• The crypto revolution was supposed to make finance more decentralized but much of the industry is centralized.
• Binance, Coinbase and FTX have been the giants of trading, creating a vulnerability if those companies ran into trouble.
• Decentralized exchanges (DEX) such as dYdX or Uniswap provide an alternative solution and could get a tailwind from investigations into Binance and Coinbase.
The Crypto Revolution
The crypto revolution was supposed to make finance more decentralized, with Satoshi Nakamoto extolling the benefits of decentralizing the financial system in 2008. However, much of the industry has become centralized with companies such as Binance, Coinbase and FTX becoming giants of trading and vulnerable to regulatory action if they run into trouble.
Decentralized exchanges (DEX), such as dYdX or Uniswap, provide an alternative solution that is not as user-friendly as centralized exchanges (CEX) like Binance but could get a tailwind from investigations into Binance and Coinbase. Dave Weisberger, CEO and co-founder of CoinRoutes believes this will further increase DeFi market share due to protocols being harder to stop than traditional ones.
U.S Regulatory Pressure
The U.S regulatory pressure on both Binance and CoinBase could be positive for DEXs in the long term as it forces more users away from CEXs towards DEXs which are harder for governments to shut down due to their decentralized nature. This would help fulfill Satoshi’s original vision by increasing decentralization of finance while also making it harder for authorities to control or regulate cryptocurrency usage or trading activity.
Obstacles Faced By DEXs
Despite having multiple advantages compared to CEXs there are still obstacles faced by DEXs including being less user-friendly than CEXs which hampers wider adoption among non-crypto enthusiasts who prefer using websites or apps that resemble traditional brokerage software seen in traditional finance (TradFi). Additionally, although protocols used by these types of exchanges are harder for governments to shut down completely they can still be targets for investigation or subpoenas such as when the SEC launched an investigation into SushiSwap’s decentralized autonomous organization (DAO).
Overall, while there are still obstacles preventing wider adoption of DEXs they may receive a tailwind from US regulators cracking down on Binance and Coinbase which could potentially lead more users towards DEX solutions in fulfilment of Satoshi’s original dream – making finance more decentralized