Wednesday, October 5, 2022

Decentralized Exchanges Growing In Popularity As Opposed To Centralized Counterparts — Report

Just like there are always two sides to a coin, decentralized exchanges or DEXes as they are sometimes called, also have their advantages and disadvantages. Despite having crypto trading pairs that sometimes seem limitless, their onboarding experiences can be more difficult, especially in comparison to the centralized exchanges. Regardless of the fact however, DeXes are rising in popularity.

Decentralized Exchanges In Shining Mode

Going by a recent Chainalysis report, DEXes have outshined centralized exchanges by a long shot. At least, considering the time between April 2021 to April 2022, per a report by Coindesk. Within that period, Web3.0 users sent $224 billion in on-chain value to DEXes. However, at the same time, centralized exchanges such as Coinbase only managed to see $175 billion in on-chain value.

Now, while these figures don’t exactly convey what the trading volumes look like, they sure paint a picture of how DEXes are a better alternative to CEXs. 

Regulatory Concerns

Without a doubt, it sure looks newsworthy that DEXes are taking over, however, concerns are being raised regarding the transition and how the sector will be regulated. In all honesty, decentralized exchanges do not have the human element that centralized exchanges do have. And as such, they are self-executing, meaning that they’re more difficult to regulate.

According to Chainalysis Economist, Ethan McMahon, the transition from CEXs to DEXs did not just begin. As a matter of fact, it started in 2020’s DeFi summer and went on ahead throughout the boom season of NFTs in 2021. 

By September 2020, DEXes boasted a 50% market share, per the report. However, by June 2021, this had already surged to 80%.

For what it’s worth however, DEXs have continued to grow in popularity, albeit unprecedentedly. Therefore, it is only expected that a regulatory crackdown is in the works. And as McMahon said;

“If [regulation] serves as a hindrance, it may actually reduce the market share.”

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