Editor's Note: This article comes fromChain reference (ID: lianneican), Author: Internal Reference Jun, reprinted by Odaily with authorization.
Editor's Note: This article comes from
Chain reference (ID: lianneican)
, Author: Internal Reference Jun, reprinted by Odaily with authorization.
However, in October, DEX’s monthly trading volume dropped by 38.8%. The turnover fell from 26.3 billion yuan to 16.1 billion yuan.
secondary title
DEX trading volume dropped sharply
image description
Source: CryptoRank
The market meltdown began in September, when top DeFi tokens Chainlink, yearn.finance (YFI) and Uniswap (UNI) saw their first major corrections. While LINK managed to recover and shut down the top performing DeFi tokens, in October, YFI and UNI were unable to recover as it lost 56% and 40% of its value respectively during the same month. LINK is up 13.7%, while REN is up 12.2%, which has become popular due to the growing demand for tokenized bitcoin.
image description
Source: CryptoRank
After a brutal month in October, the DeFi market is recovering, with some top coins recording gains, according to CoinMarketCap. At the time of writing, YFI is up over 24% in the past seven days. UNI, Maker (MKR) and Synthetix Network Token (SNX) are also in the green, with gains of 14%, 3.8% and 15% respectively over the same period. As Bitcoin began to rise in November, DEX trading volume also began to pick up gradually. Whether it can reach a new high, only the market will give the answer.
secondary title
DEX is still the future of encryption
At present, there is a problem that has to be faced for the development of DEX. KYC and anti-money laundering laws have forced most cryptocurrency exchanges to be more transparent about who their users are, and those who refuse have had to limit the jurisdictions in which they can offer their services.
In order to operate legally in many countries, many exchanges have no choice but to comply with strict anti-money laundering procedures, and with the exception of Monero (XMR), blockbuster privacy coins have been delisted from most major exchanges.
Recently, regulators have begun to sound the alarm, and jurisdictions around the world continue to tout further measures to ensure investors disclose their cryptocurrency holdings and pay taxes on their profits.
And this is all while the US Department of Justice has arrested the co-founder of BitMEX and the CFTC has charged its owner with operating an illegal crypto derivatives exchange.
About a week later, the UK’s top regulator, the Financial Conduct Authority, went so far as to ban investors from trading derivatives on all crypto exchanges.
All of these maneuvers are aimed at forcing compliance from crypto service providers, and while they may ultimately help further drive mass adoption, many crypto ideologues are looking for alternatives to push their financial self-sovereignty.
These platforms allow users to trade derivatives without depositing funds into any centralized platform and without completing any KYC procedures.
A growing number of investors believe that centralized crypto exchanges essentially operate in the same way as traditional banks. As a result, decentralized exchanges such as Uniswap, 1inch, Curve Finance, and Balancer have grown in popularity throughout 2020.
For more sophisticated investors, decentralized exchanges offering derivatives trading have also emerged. Similar to traditional derivatives, the crypto exchange offering the service basically acts as a broker, but on a decentralized exchange, the process is slightly different. This is because they use smart contracts instead of brokers, where derivative contracts are settled when the terms of the contract are met.
Currently, Synthetix is one of the most popular decentralized derivatives exchanges, in 2020, its total value locked rose to 1 billion US dollars, and then the sharp correction of the entire industry caused the TVL and daily active users of most DEXs to decline .
The exchange allows users to create a tool called a synthetic asset "Synth" that can track gold, fiat and cryptocurrencies. It also allows for the creation of assets that can back track the price of an asset.
Platform users can also stake native SNX tokens as collateral to mint new synthetic coins, and similar to Uniswap, those providing liquidity will be rewarded by earning a portion of the exchange’s transaction fees.
Those who are familiar with DEXs such as Uniswap know that literally anyone can list new assets. In terms of derivatives, this means that any underlying asset can be converted into derivatives.
While some investors shy away from KYC and tax compliance, for crypto service providers, this is a serious issue. According to Molly Wintermute, an anonymous developer believed to have founded the Hegic DEX, compliance is more of an issue for centralized crypto service providers than for DEXs.
When asked how DEXs could remain compliant with financial regulators, Wintermute explained in his distinctive vernacular: “They can’t, it’s a new layer of financial infrastructure, not an addition to the existing financial system.” .It’s like TCP/IP or FTP, not a decentralized crypto exchange. Unless the public blockchain is open and permissionless, it’s almost impossible to ban decentralized derivatives protocols.”
According to Wintermute, the number of investors actually using DEXs is quite small compared to the total number of crypto investors. In Wintermute’s view, this means that the FCA’s derivatives ban is completely irrelevant to the recent legal action against BitMEX, nor does it apply to decentralized finance protocols.
Wintermute said: “Decentralized derivatives are part of the small crypto world. There are 100M+ crypto holders globally. About 5-10 people are probably actively trading crypto derivatives (global). I don’t think the FCA ban opens any new Interesting opportunity. Nothing has changed."
In addition to addressing privacy concerns and restoring decentralization in the crypto space, DEXs also provide a sandbox for second-tier developers. As Cointelegraph reported, scaling the Ethereum network is an ongoing challenge.
When the network becomes congested during times of high demand, gas fees multiply and transaction speeds grind to a halt. As Ethereum 2.0 is "developing" emotionally, some DEXs have begun to try to integrate second-layer solutions to provide cheaper and faster options for users who are willing to give up the Ethereum network.
Project Serum is probably one of the more famous success stories of a non-Ethereum-based DEX.
The decentralized derivatives-based project is built on the Solana blockchain rather than the default Ethereum network that most DEXs operate on, but it is also fully interoperable with ERC-20-based assets and Bitcoin.
FTX CEO Sam Bankman-Fried and his team are the brains behind Project Serum, which according to Bankman-Fried aims to circumvent the privacy and security concerns of centralized exchanges by providing users with a permissionless method to invest using leverage and swapping assets.
The project also offers a cheaper alternative to the high gas fees and slow transaction speeds that often plague the Ethereum network during times of high traffic.
