Much has changed in crypto since the first major Bull Run in 2017. While that rally was largely driven by ICO hype, the recent uptick has seen demand for regulated exposure to digital assets (particularly Bitcoin) soar among institutional players. Factor in the explosive growth of decentralized finance (defi), the popularization of non-fungible tokens (NFTs), and increased stablecoin usage, and the market is looking rather strong.
Another factor that’s all too easy to overlook is innovation on the part of cryptocurrency exchanges, the heavyweight platforms that facilitate spot and derivatives trading. Since 2017 dozens of exchanges have come online, and though the last run precipitated the formation of countless Binance clones complete with native tokens, a number of inventive new models have also been developed. Indeed, exchanges are starting to understand that they must offer maximum value to users if they’re to remain one step ahead of their competitors.
DEX Marks the Spot
2020 was undoubtedly the year of the decentralized exchange (DEX). This particular template is geared towards users who are uncomfortable with the idea of surrendering control of their wallets to a centralized platform.
With DEXs like Uniswap, Sushiswap, dYdX, Balancer, Kyber, and Curve, users can eliminate counterparty risk and trade trustlessly simply by connecting their Metamask wallet. This is made possible through the implementation of smart contracts, which automatically execute peer-to-peer trades without the need for an intermediary.
Trading activity on DEXs started to rise last summer, with Ethereum-based DEX Uniswap eventually recording over $58 billion of volume during the course of the year – an annual increase of 15,000%.
Needless to say, the DEX landscape has come a long way in the last 18 months with permissionless platforms popping up on second-layer networks like Binance Smart Chain (BSC), Polygon (Matic), Avalanche, and Solana. The primary attraction of these Ethereum alternatives are low transaction costs and speedy confirmation times, as well as access to new defi tokens belonging to other chains. UX and liquidity have also improved over time.
This past February, DEX volume hit a record monthly high of $72.89 billion – and this month Uniswap is on course to surpass its 2020 total altogether.
The Rise of Hybrid Exchanges
Not to be outdone, some centralized exchanges have diversified their businesses by integrating a DEX. The best example is probably Binance, whose slick decentralized order-matching engine is powered by its own Binance blockchain and Binance Coin (BNB). Given its earning protocol, crypto Visa card, liquidity pools and academy, the tier-one exchange Binance has become a veritable one-stop shop for all crypto investors.
Cryptocurrencies.ai (CCAI) is another emerging hybrid exchange that offers the best of both worlds, giving users access to features such as inbuilt tools for automated trading and risk management, as well as calendars and performance tracking. Such features are accessible via existing AMMs – but only through third-party plug-ins. CCAI also leverages other platforms and protocols to ensure deep liquidity from the debut of their trading platforms. Top exchange Binance serves as broker partner for the forthcoming CCAI centralized exchange, while Project Serum provides the orderbook for its already operational Solana-based DEX, CCAI DEX.
This decentralized exchange has already drawn rave reviews from the Solana community. The underlying technology of a high-performance blockchain capable of handling 50,000 transactions per second (tps) is a strong attraction. Other slick features like Take Profit smart orders, Trading View integration directly in the dex interface and a beautifully rendered Solana wallet make the CCAI DEX a compelling trading venue. With the debut of its utility token and other functionality, like swaps and pools, on the horizon, the cryptocurrencies.ai advanced exchange suite figures to be a powerful one.
Other projects aiming to aggregate fragmented liquidity include OpenOcean, which has facilitated over $1.7bn since launching less than a year ago, and Orion Protocol which describes itself as “the first gateway to the entire crypto market.” Essentially this noncustodial protocol pools liquidity from across the industry, including CEXs, DEXs, and swap pools, with users able to connect their wallet and execute orders without signing up to numerous exchanges.
Because it aggregates various order books, Orion can offer users great prices and low fees, with almost zero spread or slippage.
Exchanges Are Investing in the Cryptoconomy
Aside from building sophisticated trading tools, offering features like copy trading, demo trading and automated recurrent buys, and integrating DEXs into their platforms, cryptocurrency exchanges are becoming major investors in their own right. Whether it’s Coinbase Ventures, Binance Labs, Huobi Ventures or some other cash-rich incubator, these entities are bootstrapping blockchain startups for all kinds of exciting projects.
This refusal to sit still and simply soak up interest in crypto is refreshing, because it indicates a desire on the part of exchanges to level up and deliver more value. Sometimes, exchanges even acquire smaller versions of themselves – as when Binance bought Indian exchange WazirX in 2019. Despite regulatory uncertainty, India could be a massive market for crypto in the years ahead.
Despite the industry’s preponderance of self-professed experts, no-one really knows what lies around the corner in crypto. If recent developments are any indication though, exchanges will remain at the center of the crypto universe.