Concept to create DEX (Decentralized Exchanges) platform was itself impressive as it aimed to give full financial freedom to buyers and sellers by replacing the middlemen. Most of the DEXes do not require you to pass KYC verification but still they are lagging behind Centralized Exchanges (CEXes), what do you you think what can be the reasons ?
Centralized exchanges with a good volume are traded. Large capital, official traders (speculators) they are forced to work in the white. Officially.
There are alot of factors to put into consideration
- Trading volume
- Unavailablity of desired trading pairs
- High gas fees
- Most DEXs are insecured
- Lack of liquidity
Most Decentralized exchanges lack these basic things, I wouldn’t want to risk my private wallet in a Decentralized exchanges exposing my data to an unknown API of an exchange for a particular coin on the exchange alone where as a CEX doesn’t require such a herculean task. There is enough time for improvement, new DEXs like Uniswap and Injective Protocol are already capitalising on these loopholes.
DEX are still new to crypto space, it requires time to get familiarize with the existing system especially now that they are independent of anyone or middle man.
Another problem with this DEX is they are limited to swap. Like the popular decentralized exchange Uniswap, it can only swap ERC 20 tokens on a single chain making it difficult to convert to other chains but on centralized exchanges, there are nothing like this.
It has to even convert Eth to WETH to be able to trade them since they aren’t ERC-20.
I hope in the future we see more development as it grows.
Decentralized exchanges aren’t a new thing. They have been for years because there chain was built for it. Reason why decentralized exchanges aren’t really used is because they allow single chain which you have mentioned already.
You are right, I have use Idex and Fork delta in the past just that they lack liquidity, Uniswap and others has improved that, just ERC-20 is still the problem.
Although, I was going through article on decrypt and I realised there are some DEX that actually support cross chain transaction, swapping through smart contract and creation and burning of coins simultaneously. The only challenge is data are been collected from oracle which of course is a third party and eventually beat the aim of decentralization. Oracle can get shit down any time.
I think the high gas fees obstacle the progression of DEX, since Ethereum augmented their transaction fees, I heard many people comment to quite Ethereum trade because of the high fees. So the people don’t see just if they don’t require the KYC also looking for their profit. DEX to success and to compete vs CEX needs to be better than it.
This gas fee is reason why I avoid trading on ethereum blockchain decentralized exchanges. You see fees like 10$ on a little trade. Other chains are better than ETH.
I think vary with how contracts are created on it chain.
I hope developers can do something about it when creating contracts.
The main reason is that smart centralization and the contribution of professional intermediaries can also be very beneficial. The absolute advantage of complete decentralization in the modern world is a myth and partly an utopia. (Eco)systems with a good team of experts, defining fundamentals and guiding principles and providing general governance, on the one hand, and high community involvement, on the other hand, can bring more synergy than environments aiming at full democratization.
At least AtomicDEX starting from v0.3 uses decentralized oracle data for coins prices from Band Protocol already. I use it to perform cross-chain trades by means of atomic swaps sometimes. It works and looks good for me, but there’s is definitely lack of support for many chains. Would be nice to see support for FreeTON there one day.