Decentralized exchanges running on the ethereum network are now nearing $1 billion a month in trading volumes.
That’s a huge milestone for this still very new space where reside ‘traditional’ but smart contract based exchanges as well as algorithmic broker-like exchanges.
DyDx for example is a traditional looking exchange where you put a bid – as in a price you are willing to buy or go long – or an ask, the opposite.
While something like Uniswap is more a complex algorithmic decentralized broker that does not depend on bids and asks, but instead gives a fixed price based on the amount of say wbtc and eth that have been sent to the ‘pools’ to make them available for swapping.
Of course the price on Uniswap is generally the market price based on arbitrage which is mainly done by bots.
So you have the top three exchanges/brokers doing pretty much the same amount of daily volumes.
That’s at close to $40 million for today, and some $230 million in the past week. So this may break the $1 billion milestone this month.
Last month it was a bit more than $700 million, while quieter April gave more than half a billion. March saw a big jump, crossing $800 million for the first time, with a clear trend of considerable growth for this year very visible in the featured image.
According to Anthony Sassano, Product Marketing Manager at the Set Protocol, volumes on ethereum based decentralized exchanges (dex) have surpassed already all of 2019.
He says last year $2.4 billion was handled by the tracked dexes, while this year it’s already at about $3 billion.
This is growing at 39% week over week according to Dune Analytics which queries the ethereum blockchain. Making this thus now a significant space for entrepreneurs and traders.
For entrepreneurs the benefit is that there are no barriers to entry except for knowledge. So even a poor guy in Africa can set up a very nice business, presuming skill of course, by taking some % of the exchange as a fee like in traditional exchanges or brokers.
For traders the benefit is you’re not trading database eth IOUs that the exchange can exit scam in a yacht, you have full possession of the private keys and therefore are trading eth – minus disclaimers in regards to potential backdoors in the contract or bugs.
You also don’t have a potential manipulator sitting between you and the buyer or seller, a manipulator that might cut you off during high price volatility or might even be trading against you through ‘market-making’ desks.
Something that you obviously expect at least in some exchanges in this space, but more importantly it is something well known in the traditional world where ‘investment’ banks have their customers account and advice at their hand, as well as their trades.
Even if there were no systemic issues from the top, there will always be bad apples. So realistically there’s isn’t much you can do in regards to this sort of manipulation but try and add plenty of red tape and turn a blind eye now and then.
While in the open space of code value transfers, you can remove those third parties completely. Except for the devs for now who can be seen as third parties but that is perhaps only because all this is still quite new and therefore not quite ready to be set in stone.
If it ever will fully, but by degrees there is or will be natural competition because many issues in traditional systems are not necessarily due to intentional rigidness, but because there was or there was perceived to be no better way to do it as for a traditional exchange a third party is necessary to sit in between supply and demand.
In this space, it isn’t necessary. And therefore that can give the exchange a competitive advantage especially as dapps in particular start coming out of the dial up age due to all sorts of sublayer scaling methods that are now available to the market.