There is a lot of reason to be optimistic about decentralized exchanges (DEX). Ultimately, these might prove to be the future, at least for crypto-to-crypto transactions.

Centralized exchanges, like Coinbase and Binance, still dominate the volume. This is something that is starting to change. Whether DEX will catch up to CEX remains to be seen.

However, in the digital world, there is no reason to introduce counterparty risk if it can be avoided.

Here is a headline from Decrypt:

This is a trend that is likely to continue as DEX look to provide more services. wallet features are important with some improvements taking place over the traditional Metamask.

The key for DEX is going to be for people to understand the Web 3.0 mindset. There is a reason why CEX should only be used when interacting with fiat currency. Of course, to fully serve the needs, liquidity is necessary.

Trillions In Trading Volume On The Line

When it comes to the cryptocurrency market, it might not rival stocks or bonds. That said, it is nothing to sneeze at.

Here is the volumes that we are looking at. Notice the amount on CEX.

It went from $133.5 billion in January to $179.5 billion this month, showing an increase of roughly 34%. This year’s high was reported in March, when both CEX and DEX volume saw a major uptick to $4.8 trillion and $266.89 billion respectively.

These numbers show that DEX is accumulating roughly 5% of the trading volume. That means more than $4.5 trillion was on CEX.

Naturally, not all of this can end up on DEX as percentage of that volume was transactions that included fiat currency.

That said, we are starting to see how massive this market can be. It is no wonder that exchanges do so well. They collect fees on every transaction.

The removing of this revenue from CEX, while directing a significant portion to DEX, could have a major impact. That is a lot more money not extracted by outside entities.

Cross Chain trades

One of the things that CEX has going for it is the ability to offer cross chain trades. This isnt really the case since it is simply moving it around within their wallet system.

DEX face the challenge of being able to swap BTC for ETH. Since they are two different chains, it is a challenge.

This is where THORchain and Maya look to have an impact.

Since they are designed to operate within this environment, the ability to engage with a couple chains at the same time is of benefit. Suddenly, someone could move BTC from their wallet and end up with ETH. This was a challenge before.

As these start to offer more DeFi services, things could get very interesting.

This is something the CEX are omitted from doing. Sure, they can offer things such as staking. Nevertheless, what they can offer is limited as compared to the DEX.

For example, collateralized loans are something that requires further approval from regulators. With DEX, simply build it in.

The success of DEX is going to determine how well DeFi does. This is one of the reasons why we have to watch what is taking place here.

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