Cryptocurrencies are decentralized forms of electronic money, yet for the most part, the places where you obtain cryptoassets — exchanges — are thoroughly centralized. This centralization has a practical and a political downside, since not only does it introduce single points of failure in which precious funds might be lost, but it’s likely to lead to concentrations of power and influence.
Decentralized exchanges (DEXes) are a solution to this quandary, and while they remain relatively niche compared to centralized exchanges (CEXes) (in terms of volumes), much of the industry seems to be confident that they’ll witness significant growth in 2021. This will be helped by the introduction of new innovations, from layer two scaling solutions, improved automated market maker (AMM) models, and atomic swaps.
This process of improvement and growth might be slower than the market would like to, but even major centralized crypto exchange Binance told Cryptonews.com that it expects DEXes to ultimately overtake their centralized equivalents somewhere down the line.
Niche, but growing
While industry figures are generally in agreement that DEXes will witness growth in 2021, opinion is mixed as to how strong and fast such growth will be.
“DEXes have quite a high entry threshold, and expensive transactions. Until this changes we can’t expect true mass adoption, and the shift to decentralized domination,” said Alexi Lane, the project spokesman at Ethplorer, an Ethereum (ETH) tokens explorer.
This is also the view at Binance, which runs a centralized exchange and is developing a DEX of its own.
“Centralized exchanges provide the convenience needed for mass adoption […] DEXes are a niche segment for a niche market, there’s a thick layer of awareness that needs to be penetrated via consumer-friendly interfaces,” a spokesperson for the company told Cryptonews.com.
If you look at trading volumes, it becomes fairly apparent that DEXes are still some way off CEXes in terms of market share. The biggest DEX — Uniswap — currently has a daily volume of USD 1.25bn (according to CoinGecko), while Binance’s daily volume is USD 27bn.
Source: Cryptonews
