Among the pros, limitless crypto trading pairs and higher yield are a big advantage, whereas difficult experiences and unlimited risk draw as the major cons for the same.
According to a latest report from Chainalysis, Web3 users sent $224 billion in on-chain value to DEXs, outstripping centralised exchanges which contributed for $175 billion for the from April 2021 to April 2022.
The transaction volumes at centralised and decentralised exchanges are closely correlated with market performance. But with the recent market slump, the amount sent to both exchange types declined.
The balance first shifted away from centralised to decentralised exchanges in September 2020, when centralised exchanges supported below 50 per cent of on-chain volume for the first time.
The downward spiral in trading volume figures do not speak much about the bottomline, but they do highlight the fact the DEXs have emerged as a viable alternative to the CEXs and investors are openly accepting the offering.
Shivam Thakral, CEO, BuyUcoin, said that many experienced investors in the space use DeXs to invest in cryptos vs crypto trade which has led to inflation in volumes of these platforms.
However, it raises a serious threat over the regulations possibilities amid the rising popularity. Decentralised exchanges are self-executing, and for better or for worse lack the human element of centralised exchanges. This makes their regulation hard.
Ordinary investors will pay more attention to the stability, security, reliability, and convenience of the platform. It is more in line with the interests of investors to choose a safe and reliable exchange.
Jennifer Lu, Cofounder at Coinstore, a Singapore based crypto exchange said that traditional analysis methods are always used to oppose centralisation and decentralisation, but these two aspects are not contradictory.
“We are very happy to see the growth of decentralised transactions, which means that more people and institutions are starting to enter the crypto space, which is the growth of the industry,” he added.
The top five decentralised services currently support about 85 per cent of all aggregated DEX transaction volume during the time period studied. This includes Uniswap, SushiSwap, Curve, dYdX, and the 0x Protocol, said the Chainlysis report.
The high concentration of DEX transaction volume is likely a byproduct of DEXs’ recent emergence. Without as much time on the market, fewer DEXs have been able to establish themselves and sustain an active user base, said the report.
Investors across the globe consider DeXs as an opportunity to diversify their investments. However, most of them still vary about the regulatory concerns that come with using these platforms, said Thukral from BuyUcoin.
Investors can be completely cautiously optimistic, cautioned Lu from Coinstore. “The biggest advantage of decentralised exchanges at present is that they use immutable smart contracts to trade assets. Decentralised exchanges cannot use technical means to ensure absolute asset security.”
Which one should you choose?
Investors should keep several factors at focus while choosing between DEXs and CEXs and user experience is the paramount of them. Fast speed, ample liquidity and smooth transactions are key pointers that must be considered.
Users are likely to become regular on the platform they use and CEXs satisfy more to this condition, but the pluses of DEXs must not be undermined either.
“Ease of buying or selling crypto, regulatory concerns, available liquidity and number of tradable assets are generally the top concerns for an average investor while comparing these platforms,” said Thurkal.
Coinstore’s Lu added a few more points including security, professionalism, transaction fees levied for transactions in the list and ease of withdrawal to the list. “For ordinary users, CEXs are recommended,” he sums up