Look at the competition and comparison between DEX and CEX after a lapse of one year

Centralized exchanges have always been criticized by the industry due to problems such as “black boxes”, but even so, the market cannot easily get out of centralized exchanges. On the one hand, user habits have been developed, and on the other hand, huge trading volume is supported. This type of exchange is the so-called “all the world is profitable.” Centralized exchanges have established a key position as a trading infrastructure. However, this status may have more factors to be challenged this year.

“Battle of Positions” between CEX and DEX

Due to the huge profit potential of exchanges, the number of exchanges has been mushrooming. According to incomplete statistics, there are already 419 exchanges in the world. Of course, the market elimination rate in this field is very high. In addition to the competition in this field, the more inadvertent strong sharers come from DEX planners. The track’s development last year was like a break. With its huge trading liquidity, it has captured a large number of trading users, and it has been considered time and time again. The strongest opponent to replace CEX. In this year’s environment, the development of CEX has become more and more difficult.

From home to abroad, major regions around the world have carried out a series of management of the cryptocurrency trading environment. After the domestic issued a crackdown on Bitcoin and other virtual currency trading hype and shut down mining operations in the first half of the year , a notice was issued in September to rectify the virtual currency trading hype, and the supervision of virtual currency is being upgraded. While abroad, South Korea has also issued the “strictest supervision” policy, requiring crypto exchanges to complete a series of audits before September 24. Similarly, Asian countries such as Thailand, Indonesia, and Turkey also have clear regulatory frameworks. Even though there are still many countries that have not issued bans, they have expressed their continued interest in the cryptocurrency market. It can be said that for the crypto market, global regulation is becoming more stringent, and for exchanges that buy and sell cryptocurrencies, the pressure cannot be underestimated.

So, in an environment with increasingly clear policy supervision, does it mean that DEX, the candidate for CEX, will usher in a more impetus for development than before. Judging from the policy response, Binance, Huobi, CoinBene, and BHEX have successively announced closures or restrictions on users in China. At the same time, many centralized exchanges have seen a significant decline in platform currencies under the influence of the retreat. In sharp contrast, DeFi tokens have ushered in a small increase, including Uniswap, dYdX, Aave, Compound and Sushiswap and other DeFi blue chip tokens, which have all increased by more than 10%. Among them, the 24-hour trading volume of the decentralized exchange dYdX reached 3.68 billion U.S. dollars, surpassing Coinbase’s 3.61 billion U.S. dollars for the first time.

This transcendence was also staged last year. At the end of August last year, Uniswap, which has repeatedly set new highs, reached a new milestone. For the first time in its history, its 24-hour trading volume was higher than Coinbase. Uniswap’s 24-hour trading volume exceeded US$426 million, while the 24-hour trading volume of Coinbase Pro during the same period was 348 million. Dollar. In one year, the trading volume of DEX and CEX ushered in multiple growth. But objectively speaking, from the comparison of the overall market value, the scale of DEX is still small, and it has not reached the level of shaking CEX.

Although DEX is growing rapidly, CEX is still difficult to shake

From a macro perspective, the popularity of DEX is attributable to the increasing difficulty of using centralized service providers, namely CEX, in areas where the regulation is uncertain or certain. This type of service has become more and more stringent. It is also getting more and more difficult to use. Unlike DEX, this is an open, permissionless system. These products allow users to trade directly without going through a third party. Especially for a market that is constantly evolving and actively absorbing external investment and assets, we find that the development and use of innovative projects such as the DEX protocol is increasing. It also explains from the side that the restrictions on CEX by the cryptocurrency trading policy may provide some opportunities for DEX. From the perspective of the entire industry, the source of its steady growth comes from the iterative update of DEX’s field and the development of new and old projects. Keep attacking.

In fact, decentralized exchanges have been developed for a long time. As early as 2014, when V God introduced Ethereum again, decentralized exchanges were mentioned. It was not until May 2020 that DEX was truly centralized. The exchanges competed, and the share of trading volume accounted for by its activities began to soar. In September, it entered a stage of increasingly fierce competition with CEX. By this year, it has shown a steady upward trend. These activities are mainly composed of Uniswap, Promoted by AAVE, 1inch, and DyDx, the internal competition of this track shows a lot of upgrades. Regarding the insufficient trading depth of DEX, the inability to support large transactions and the platform itself cannot be independently priced, Uniswap DEX products are experiencing A series of upgrades.

And the war on liquidity has kicked off on Layer 2. In the new stage of DeFi 2.0, performance will continue to improve, and more DEX will be deployed on L2, including Uniswap V3, SushiSwap, DODO, Bancor, etc. Decentralized exchanges have been deployed on Arbirum, but according to online data, in June, Uniswap V3 (L1), which ranked first in the 24-hour spot trading volume of each DEX, accounted for only about Binance’s 5.8%, while the 24-hour transaction volume of some DEXs in the head of L2’s different side chains is only in the order of tens of millions, such as PancakeSwap (BSC) and QuickSwap (Polygon), which are $342,091,865 and $208,976,311, respectively, and have not gathered more users and fluidity.

