How much do DEX users earn for providing liquidity? However, it is worth noting again that on-chain CEX volume represents only the flows into and out of CEXs, not the trading volume of their off-chain order books.Ĭentralized exchanges’ lower concentration may be due to greater competition among CEXs, greater focus on regulatory hurdles within and across jurisdictions, and/or greater variability in how much these services’ users also use personal wallets. DEXs with higher liquidity may be able to provide more stabilized pricing for even the biggest market participants, but smaller pools may struggle to do the same without causing considerable price slippage – an unappealing proposition for both consumers and liquidity providers.īy contrast, the top five centralized exchange services –, OKX.com,, , and FTX.com – supported roughly 50% of all on-chain CEX transaction volume during the time period studied. For example, even seemingly established DEXs – like DEX 1 – have seen their users abandon ship en masse during the recent decline in DeFi activity.Īnother possible explanation is economies of scale, an important mechanism for DEXs. Without as much time on the market, fewer DEXs have been able to establish themselves and sustain an active user base. The high concentration of DEX transaction volume is likely a byproduct of DEXs’ recent emergence. This includes Uniswap, SushiSwap, Curve, dYdX, and the 0x Protocol. The top five decentralized services currently support roughly 85% of all DEX and aggregated DEX transaction volume during the time period studied. Today, their share of on-chain volume is more evenly split, with 55% happening on DEXs and 45% on CEXs.Īt the service level, the concentration of transaction volume at the top five DEXs is much higher than the concentration of volume at the top five CEXs. DEX dominance then reached its peak in June of 2021 that month, DEXs facilitated more than 80% of on-chain transaction volume. The balance first shifted away from centralized to decentralized exchanges in September 2020, when centralized exchanges supported below 50% of on-chain volume for the first time. But with the recent market slump, the amount sent to both exchange types declined, with CEXs proving slightly more resilient than DEXs in current market conditions. Similarly, DEX and CEX transaction volumes alike skyrocketed in 2021 as cryptocurrency prices again multiplied. For example, CEX transaction volume reached an all time high in late 2017 as Bitcoin climbed to its all-time high. The transaction volumes at centralized and decentralized exchanges are closely correlated with market performance. From April 2021 to April 2022, $175 billion was sent on-chain to CEXs, well below the $224 billion sent to DEXs. For this reason, as well as the rapid growth of DeFi generally, DEXs now have a confident lead in on-chain transaction volume. While most CEX transactions happen off-chain on centralized databases and captured on their order books to save on transaction fees, every DEX transaction occurs via smart contracts on-chain. And fifteen months ago, these DEXs first eclipsed centralized exchanges (CEXs) in on-chain transaction volume. DEXs allow users to swap between hundreds of trading pairs without an intermediary. Over the past five years, decentralized exchanges (DEXs) have emerged as a self-custodial, programmatic way for cryptocurrency investors to trade. This blog is a preview of our State of Web3 Report.
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