Ethereum and decentralised exchanges

September was an exceptional month for decentralised exchanges (DEX), which reached US$ 733 million in average daily volume. For comparison, Coinbase, the largest US exchange, makes half of this figure.

Is DEX the end of centralised exchanges?
Some will say that DEX will ‚kill‘ traditional exchanges, and this gives security for the purchase of Ethereum (ETH), the most widely used network. That’s where the problem lies, because first of all DEX does not compete directly, at least today, with the other exchanges.

Then there is another issue, which is the competition of other cryptomites for this decentralized financial market (DeFi). The potential of Binance Chain behind Binance Coin (BNB) is undeniable. Whether or not it is a „clone“ of Ethereum, it has the strength of the world’s largest exchange in volume and number of clients.


The proof of this? While Ether (ETH) fell 27% in September, BNB rose 26.5%. One of the reasons was the launch of the Venus DeFi Protocol in Binance Chain.

This market, however, is led by Uniswap, with 68% of the volume, or US$ 500 million per day. No doubt these numbers are impressive, but is it really comparable with the traditional market?

Above are the monthly data from Dune Analytics, where you can see the dizzying growth of the last three months.

Who is the DEX user?

Let’s start with the differences. At Uniswap there is no brokerage fee except the Ethereum network GAS fee for any transaction. Also, in the decentralized exchange there is no entry or exit of dollars, euros, yen, etc.

It is true that the use of stablecoins reduces this need for non-digital money circulation, but it does not meet everyone’s needs. Another big difference is the bid book, since the DEX exchange calculates a value and the user decides whether or not he is interested in the exchange.

In short, whoever seeks DEX:

is not looking for exchanges involving trust money;
has some level of experience in using MetaMask;
is probably performing trades involving DeFi, mostly in an automated way.
Not everyone benefits from DEX
If we think of the usual customer of traditional exchanges, it is just the opposite. It doesn’t matter if we are talking about the beginner, or the more experienced trader, who leaves some amount of money in the exchange precisely to take advantage of distortions.

The beginner, besides not having ETH to pay the necessary GAS fees to use DEX, has no experience or security to use MetaMask. The more advanced user looks for a quote chart and offer book, something that is not offered in DEX.

In short, it is unreasonable to assume that DEX will kill centralised exchanges in the short or medium term, and that Ethereum (ETH) will necessarily reign supreme.