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DeFi Sunday: An interesting situation on decentralized exchanges

These exchanges are the opposite of centralized solutions and provide the opportunity to trade without an intermediary. They seem to eat their home chains gradually.

Messari data shows really interesting data

In the second quarter of this year, it looked good with the cryptocurrency market, and in some metrics, new historical highs were even reached. Subsequently, however, the entire market cooled down considerably, and with it, of course, the decentralized finance protocols began to slow down. However, trading volumes of decentralized exchanges nevertheless reached $ 405 billion in the second quarter. This is an increase of 83% compared to the previous period.

More importantly, for the first time in history, DEX volumes have reached levels over 10% compared to centralized exchanges volumes. This metric clearly indicates the future trend, and decentralized exchanges will gradually "eat" their centralized competition.

There is also a battle between decentralized solutions

The growing interest in this type of anonymized cryptocurrency exchange makes this market a very dynamic and competitive environment. A good example of this is the competition between Uniswap and PancakeSwap, which operate on the Binance Smart Chain and Ethereum blockchain. In April alone, PancakeSwap finally managed to outperform its biggest competitor, Uniswap.

DeFi market profit concept with a view from the big window DeFi market profit concept with a view from the big window, Source:

However, they did not maintain the lead for long, and Uniswap took the lead again after the launch of the V3 protocol, which brought benefits especially to liquidity providers. By the end of June, Uniswap had managed to control up to 54 % of the weekly volume, which currently represents 40% of the total trading volume of DEX.

The aforementioned market decline was probably the hardest hit for the BSC blockchain, where the total locked value (TVL) fell from its peak by up to 50%. Binance thus faces another problem, which they certainly do not need in the current situation. Apparently, they are also losing the race with Ethereum for the top blockchain for decentralized finances. According to experts, BSC can be a victim of short-term thinking, as users have been attracted to various benefits - simply - BCS was used to make quick money.

Investors and traders should be wary of decentralized exchanges

Many decentralized exchanges are doing extremely well and only a few days after launch are able to accumulate huge amounts of liquidity (total value locked - TVL). This happened, for example, at the ShibaSwap exchange, which rallied on the wave of popularity of Dogecoin (DOGE). They gain a TVL of $ 1 billion in one night, despite the fact that their protocol received a very low rating from independent quality assessors from DeFi Safety.

As a result, several security companies have begun to question the overall security and transparency of these platforms in recent weeks. Questions also arise as to whether these numbers are not being deliberately manipulated so that the platform will show a huge interest in its services.

Slavomír is working in the field of cryptocurrencies since 2018. As a Co-Founder and Chief Marketing Officer of Dollero Technology, which is currently developing a crypto exchange ...


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