Hello readers,

Did you know that the “toy-like” trading bot sector generated over $1.2b of protocol revenue over the last year?

That’s more than both Ethereum and Solana ($1b each).

In this week’s free report, we shine a light on the “crypto trenches” and value accrual at the user interface layer of the stack.

Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment advice.

Let’s go.

The Trading Bot Market

The Product & Business Model

Most trading bot products initially launched via Telegram’s distribution and its open-source bot API.

The Telegram bot user experience looks like this:

1. Join the bot via Telegram

2. Create a wallet or import your own

3. Fund the wallet

4. Create/integrate with automatic trade commands. For example:

   1. Buy/sell/auto-snipe various contracts based on liquidity levels (often new token launches on launchpads)

   2. Take profit/stop-loss/DCA

   3. Copy trading (follow whale/known trader wallets)

Basically, they allow anyone to create a “systematic” trading strategy that integrates with your wallet via a “chatbot” like user experience. They primarily serve “degen” retail traders focused on the memecoin sector.

Welcome to the trenches.

The various products compete on:

1. Speed/latency. The best bots offer premium/private RPCs and co-located infrastructure, ensuring superior speed & trade execution.

2. Feature sets. Copy trading wallets, private chats, stop-loss, take profit, DCA, and integrations with various DEXs & launchpads.

3. Fees. Most bots are charging .5 - 1% fees for successfully executed trades.

4. Referral incentive programs. To lock in users, many offer referral fees or discounted fee structures for users who refer others.

Revenues

Axiom is #2 on the list today (revenues start 1/1/25), but it’s producing $1.45m per day over the last 30 days vs $178k for Photon.

Keep in mind that small (often anonymous) teams are generating these revenues.

Bot Volume as a % of Total Trading Volumes

Based on our own data analysis + other estimates, we believe roughly 60% of Solana trading volume comes from bots/algorithms. That may seem high, but it’s still less than what we see in the traditional markets (roughly 70%).

The above platforms did over $1.2b in fees over the last year. If we assume an average fee for executed trades of .8%, that means they combined for roughly $150b of trading volume.

Now. Solana did $1.3 trillion of DEX volume over the last year.

Given that most trading bots are operating primarily in the Solana ecosystem, that means the above platforms drove roughly 10% of all Solana DEX volume over the last year.

Given the success of these platforms (most with very small teams), we are now seeing the emergence of a new breed of “trading terminals” offering a full suite of services, sticky UX, and interesting referral programs to “lock in” users.

Enter Axiom…

Axiom Model

Axiom is the fastest-growing app on Solana. Its growth can be attributed to the following factors:

1. Product. It’s an all-in-one approach via a web experience (not a “Telegram bot”) offering a full suite of services including:

   1. Slick UX/one-click trading and onboard (embedded wallets via Turnkey, or use your own wallet)

   2. Access to the memecoin trenches (integration with launchpads & DEXs)

   3. Token Discovery (“trending” feature + integration with DEX Screener)

   4. Perp trading (integration with Hyperliquid)

   5. Staking & yield farming (integration with MarginFi)

   6. Speed/latency (integration with private RPCs for faster fills)

   7. MEV protection (via Jito) & slippage tolerance

   8. Leaderboards/social experience

   9. Copy trade (trader rankings, performance, and tracking)

2. Monetary incentives. Axiom rewards active traders with what is essentially a “cash back” on their trading fees. Sort of like credit card rewards. The more you trade, the more rewards you receive. The max “cash back” is up to .25% of trade fees at the top tier (.05% at the lowest tier).

3. Referral system tied to rewards. Based on your “trading level,” Axiom pays 30%, 3%, and 2% commissions on trading volume from anyone you refer. 

Active Addresses & Transaction Count

Over the last 30 days, Axiom is averaging 42k active traders on the platform/day and 1.4m transactions/day (33 trades/day per user on average).

That’s more transactions/day than Ethereum L1.

It also reveals just how concentrated the user activity is on some of the most profitable crypto apps. The 42k active traders/day is similar to what we see on Hyperliquid.

Gross Fees & Reward Payouts

As noted, over the last 30 days, Axiom is averaging $1.45m in fees/day.

