An increasing number of DEXes are integrating scaling solutions that will massively increase transaction workload while keeping costs low
Amidst talks of growing adoption and decentralisation becoming the norm, the great decentralised exchange (DEX) vs centralised exchange (CEX) debate is more prominent now than ever. This debate has many case studies for us to refer to.
The latest would be FTX. FTX owes nearly US$3.1 billion to the top 50 creditors and is estimated to have “more than 100,000” creditors.
Why trustless DEX is the way forward
- Individual data and asset control
CEX holds custody of your deposited assets and all your personal information. You have no control over how the assets and data are being used. While in a DEX environment, it is non-custodial; typically, only an individual wallet address is connected to the exchange. In other words, you have complete control over your assets.
- Liquidity and market depth
Historically, CEX is known for deeper liquidity and market depth. DEXes, in general, are trying to catch up with CEX’s efficiency in matching and executing orders. But the top DEXes have good enough liquidity and market depth for the major coins, and in fact, DEX’s liquidity is more accurate and traceable.
- KYC and accessibility
KYC is often required for withdrawals exceeding a specific amount or specific trading products, and it is typically region-locked for most CEXes. While DEX has no KYC, traders only need a wallet address. This helps to drive accessibility to true financial freedom.
CEX provides a wide range of products, including spot and fiat on-ramps, which is most familiar to traditional and crypto traders, especially beginners. DEX products may be harder to grasp with insufficient onboarding guidelines for traders. Again, this point for DEX is changing.
The user interface and experience have significantly improved; some of the newer DEXes look and function exactly like CEX.
- Transaction costs
CEX is known for high transaction or platform costs, especially when the system is hugely loaded with trades at a single point in time. An increasing number of DEXes are integrating scaling solutions that will massively increase transaction workload while keeping costs low and passing the savings on to traders.
- Community involvement
CEXes, are often one-way, non-reciprocal communication from a central operator to traders. Individual traders are seen as clients utilising as service that the CEX provides. While DEXes focus on community-building and involvement, where traders can become stakeholders and have a say in protocol changes or share in transaction fees on the platform.
DEXes offer strong execution guarantees and increased transparency into the underlying mechanics of trading. Trades are trackable, traceable and data is permanently on-chain. This is one of the core basics and the beauty behind the ideology of DEXes.
A new DEX era
The challenge with CeFi and CEXes boils down to a lack of trust and security. This is continually reinforced time and again; this year is no different, with funds, exchanges and even established projects hitting the buffers and leaving behind affected, concerned investors and traders fearing for their assets.
News of increased risk with CEXes come into question of insolvency and possible withdrawal delays, causing widespread panic amongst traders.
I would like to discuss the following DEXes for your reference and research purposes.
dYdX is a decentralised exchange (DEX) platform that offers perpetual trading options for over 35 popular cryptocurrencies, including Bitcoin (BTC), Ether (ETH), Dogecoin (DOGE) and Cardano (ADA).
Non-custodial exchange dYdX has climbed to the top of the DEX rankings by trading volume, beating out Uniswap, for the first time. More than US$9 billion has been exchanged on the trading platform in the last 24 hours in 2021, according to data provider CoinMarketCap.
Also during the same time, according to CoinGecko, dYdX has facilitated more than US$4.3 billion worth of trades in the past 24 hours, beating out Coinbase’s US$3.7 billion
They changed how DEXes were perceived back then.
ApeX Pro is set out to be a dynamic non-custodial derivatives DEX powered by StarkWare’s Layer two scalability engine StarkEx — all to deliver a made-to-order, permissionless platform designed for precision trading.
This comes after ApeX Protocol’s initial ApeX elastic Automated Market Maker (eAMM) launch, where popular inverse perpetual contracts were supported; automatic, fully permissionless and without needing KYC. With full spectrum asset support, ApeX Protocol was able to uplift decentralised derivatives trades.
To add on, they are multi-chain supported. This responded well to the demand from the market.
Another multi-chain DEX is Just Ex. They are relatively new, and currently, they support APTOS, SUI and Solana. They will support Ethereum and BNB Chain later on. This strategy is also different, as we all know that most of these multi-chain DEXes are usually based on Ethereum first.
At the point of publishing, I have not tried the DEX yet, but the fact that it has no slippage, open trade and infrastructure API ready and that they are order-book based are worth exploring.
As usual, I will end with a quote:
The answer is to return to the basics of what blockchain is supposed to be. It is decentralisation and transparency. DeFi is one of the solutions, and we need to work together to build the future. For now, it cannot replace CeFi completely for obvious reasons, but this will not stop us from trying.
Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.