Decentralized crypto exchanges are rapidly gaining ground on their centralized counterparts.
Decentralized exchanges (that’s DEXs, for those in the know) have processed more than $420 million in trading volume over the past 24 hours, according to data gathered from Dune Analytics. That’s a growth rate of more than 20% over the last week.
The recent increase in Ethereum DEX volume saw more than $4.4 billion in value traded in July, with more than $3.1 billion captured already less than halfway through the month of August. For context, $420 million in a single day is more than DEXs pulled in an entire month back in June 2019 ($300 million). And $4.4 billion for the month of July this year is more than decentralized exchanges had generated for all of 2020 up to June.
The figures demonstrate that decentralized finance applications are taking hold, offering enticing user experiences and unique trading strategies, even in the face of extraordinary transaction fees on the Ethereum network.
Decentralized exchanges use smart contracts to allow users to swap between digital assets using reserves of tokens locked in the protocol by “liquidity providers.” Swaps are executed directly on the Ethereum blockchain, allowing users to avoid hurdles like know-your-customer (KYC) verifications and relinquishing custody of their coins to an exchange wallet that can potentially be hacked or exploited. Liquidity providers are rewarded with transaction fees that would otherwise be funneled to owners and executives at centralized exchanges.
Some decentralized exchanges, like 0x, have been around since 2017, but the prolonged hangover following the ICO craze saw little adoption of the protocols. Less than $3 billion in value was transacted across decentralized exchanges in 2019; 2020 has already seen more than four times that amount change hands, $13.5 billion and counting.
By far the most popular decentralized exchange today is Uniswap, upgraded to V2 in May 2020. Uniswap saw volume of more than $1.7 billion in July, and more than $1.5 billion already in August. The exchange routinely services more than 50% of all aggregate DEX volume, capturing 57%, or $246 million in the past 24 hours.
Another DEX growing in popularity is Curve Finance, used for swapping between stablecoin assets. That exchange has seen increasing interest and volume in the lead up to the release of its CRV governance token, capturing more than 15% and $67 million of volume in the past 24 hours.
Balancer, an early entrant to the governance token scene with the release of the BAL token is another consistent volume contender, scooping up more than 11% of volume in the last 24 hours, worth close to $50 million.
Decentralized exchanges have a long way to go before overtaking centralized counterparts like Binance, with 24 hour volumes topping $4 billion. But with the rapid pace of growth, crypto users might be turning to a “DEX first” approach to trading sooner than some may think.
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.