Survey data shows that centralised exchanges do not see DeFi as a threat, so why are they planning to launch their own DEX in the future?
A recent survey conducted by the cryptomoney data aggregator, CryptoCompare, shows that centralised exchange operators do not see the emergence of decentralised exchange (DEX) sites like Uniswap as a threat despite the increasing volume and activity in the DeFi ecosystem.
In its September review of exchanges, CryptoCompare asked 26 of the main locations in the crypto space how likely it was that the liquidity of DEX would exceed that of centralised exchanges within approximately two years. 70% of the respondents said that decentralised exchanges will not exceed the volume of centralised exchanges due to their lack of liquidity.
Only 7.7% of the representatives considered that this was somewhat possible, while 19.2% remained neutral. As shown below, 34.6% of participants believe that such a scenario is unlikely and 38.5% say it is very unlikely.
Is DeFi still a rough diamond?
It is easy to dismiss DeFi as another short-term trend in the crypto space driven by money-hungry founders and fuelled by gullible investors. For many reasons, the sector resembles the ICO craze of 2017.
There are unaudited contracts that raised hundreds of millions of dollars, unrealistic profits for platforms that look like nothing more than vaporware and a lot of FOMO. Since DeFi became a buzzword, there have also been a significant number of scam projects and developer dramas that have generated huge waves in the Crypto Cash sphere.
So, the question is, if most highly speculative token projects increase their price abruptly overnight for no reason, then collapse abruptly the next day, why do investors keep investing so much money in DeFi?
The main reason is that the rewards provided by the liquidity protocols have given yield farmers incredible amounts of money. As high annual return percentages attract more yield farmers, decentralised exchanges such as Uniswap and Curve can count on increasing liquidity, and as long as this cycle continues, DeFi niche trading volumes are expected to continue to grow.
Is it time to take DeFi seriously?
However, the rewards generally come from trading fees. This means that the higher the volume, the more the exchange and liquidity providers earn.
Although data from Cointelegraph and Digital Assets Data show that the number of active users on decentralised exchanges has steadily declined since September, the total value locked in on DeFi platforms continues to rise.
Flipside Crypto, a chain data source, recently discovered that approximately USD 300 million in Ether and other ERC20 tokens are sent every day to DeFi applications.
This is almost double the input seen in centralised exchanges and 70% of that $300 million is sent to Uniswap alone. It is also worth noting that in September Uniswap’s trading volumes eclipsed those of major centralised exchanges such as Coinbase on multiple occasions.
According to the CryptoCompare survey, representatives of centralised exchanges believe that the privacy provided by DEX is the main reason why traders use such platforms.
While this is partly true, some of these projects also aim to solve some of the most challenging problems in the world of digital assets.
For example, Curve offers its users a way to trade stablecoins with very little slippage due to its liquidity pools, while Pickle Finance aims to provide stability to stablecoin bindings by artificially increasing supply and demand through malleable incentive mechanisms.
There are a number of similar projects and their existence shows that DeFi is attractive not only because of its advantages for an individual but also for the community.
The truth is that centralised exchanges feel threatened by DeFi
Many crypt industry leaders have decided not to take DeFi seriously by simply dismissing it as just another fad, but Binance CEO Changpeng Zhao has a different opinion. Recently, CZ told CoinDesk that it expects DeFi to „cannibalise“ its exchange and this explains why the exchange has been making serious bets on DeFi lately.
Although survey participants are effectively ignoring the trading volumes of the decentralised exchanges now, an interesting finding is that 40% of the exchanges surveyed admitted that they are developing or planning to develop a DEX in the future.
This is another clear sign that centralised exchanges really do see DeFi as a serious threat to their current trading models.