Look at the competition and comparison between DEX and CEX after a lapse of one year

(The picture comes from the Internet)

In terms of transaction experience, except for the gas fee that needs to be paid on the chain, the transaction fee of each DEX is basically the same as that of CEX. The transaction currency and transaction pairs supported by the head DEX can already surpass the head CEX, including More long-tail assets.

Look at the competition and comparison between DEX and CEX after a lapse of one year

(The picture comes from the Internet)

This year, the DeFi market has maintained a relatively stable growth rate. As of now, its overall value has been locked in at 186.1 billion US dollars, and this larger source is dependent on DEX, which comes from data from the coingecko website. DEX 24-hour trading volume is 7.2 billion US dollars. , The number of monthly visitors reached more than 100 million, showing an overall upward trend.

Look at the competition and comparison between DEX and CEX after a lapse of one year

(Picture from coingecko)

From the perspective of transaction volume, there is still a big gap between DEX and CEX. Uniswap (V3), which is currently the number one DEX, has a 24-hour trading volume of US$2.3 billion, while in the CEX field, Binance, which ranks first, has a 24-hour trading volume of 317. Billion dollars. When the two are compared, they still can’t be the same.

Look at the competition and comparison between DEX and CEX after a lapse of one year

(DEX trading volume ranking, source CoinGecko)

Look at the competition and comparison between DEX and CEX after a lapse of one year

(CEX trading volume ranking, source CryptoMarket)

This huge gap does not mean that centralized exchanges can be done once and for all, and data shows that their outflows are increasing. Last month, more than $1 billion worth of Ethereum was removed from the centralized exchange within 24 hours, and the Bitcoin supply from the exchange has also been steadily flowing out since March of this year, according to the on-chain analysis company Glassnode. According to data, the BTC reserves of centralized exchanges have fallen to the lowest level since February 2018. This also shows that the balance of mainstream coins in exchanges is becoming less and less, that is, the supply of centralized exchanges is constantly decreasing, and this kind of token transfer and outflow will also bring opportunities to decentralized exchanges to a certain extent.

According to data from Coingecko, in the first half of this year, the total transaction volume generated by decentralized exchanges increased from US$100 billion in January to US$300 billion in May. DEX has successfully attracted business from the Centralized Exchange (CEX). From January to June, the total trading volume of DEX doubled, and the growth of CEX appeared to be relatively flat, from 1.2 trillion US dollars to 1.3 trillion US dollars.

Look at the competition and comparison between DEX and CEX after a lapse of one year

(The picture comes from the Internet)

Which projects are promoting the development of DEX?

Uniswap

As a leading project in the DEX field, Uniswap has always maintained a relatively active and high circulation, and has established a position equivalent to Binance in CEX. It has been at the forefront of upgrade iterations. At present, the project has undergone an upgrade from Uniswap V2 to Uniswap V3, which provides more aggregated liquidity, flexible rates, and more advanced liquidity oracles. Since its launch, Uniswap V3 has leapt to the top position of the Decentralized Exchange (DEX) trading volume in just a few months.

1inch

1inch was incubated by Binance Exchange and is a major player in the industry. Since the first half of this year, the number of users of the project has increased from 80,000 to 600,000 through DEX aggregation trading services. It was one of the few that showed strong performance at the time. The growth of DEX-based aggregator projects comes from official introductions. They have low gas costs, free transactions, secure smart contracts, support BSC, Polygon, Optimistic Ethereum, and provide mobile applications. At the end of September, 1inch Network announced that the 1inch aggregation agreement and the 1inch limit order agreement were launched on Arbitrum One.

Zenlink

The Polkadot ecological cross-chain DEX protocol Zenlink has two core functions. One is the Zenlink DEX module. The project party can deploy the business of sending DEX by plugging and unplugging. The other is that it provides a cross-chain DEX protocol based on XCMP. It can realize the cross-chain transaction function while opening up the liquidity of all parachains. Although the project is still in the development phase, it has already established cooperation with many projects including Plasm, Chainlink, Phala, etc., and placed in Polkadot’s huge cross-chain network, it will also get more resource opportunities. When it starts to work, its future value will also be very visible. Currently, Zenlink has just released an economic white paper, and plans to issue the same set of ZLK Tokens on the Kusama and Polkadot networks.

Serum DEX

The explosion of Solana’s new public chain directly drove the rise of its ecological projects. Among them, Serum is one of the best and has attracted industry attention. The project was launched in the first year of DeFi in 2020 to establish a decentralized exchange based on Solana. , Intends to bring CeFi’s high-quality trading experience into DeFi, with a centralized limit order book model and extremely fast speed. It can be predicted that when the core driving force of all basic applications is built, Serum will get many projects that are truly oriented to a large number of users to build on it.

In short, there will be only a lot more projects in the future to deploy DEX, and its internal competition will become more and more fierce. Centralized trading platforms that once seemed unshakable seem to be gradually being pursued in this wave of DEX upgrades, but it will take some time for the “DEX to replace” to catch up or overtake the argument, and the two should be complementary and integrated in the future , Complementary relationship, to jointly meet the transaction needs of future users, and provide users with more transaction options. However, in the short term, the trading volume of DEX obviously cannot compete with mainstream CEX. In the future, DEX will have the opportunity to occupy a large market share, but CEX will still dominate

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/look-at-the-competition-and-comparison-between-dex-and-cex-after-a-lapse-of-one-year/
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