It’s paying out $660k in fees/day to its users (referrals + “cash rewards”), with a net margin of 54% after user payouts.

In terms of gross fees, Axiom is #4 on Solana over that time period (ahead of Raydium, Orca, Phantom Wallet, Jito, and the Solana L1).

Takeaway

The most profitable layer of the stack is revealing itself as the user interface layer that aggregates services via the underlying infrastructure.

It’s our view that the teams that aggregate sticky users and solve the “binding constraint” (in this case, performance, UX, and a full suite of services) will win in the long run.

Axiom Volume Analysis

The above chart shows Axiom volumes per day (avg. of $157m/day total over the last 90 days) and the underlying infrastructure of where those volumes are routed through.

Here’s the breakdown (last 90 days):

• Pump dot fun bonding curve: $3.7b (26% of volume). These volumes are “pre-graduation” — indicating the demand for “sniping” new tokens launched on pump fun as liquidity hits the bonding curve.

• Raydium: $3.3b (23% of volume). These are “post-graduation” volumes routed through the Raydium DEX.

• Pumpswap: $2.9b (21% of volume). These are “post-graduation” volumes routed to the DEX via pump fun.

• Raydium Launchlab: $2.3b (16%). These are “pre-graduation” volumes for tokens launched via Raydium’s launchpad infrastructure.

• Meteora: $1.9b (13%). These are “post-graduation” volumes routed through the Meteora DEX.

Below, we can see that in total, more than 50% of volumes are coming from launch pads (pre-graduation), revealing user preference for “sniping” — a trading strategy that focuses on low liquidity tokens launching on Pump Fun and Raydium LaunchLab.

Pre-Graduation Volume (launchpad) vs Post-Graduation Volume (DEX)

Where is the Market Heading?

Today, the market is “toy-like,” serving the retail/degen crowd with a “gaming” like experience that thrives on memecoins, volatility, leaderboards, and virality that fuel the same dopamine loops that Robinhood tapped into — only on steroids.

For years, crypto VCs have deployed hundreds of millions of dollars funding “crypto gaming” use cases to no avail.

I think we know what the “game” is now.

It’s trading. In the trenches. With a full suite of services.

That’s it. That’s the “game.”

While “toy-like” today, we feel strongly that the sector is here to stay.

Why? People like to speculate. Crypto trading in the “trenches” is akin to gaming, with the added upside potential of generating a profit.

So, where do we go from here?

We see two primary avenues for the sector to grow, mature, and consolidate:

1. Introduction of more advanced algorithms and quant strategies. We think these will combine offchain + onchain data — extending beyond “copy-trade” and the less sophisticated auto-trading strategies we see today.

2. Combining the trading experience with social. We’re seeing the early signs of this today with leaderboards and Telegram trading groups. The next iteration? Maybe it looks like Zora? Perhaps it involves prediction markets? It’s hard to say what it will look like. However, we believe that there is a significant business opportunity for the right model that incorporates speculation/trading and social experiences, and/or prediction markets.

The online gambling industry is expected to grow to $150+ billion in revenues by 2030, expanding at a compound annual growth rate of 11.9%.

As the crypto industry matures, further democratizing access to the new “internet financial system,” we should expect the “trading bot” market to ride and further expand that growth wave.

Take a Report.

And Stay Curious.

Disclaimer: Individuals have unique circumstances, goals, and risk tolerances, so you should consult a certified investment professional and/or do your own diligence before making investment decisions. The author is not an investment advisor and may hold positions in the assets covered. Certified professionals can provide individualized investment advice tailored to your unique situation. This research report is for general educational purposes only, is not individualized, and as such should not be construed as investment advice. The content contained in the report is derived from both publicly available information as well as proprietary data sources. All information presented and sources are believed to be reliable as of the date first published. Any opinions expressed in the report are based on the information cited herein as of the date of the publication. Although The DeFi Report and the author believe the information presented is substantially accurate in all material respects and does not omit to state material facts necessary to make the statements herein not misleading, all information and materials in the report are provided on an “as is” and “as available” basis, without warranty or condition of any kind either expressed or implied.