Decentralized Exchanges Have Tripled in Volume Since 2018, But Are They Ready for Mass Adoption?
It’s no secret that centralized exchange platforms are prone to a wide range of security issues, with billions lost over the last decade in exchange hacks. Decentralized exchanges provide traders with the ability to control their own crypto while they trade and are growing rapidly — but the DEX model still needs work.
The crypto exchange ecosystem is flooded with thousands of separate exchange, from major industry platforms such as Binance and OKEx, to obscure D-rated exchanges such as LBank. Determining which exchanges are reputable is becoming increasingly difficult due to prolific artificial volume boosting, with over 95% of all exchange trade volume found to be fake.
Decentralized exchanges hold the potential to solve the wash trading and security issues faced by the cryptocurrency trading ecosystem, allowing traders to exchange crypto directly from wallets that they control the private keys to.
All trades made on a DEX, or decentralized exchange, are matched and executed in a peer-to-peer manner, enforcing a transparent trading ecosystem that makes identifying fake volume or wash trading extremely simple.
Despite the benefits offered by decentralized exchanges, however, the rate of DEX adoption is extremely slow — but appears to be accelerating.
DEX Volume up 300 Percent Since January
Cryptocurrency ranking and market information platform CoinMarketCap predicted in April that 2019 would become the “Year of the DEX”, a forecast that appears to be accurate — decentralized exchanges have gathered significant inertia since Q4 2018.
Data scientists working with data science DAO D5 recently published an analysis of DEX usage within the cryptocurrency market, revealing a dramatic shift in trader exchange usage patterns. June 2019 saw over $300 million USD in Ethereum traded across ETH DEX platforms, more than triple the $86 million USD in Ethereum traded on the same platforms in January.
The amount of capital invested in the Ethereum DEX ecosystem alone has increased by over $210 million, with the total number of transactions executed across Ethereum DEX platforms increasing 74 percent from 266,000 in January 2019, to 426,000 in July 2019.
Adoption Increasing Despite Small Market Share
The 300 percent increase in volume traded across decentralized exchanges demonstrates that a growing number of crypto traders are beginning to invest in the decentralized exchange ecosystem. The $86 million in ETH traded across Ethereum exchanges in June 2019, however, represents just 0.01 percent of global cryptocurrency spot trading volume.
The relatively small amount of volume directed toward decentralized exchanges is, in part, due to falling volumes on “traditional” DEX platforms such as IDEX, Switcheo, and Bitsquare, which saw mid-2019 volumes fall by 17 percent, 43 percent, and 35 percent respectively.
A key factor in falling volumes on current DEX platforms, according to decentralized trading platform Rubix.io founder Andrew Hamilton, is restricted adoption due to inefficient or difficult to navigate user interfaces.
“Ease of use is a key driver of adoption not only in the exchange ecosystem, but of cryptocurrency in general. Traditional decentralized exchange platforms sacrifice usability in favor of centralized components that limit transparency in order matching.”
Rubix, Hamilton’s decentralized cryptocurrency exchange and wallet platform, is designed to provide users with the ability to trade and exchange cryptocurrency in a streamlined, simple manner while incorporating decentralized authentication and atomic swap functionality that ensures users remain in control of their private data at all time while trading directly with each other.
“No other exchange is able to connect traders directly to each other in real-time — Rubix does, as well as allowing traders to execute atomic swap trades in a fee-free ecosystem”
Decentralized exchanges represent the future of the cryptocurrency trading ecosystem, allowing traders to restrict access to their personal information, eliminate wash trading and volume fraud, and provide the crypto community with a means of trading cryptocurrencies without the threat of centralized exchange hacks.
Platforms such as Rubix are leading the vanguard of the DEX revolution, providing future traders with the foundation for a truly decentralized trading ecosystem in line with Nakamoto’s original vision of a truly peer-to-peer electronic cash system.