Decentralized Exchanges Are Building a Life Raft but Need a Bridge

Published on by Cointele | Published on

Recently, crypto traders have shown a lot of enthusiasm for decentralized exchanges, or DEXs.

DEXs offer a clear set of benefits in terms of fund security, flexible custody and transparency, so why is it that the majority of the market still shuns them in favor of centralized alternatives? We think we know the answer, and we've spent the last year and a half working to build a next-generation DEX that can go head-to-head with centralized exchanges.

It's all about the market makersMarket makers drive the crypto market.

What's the problem? The glaring issue is that market makers have spent millions of dollars and working hours to build technology and human capital that interface with existing exchanges.

We can't expect market makers to rebuild their systems from the ground up for a tiny slice of the overall market.

DEXs need to be 100% plug-and-play in order for new participants to join and provide liquidity with minimal effort.

We've had multiple conversations with market makers that declined to engage with us under the assumption that, as a DEX, we weren't compliant.

These pricing curves are, by definition, a less flexible option than order books and far from ideal for professional market makers who have the capacity to make markets more efficiently.

User friction such as the need to register separate keys, asset quanta and other factors makes it time-consuming for developers to adapt their operations to support layer-two DEXs.

Market makers still need to contend with the security implications of using relatively immature cryptography to secure valuable crypto assets.