One of the most innovative developments that have emerged within the field of blockchain technology is the concept of a decentralized exchange. In its most basic form, a decentralized exchange can be considered as a crypto-currency trading platform that allows its users to facilitate monetary exchanges without the need for any assets to reach the exchange itself, reducing the risk of theft, piracy and other human-related errors. Furthermore, due to their intrinsic design, DEX are better equipped to avoid issues such as price manipulation, trade volume inflation, etc.
From an operational point of view, it is important to understand that there are essentially two types of DEX. The first one simply matches the orders of several buyers and sellers, while the whole process takes place in the chain. Examples of this type of DEX include Dexeos and Newdex from EOS.
The other type of DEX uses financing funds rather than order books, so its operations closely reflect human-machine transactions. Uniswap is considered to be the standard-bearer for this type of decentralized exchange, especially since its launch has contributed to the emergence of this market in general.
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DEX gains ground
To put the popularity aspect of decentralized exchanges into perspective, it should be noted that the DEX sector as a whole recorded a combined trade volume of $2.4 billion in 2019, according to Dune Analytics. As a result, several of the world’s leading crypto-currency exchanges, such as Bitcoin Lifestyle and OKEx, also ended up launching their own decentralized counterparts.
Data from August 2020 shows that DEX platforms accounted for more than $11.6 billion in monthly trading volume. Not only that, the above numbers clearly show a 152% increase from month to month compared to July’s total trading volume of $4.4 billion.
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In this regard, it should be noted that Uniswap, on its own, reported a volume increase of 283% in August, reaching a total volume of $6.7 billion and breaking its previous record, set in July, in less than 14 days. Not only that, but thanks to the increase mentioned, on August 30 Uniswap’s trading volume surpassed that of Coinbase Pro.