Despite DEX’s Phenomenal Explosion in this Year, there are still Major Flaws in Them

Steve Anderrson
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain. Join the official channel of thecoinrepublic, For the latest news updates: https://t.me/thecoinrepublic
  • The DEX trading volume has appreciated by almost 68% and a total of cryptocurrencies worth $2.4 billion were swapped on these DEXs.
  • The gas price on some Ethereum based DEXs can go up to 250 gwei when there’s a lot of load in the network.
  • DEX allows the users to directly exchange or on a peer to peer basis without requiring an intermediary.

DEXs have performed exceptionally well this year. In the last week, the DEX trading volume has appreciated by almost 68% and a total of cryptocurrencies worth $2.4 billion were swapped on these DEXs. And yesterday alone, $448 million was swapped. Back in January 2019, the DEX monthly volume was around $40 million. However, DEX’s total monthly volume as of this year’s July is an enormous $4.5 billion. And currently, the entire DEX sector is controlled by AMMs or Automated Market Makers. 

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DEX Work Differently Than the Conventional Centralised Exchanges

Decentralised Exchanges, most commonly referred to as unlike the traditional centralised exchanges eliminate the need of giving up the custody of their crypto wallets to any third party. Instead, DEX allows the users to directly exchange or on a peer to peer basis without requiring an intermediary. In addition, the price of the assets is decided by a mathematical formula that determines the price by calculation of the relative assets in the liquidity pool. When a user transacts, the price of assets tends to move higher or lower as the mechanism attempts adjustment in the balance of assets. Followed by which the AMMs follow the current trend of the market. 

High Gas Price on Ethereum Based DEXs

With the increasing demand of the decentralised exchanges, there are some drawbacks associated with them. For instance, the gas price on some Ethereum based DEXs can go up to 250 gwei when there’s a lot of load in the network. When the network is light the gas price goes down to as low as 2 gwei. So what does the increase in gas fee imply? This indicates that the maximum volume levels of the DEX are very close to the current volume levels. Some experts suggest that this issue can be easily solved by improving on-chain scaling. However, Bitfinex’s CTO, Paolo Ardoino believes that even if the on-chain scaling on DEXs was fixed they could never equal the centralised exchanges.

DEX Not Ready To Compete With Centralised Exchanges

The co-founder of trading firm CMS Holdings, Dan Matuszewski said that the Decentralised exchanges are not yet ready to be used by professional users. In a tweet, he said that DEXs are expensive and the terms of the transactions are unclear until the post settles. 

Clearly, DEXs still have some major faults in their performance levels. Hence, DEX replacing the conventional centralised exchanges is still a far dream.

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