees more volumes. With some minor calculations for the future trader market that WOO will target, I anticipate this figure could easily surpass the** 50% mark **in a bull market given the cleverly thought of staking tiers on WOOX and real yield on WOOFi.

To me, the investment thesis behind WOO network is really a bet on the growth of the industry as a whole. WOO Network has a full suite of products for the onboarding normies.

A new user who would like to purchase crypto and doesn’t want to worry about self custody, Woos centralised product has the best execution across all CEXs. Users who want to explore blockchains and embraces decentralisation? Woo has cross chain swaps, staking and orderbook features.

The project is really an full suite having steadfast focus on both centralised and decentralised venues and making continuous progress. I anticipate Woo network will be one of the biggest platforms to gain traction.

The Woo token is also placed in the middle of the ecosystem and unlike other tokenomics, it stands to gain the most. Here are the things that are some key takeaways for me on why I believe WOO is best positioned for an exponential trajectory over the next cycle.

For WOOFi

1. Large User base and Audience

   The number of unique active wallets the application is able to attract across chains is really insane. Over 300k MAU at the depths of the bear market is truly extraordinary. Although a large portion of the activity comes from Layerzero airdrop hunters, the numbers cannot really be discounted. I believe in defi, users stick to what they are familiar with and after interacting with WOOFI to farm airdrops regularly, WOOFi would be a safe place for these users . Not to mention, numbers like these in a bull market will just push the price to valhalla even for tokens with little fundamentals.

2. Cross chain focus

   We are in for a cross chain future across evm chains. User will not stick to just one chain but a list of chains chasing opportunities. WooFis crosschain support across 11 EVM chains with stargate positions it well to receive a significant share of the volumes. Expecting billions in daily volumes being transferred through chains and WooFi capturing just a few percentages could be a massive fee generator.

3. Best in class swap algorithm

   WOOFis sPMM algorithm has one of the best execution and pricing among decentralised venues period. The capital efficiency it obtains with little TVL just is the living truth of how innovative the team is with the product. Apart from flow from WOOFis frontend, the connection with brokers like 1Inch, Paraswap etc puts the protocol at a very suitable position to get lots of volumes channeled through it.

4. Omnichain Orderbook Infra competing with likes of DyDx

   Powered by Orderly Network, WooFi pro stands strong as a big competitor to DyDX. The new V2 with omnichain across EVM chains just creates the orderbook an irresistable option for traders. Trade using the interface whether you are in BNB Chain, optimism and all other evm chain. Volumes should start picking up very soon with token rewards from orderly.

5. Real Yield guzzler

   WooFi is one of the most best platform to acquire the real world yield narrative with WOO tokens at the center. The entire narrative was so hot with GMX a couple months ago but has died down significantly. WOOFi redistributes 80% of revenues from its platform as USDC rewards. Not in native token rewards but in USDC stablecoin. See this as being a huge demand driver as the real yield narrative is back in full force.

   80% of fees are distributed to stakers of the token (Source: @thethreewords)

For WOOX

1. Best execution and trading interface

   WOOX provides the best interface for trading compared to all other exchanges. All traders ever need in terms of execution of trades. Generally, this will bring in lots of retail volumes which will bring more demand to the tokens.

2. Transparency and compliance

   WOOX is one of the select exchanges that is going through the compliant route unlike some large exchanges. The exchange operates only in compliant countries and has not launched products in the US. As much as it is enticing to hit the large US markets, this approach followed by WOOX will pay off in the long run.

• Increased Awareness with Large Partnerships

  More partnerships among trading communities result in more awareness and volumes on the platform at the end of the day. As we are heading into the bull market, i believe there will be strong partnerships which will bring more mindshare around crypto traders and circles. Mindshare > More Volumes > More Value to Token

• New product launches such as launchpad, social trading and more

  Lots of more products that would get value accrual to the token, especially the much awaited launchpad. Kronos Research and WOO participate in the cap table of multiple top protocols and the WOOX exchange presents an attractive avenue for projects to launch tokens. Social trading and copy trading is also on the way. Both of these will start to usher stronger utilities, with staking tokens becoming even more important in the ecosystem.

• Increase in Volumes across CeFi and DeFi

  Although it might not seem much, a general increase in volumes in both avenues are generally a major catalyst. More volumes will result in revenues that eventually results in positive price action for the WOO token. The real yield narrative will come back stronger as it is one that tradfi really understands especially on the WOOFi side.

• Airdrop Farming on WOOFi Pro

  Orderly network raised their seed round at a token valuation of a whopping $200 million. The Orderly token has been hinted and at such a high val, it’s pretty plausible that there will be an incentivised mainnet. The flagship product, WOOFi pro should see 9 figure volumes daily in this case. At a few bps of fees, the airdrop incentives could very well lead to over $50,000 of daily fees or $1.5mil of monthly revenue distributed to WOO stakers. All without any token inflation whatsoever.

• Token Burns possibly?

  WOO network used to burn tokens based on revenue generated but hit the brakes to focus on boosting revenue for product expansion. Once the products are mature, I believe a small % of the revenues could be used to burned tokens in the future. All other exchanges with tokens do conduct token burns regularly (Binance for instance does quarterly large burns). Although I’m just merely speculating here, the idea of token burns we all know will make numbuh go up.

• Smart contract and DeFi risks

  All DeFi products have this risk and WOOFi is not an exception. Smart contract vulnerabilities or exploits of the underlying cross chain technology could be a major blow for the DEX. The entire DEX along with its staking components is cross chain, making it a considerable risk. WOOFi has done over 8 audits over the past 2 years, most of which without major critical findings. As everyone should know, audits are no guarantee for no exploits. What’s comforting to me though is that the team has a Immunifi bug bounty of up to $100k.

• Centralization risk with Kronos Research as a market maker

  This used to be a huge deal to me for quite some time both on the centralised and decentralized products. Kronos Research used to be the sole liquidity provider at the exchange since the beginning. WOO network few months ago changed their business model to allow multiple market makers to provide liquidity on the exchange. Currently, the exchange has expanded to over 8 market makers, who collectively make up 50% of the maker volumes. Would still like to see a further increase across all market makers to have this ruled out.

  Steady increase in volume from new market makers since August 23

  On the WOOFi end, Kronos is still the only sPMM manager posing a risk in case of any mismanagement - still remains a big concern to me.

I’ve been following the team and the growth of the product line over the last few years and I gotta say they are the most stacked team around building. All through the bear market, the team has been heads down building innovative products and expanding the ecosystem. WOOX and WOOFi are now fully fledged products which are outstanding products in their own domains.

The stars are aligned now more than ever for exponential growth in volumes. Presently, WOOX and WOOFi command nearly 1% of the trading volumes observed on both centralized and decentralized exchanges. With strategic marketing initiatives underway, both products are poised to experience an uptick in trading volumes. I am confident that the WOO network will successfully capture a substantial portion of the trading volumes in both CeFi and DeFi. As volumes soar, the WOO token is strategically positioned for a large price appreciation.

• WooFi Research Report by ASXN

• WOO Q3 Quarterly Report

• WOO Q3 Twitter Spaces

• Ultimate Guide to WOO Network by TCE Labs

• WOO X — Deep Dive by Technical Roundup