Breakup CEX - The Daily Gwei #34

Friendship ended with CEXs, now DEXs are my best friend.

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DEXs have been growing at an incredible pace over the last few months and their volumes are inching closer and closer to centralized exchange levels. I’ve outlined previously why this growth has been happening and why people are drawn to using DEXs. Now, Ethereans are finally able to break up with CEXs for good.

Chart source: https://www.duneanalytics.com/dex

DEX growth is awesome but what I wanted to focus on today was that I don’t see nearly enough people talking about the fact that we are now in a post-centralized exchange world. That is, new ERC20 tokens that launch no longer need to rely on centralized exchanges to be able to start trading or get liquidity - they can simply utilize decentralized exchange infrastructure with deep liquidity and healthy volumes to create a market.

This whole process isn’t just limited to ERC20 tokens either - it extends to any asset type on Ethereum. Things like NFTs (game items, collectibles) can instantly start trading on Ethereum in numerous ways whether that’s on dedicated marketplaces like OpenSea or general DEXs like Uniswap. This allows teams to instantly bootstrap a market for these items that their users care about without relying on any central parties permission.

Speaking of users - I think we’re going to start seeing more and more users only use CEXs as a fiat on-ramp and then immediately move the ETH that they bought into their own wallet. From here, they can go ahead and use any number of the DEXs available on Ethereum to buy their favorite token because at this point the liquidity has become deep enough to fill most peoples orders (whale orders too on certain trading pairs).

Of course, people are also able to use services like LocalCryptos to bypass the intrusive KYC/AML processes of centralized exchanges and onboard into Ethereum/DeFi seamlessly. The ultimate goal is to have low-fee fiat on-ramps at every corner store or supermarket (which has already been happening for some time but the fees are still quite high).

All of this is a major paradigm shift. To my knowledge, nothing like this has existed in history and been completely global. Someone in a remote village in Africa could create a protocol, issue a token and instantly create a market for it using Uniswap. This gives them the same opportunity as someone in the U.S. who has contacts at a centralized exchange - that’s incredibly powerful.

Have a great day everyone,
Anthony Sassano