Decentralized exchange trading lacks infrastructure despite rapid growth
2 min readTL;DR Breakdown:
- Two problems may pose threat to the use of decentralized exchanges.
- Decentralized exchanges top 24-hour trading volume.
According to data obtained from Coinmarketcap, decentralized exchange trading has generated more than 15 percent of the entire cryptocurrency trading volume. During the most part of 2020, Uniswap surpassed Coinbase’s trading volume, achieving this feat with just 20 workers.
The growth of decentralized exchanges has increased rapidly in just a few months, since November last year. As of this writing, Venus exchange is making the news today, leading the 24-hour market trading volume alongside Binance.
Problems with decentralized exchange trading
There are several reasons why many expert traders value decentralized exchanges. From secure P2P (peer-to-peer) to trading between wallets, traders are very much pleased with trading using these DEXs platforms.
However, there are two significant problems users face when trading on decentralized exchanges. First, the KYC is a real issue for traders. Individuals cannot trade on decentralized exchanges if counterparty KYC is not sorted out. Secondly, DEX trading is way too expensive than regular trading and relatively slow due to its support technology.
Therefore, for decentralized exchange trading to be widely accepted by a large number of traders, it must be fast, offer cheaper fees for trade, and provide state-of-the-art KYC protocols.
Decentralized exchange trading is not a viable option for traders because of the absence of KYC during onboarding. Still, traders remain active on Uniswap. With just 300,000 users compared to Coinbase with over 35 million users, Uniswap users take part in trading more, which is quite shocking judging by the huge gap between both platforms in terms of users.
The implication of these statistics means that many traders prefer decentralized exchange trading to a centralized exchange. However, no real market provides real coverage data, and no trading market offers efficient, secure, and fast decentralized exchange trading.
With the large number of people making transactions on decentralized exchanges, large-scale trading is inevitable. Therefore, users are exposed to many risks due to inadequate regulations. It remains to be seen if KYC will be added to decentralized exchange trading, but in the meantime, decentralized exchanges such as Uniswap will keep growing.
