In the blockchain area, 2020 is the year of DeFi without a doubt. There are 2 types of DeFi: finance and DEX (decentralized exchange). So you will see that, in dapp.com, we sperate the data of these 2 types of DeFi - Finance and Exchange.
Finance DeFi is focusing on staking and borrowing services. Finance Dapps like Compound, Aave Protocol, etc. DEX (decentralized exchange) is providing a decentralized token trading service. Leading DEX for now are Uniswap, Curve, etc.
Many Centralized exchange (CEX) platforms also have crypto staking service. For example, Huobi, Binance, Kucoin, etc. (Easy “Bitcoin Mining” And Earn Up to 4.84% Interest?, How to “Mine Ethereum” and Earn 8% Interest?) Although DeFi Finance is really hot recently, they do not really influence those Centralized exchange(CEX) as the main business of CEX is crypto trading instead of lending and borrowing business.
But DEX is totally different as the core business of DEX and CEX is the same - cryptocurrency trading. If the pie of crypto trading remains the same, the increase of transaction volume and users in DEX means the decrease of that in CEX.
Let’s see the trend from the data.
We can see that DEX active users increased steadily starting from May. Its transaction volume in Jun is 5 times of that in May and continues to remain over $10B in July.
The top 5 DEX transaction volume experienced a sharp increase in the past 30 days. Curve increase 202.31% and Oasis Trade increase 99.88%. The top 2 DEX Curve and Oasis Trade volume reached 1B USD, the highest monthly trading volume so far. This amount of monthly trading volume has already exceeded many centralized exchanges except the top tier ones like Binance, Coinbase, Huobi, etc.
Using DEX instead of CEX is something similar to when you get used to iOS, you don’t want to go back to use Android.
Take me for example, I started to use DEX in April. After I settle all the issues of opening my Metamask wallet, I really enjoy using DEX. I do not need to do any registration and KYC. I can log in Uniswap, Curve, dydx, etc in a second by just connecting my wallet to the platforms. It is very simple and easy when you want to compare the prices of different platforms and trade at the platform that provides the best buy/sell price.
In DEX, what you need to do is just “connect” and “swap”. That’s all! Compare to CEX, registration, kyc, password setting, google 2fa, etc, you need to complete all of them in order to do trading.
However, if you are a professional trader and need to analyze the trading chart, you have to go to a centralized exchange. Centralized exchanges have the trading chart of 5 minutes, 1 day, 1 month, etc and you can draw lines to analyze the trend. (Must-have Tools to Empower Your Crypto Trading Analysis) Most of the DEX platforms are very simple besides dYdX.
(From Curve. You may feel that you were in win95)
You can see the trading chart in dYdX which is not normal for DEX.
Another benefit of using CEX is its relatively low exchange fee. Centralized exchanges tend to have lower interest rates of 0.1% - 0.2%. While for DEX, as the current Ethereum blockchain is so crowded, even if you only trade cryptocurrencies worth a few dollars, the transaction fee may be a few dollars as well.
It is really not easy for a blockchain project to get its token listed on a centralized exchange. Besides all the project reviews and checking, the project needs to pay a super high listing fee which can be a million dollars.
The listing threshold is way lower in DEX. More and more tokens choose to list in DEX and when the token prices perform well, CEX will list them afterward. Binance listed $MKR and $SNX recently. But $MKR and $SNX price have gone up for some times in DEX already.
It is good for the project as the listing cost is way lower. But it may be a risk to users as more and more scam projects may get a list in DEX easily and it is hard for normal users to identify the risk.
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