DEXs have been around since 2017. However, they didn’t make any impact until 2021. In the second half of 2020, Uniswap crossed the $1 billion trading volume for the first time. Since then, it’s only growing at a rapid speed. In 2022, Uniswap is doing around $50 billion in trade volume every month. To put it in context, Coinbase has ~$84 billion monthly trading volume.
Other than Uniswap, there are 100s on DEXs such as Pancake (~$20 billion monthly trading volume), QuickSwap ($2 billion), and SpookySwap (~$5.5 billion), Trader Joe ($7.5 billion).
Recently Uniswap crossed $1 Trillion in trading volume. This doesn’t look too much compared to Centralized exchanges (CEXs) such as Binance, which does $ trillion every month.
However, with basic user interfaces, lack of data and tools, and high blockchain fees achieving this screams the DEX potential that many trading businesses are ignoring today.
Why DEXs emerging?
Faster chains with low transaction fees attracted a lot of retail users to DEXs and made it possible for real user adoption of DEXs. Let’s discuss some other reasons for higher trading volume on DEXs.
Increasing MEV bot activity — Sophisticated Traders (Institutions) monitor Mempool and scan multiple DEXs to find arbitrage opportunities. These bots are called MEV bots, where MEV is Maximal Extractable Value or Miner Extractable Value. MEV bots can interact with any DeFi protocol for financial opportunities; however, we will talk about them in the DEX context.
There are 3 MEV bots (this, this, and this) in the top 10 Uniswap takers who generated more than $75 billion in trading volume last year. MEV bots make the DEX market more efficient, and prices will be competitive and stable compared to CEXs. To learn more check here the daily arbitrage report from Eigenphi.
Shit Load of Coins — Listing on CEXs is not easy. Also, it’s not advantageous because it’s not an alpha opportunity; people already invested money in the early stage. However, DEXs are pinnacles of access to investment opportunities. Anyone can create a token and list it on DEXs. However, primarily shitcoins are there for now, but there are some excellent projects on DEXs.
On Pancake alone, 12 million traders traded 809K tokens in the last two years, more than 12 times of tokens traded on Uniswap (67k). Some other DEXs, such as QuickSwap (11.3k), SpookySwap (15.5K ), and Trader Joe(12.6k), also have a good amount of tokens getting traded on their DEXs.
Hiding the Money — DeFi can and will make heaven for hiding money.
Complicated composable protocols can create a trail of financial activity that can’t be traced using modern software. So it’s a financial arms race between government authorities vs. people trying to hide the money.
DEXs are one of the legos in DeFi’s infrastructure.
Problems with DEXs today
DEXs have many problems, such as high fees, design limitations, and data accessibility. However, the biggest problem is the interface.
Look at the interface on Uniswap, and a trader can’t use it.
Interface matters because millions of people use DEXs today.
However, projects like DEXTools and Poocoin are now trying to build trading terminals to provide a better trading experience for DEXs on multiple chains.
And people are adopting these DEX terminals, as you can see in their website traffic data.
Pageviews on different companies based SimilarWeb
Integrate DEXs into your Trading products
Many mainstream products such as trading bots, trading terminals, and charting solutions do not show DEXs data, let alone enable trades.
There are many benefits of integrating DEXs into your products.
- Platform independence, no one can stop you from accessing DEXs.
- Transparency is much better; you can see actual coins, trades, volume, and other data.
- Users are already looking for better tooling. Therefore, you can have a first-mover advantage.
- You can introduce DEXs to your existing users and tap on extra revenue by enabling trades and getting a commission in fees.
Conclusion
As mentioned above, DEXs are now just taking off and over time will attract more users as regulators will go after Centralized exchanges and users and levy high taxes on traders. Additionally, DEXs are open and
If you have an idea related to DEXs and want to integrate them into your products, please reach out to us at hello@bitquery.io.