Centralized crypto exchanges had 14 times more trade volume than DEX in 2021

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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please review our website policy before making any financial decisions.

It’s worth being handy with a hot crypto wallet and easy access to a bank account. Centralized crypto exchanges (CEX) have demonstrated this with a massive increase in the volume of transactions.

Centralized and decentralized crypto exchange volume in 2021

From the $ 1.8 trillion in 2020, 2021 saw an increase of 689%, to $ 14 trillion in total transaction volume, according to The Block Index.

This index focuses on crypto exchanges that have a track record of accurate trading volume reporting. Despite the regulatory hurdles Binance set off with its banking-style Lend & Earn program, it remains the dominant crypto exchange with 65.27% market share. In fact, after Binance has increased its employee base since 2017 by more than 2,600%, this week it got a major Money Services Business (MSB) license in Canada.

Seychelles-based OKEx is in second place with a 17.79% market share. Although not shown in the chart above, the third place is the US-centric Coinbase. Globally, Coinbase crypto assets account for an 11.3% market share, more than double the growth from 4.8% in 2018, according to brokerage firm BTIG.

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How are decentralized exchanges doing?

For some, access to decentralized exchanges (DEX) is less practical than CEXs. MetaMask, an ERC-20 software wallet easily accessible via a browser extension, is non-custodial (users retain ownership of private keys) and can connect to any DEX application such as Uniswap. However, funds must be transferred elsewhere to be withdrawn directly to a bank account. And that means a CEX elsewhere.

Then there is the issue of high ETH gas fees if one uses Ethereum on Solana, Polkadot, Avalanche, and other significantly cheaper smart contract platforms. Because of these costs and inconveniences, DEXs have a transaction volume that is 14 times lower than CEXs, at around $ 1,000 billion by 2021.

However, DEX’s growth is even more impressive with an 858% increase from 2020. As of December 2021, Uniswap still leads with 67% DEX market share, at $ 45 billion in total transaction volume. of $ 67 billion.

Additional DEX Steps + Fee Volatility = CEX Dominance

Interestingly, during the year the DEX trading volume trajectory is down, 142% from the peak in May. This can be attributed to Ethereum’s unstable gas charges, which can run into the hundreds of dollars for more complex transactions within DeFi protocols.

Image courtesy of Crypto.com

Fortunately, Layer 2 scaling solutions like Arbitrum are starting to integrate Ethereum-based dApps to address this issue. For example, the Aribtrum One portal offers several dApps, with considerably lower transaction fees.

Image courtesy of cointool.app

Likewise, there is a Loopring tutorial on how to dramatically reduce ETH gas charges. Unfortunately, these are all extra steps that also reduce the convenience factor, ensuring CEX dominance for the foreseeable future.

However, it should be remembered that DEXs can offer the same services at significantly lower costs. For example, in July of this year, Uniswap reached 77% of Coinbase’s trading volume with 33 times fewer employees.

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Will 2022 be the year in which DEX transaction volume exceeds CEX? Let us know in the comments below.

About the Author

Tim Fries is the co-founder of The Tokenist. He has a BSc in Mechanical Engineering from the University of Michigan and an MBA from the Booth School of Business at the University of Chicago. Tim was a Senior Associate in the investment team of RW Baird’s US Private Equity division and is also a co-founder of Protective Technologies Capital, an investment firm specializing in detection, protection and protection solutions. control.

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