Decentralization is a key component of cryptocurrency and it dictates the true value of a coin as P2P transactions and privacy remains important to the crypto community. Although decentralization as a concept has powered the wave of new apps working on toppling existing traditional systems that have always governed operations in major industries.
One would expect that the same decentralized-based revolution would have already swept the crypto market; instead, centralized exchanges continue to dominate this market. However, the various developments relating to decentralized exchanges in recent weeks indicate that decentralization might just take its rightful place in the crypto market this year. As such, we will use this opportunity to put the spotlight on decentralized exchanges and what is expected from them this year before they can eventually disrupt the crypto market.
At the moment, centralized crypto exchanges control over 98% of all trades in the crypto market therefore, they remain the powerhouse in this market. Nonetheless, it is becoming inevitable that decentralized exchanges will explode as an alternative that will correct some of the frailties of the centralized exchanges. Already, it is obvious that the big guns in the crypto market like Binance are preparing for the upcoming trend as they have chosen to expand their services to include decentralized exchange. The recent acquisition of StellarX, which is a zero-fee transaction decentralized exchange, by Coinsquare. However, there is a long way for these platforms to go before they attain the needed standard that would eventually establish decentralization in the crypto market.
The issues standing between DEX’s establishment as a force in the crypto are not limited to liquidity. These issues encompass the platforms’ usability, how much it appease to traders, and scalability.
Nevertheless, we should not ignore the amount of work the new crops of decentralized exchanges are putting into making their platform a seamless ecosystem for traders. Apparently, the influx of these platforms in 2019 as already witnessed with the introduction of Binance DEX, which should carry the same level of the innovative user interface as the centralized version, will set the foundation for DEX dominance in 2019.
An Influx Of Traders
It is certain that when developers put a similar user interface in place, then it is only a matter of time before traders start noticing the improvements. One way DEX can resolve the liquidity-related issue plaguing their platforms is to organically increase the trading activities on their exchanges. However, a probable shortcut is the aggregation of trades of users from other platforms in order to create a network of DEXs that work hand-in-hand to tackle liquidity. Although some DEX has already adopted this approach, there are issues with the automation of orders as well as the transaction speed. For professional traders, speed is one of the most important factors for choosing an exchange, therefore, resolving these must become a priority for developers in 2019.
Once DEXs experience the influx of traders they have always wanted, then more attention will fall on the scalability of these platforms. Can they accommodate the level of demand that centralized crypto exchanges are accustomed to? Understand that decentralized exchanges are primarily blockchain-based platforms that very much depend on verification or authentication like all other blockchains. Hence, scalability which is currently plaguing blockchain-based payment network is also a recurring theme that continues to limit the functionalities of DEX.
Unsurprisingly, in a move to further bolster transaction speed, developers of decentralized exchanges have opted to move from the more conventional ethereum blockchain to the EOS blockchain which creates blocks every 0.5 seconds compared to the 14 seconds block creation time developers are subjected to on the Ethereum blockchain. all this is a desperate move to resolve scalability which tops the issues that would decide DEX dominance in 2019.
Like almost every sector of the crypto space, the future of DEX seems uncertain when it comes to regulations. There is no better way to illustrate this than to highlight the recent proclamation by SEC concerning a particular DEX which further raises issues concerning the legal restrictions that might hinder the activities of DEXs in this region.
Nonetheless, we expect that the legal debacle that has just become an area of concern will receive the needed attention that would throw some light on the dos and don’ts governing writing and publishing algorithms for decentralized exchanges.
Developers and regulatory bodies need to resolve the issues highlighted above before we can begin to experience the promised domination of decentralized exchanges on the crypto market in 2019. As straightforward as this seems, it involves a ridiculous amount of work and we expect that only the best DEXs to come out on top.