Bitcoin started out as a technological experiment more than a decade ago. Since then, the global financial markets have undergone a tremendous shift. At the center of the digital currency revolution is blockchain technology which gave rise to the first-ever smart contract platform, Ethereum.
Over the past years, the Ethereum network has become a significant driver offering users the ability to interact in a truly decentralized manner. Decentralized exchanges or DEXs are part of the growing suite of protocols on the Ethereum blockchain that have garnered huge traction. But due to the first-mover advantage, among other things, CEXs or centralized exchanges have continued to perform better despite a flurry of DEXs into the scene.
The battle between the two became more pronounced in 2021 with the advent of other more advanced smart contract platforms. But there’s no denying that both centralized cryptocurrency exchanges as well their decentralized counterparts are one of the most integral vehicles for transacting.
Coinbase and the CEX Narrative
Coinbase, for one, has been a force to reckon with. It is one of the world’s most reputed consumer-facing centralized cryptocurrency exchanges. The company made history after going public in April 2021 when it became the first in the industry to be listed on Nasdaq. Founded exactly ten years ago, Coinbase is often heralded as the biggest crypto exchange in the United States. Its market cap stands near $42.55 billion.
Coinbase saw real growth in 2021, thanks to the bull run in addition to other milestones. Gauging further, IntoTheBlock observed that the exchange reached its highest monthly volume in May 2021, processing around $200 billion. Despite the post-November slump, in tandem with a slew of market corrections, Coinbase has experienced notable growth in the past year and a half.
To put things into perspective, the veteran US exchange processed around $11 billion in transaction volume in May 2020. By the end of January 2022, the exchange’s monthly transaction volume stood at $120 billion, meaning an increase of 1,000% in a period of just a year and a half. This also demonstrates that – the more volume of transactions being processed, the higher the revenue to the centralized exchange and their shareholders. This is because the crypto trading platform charges a fee for every transaction being processed.
Uniswap: The DEX Contender
It was in the year 2016 that Ethereum creator Vitalik Buterin first proposed the idea of a decentralized exchange that would engage in an on-chain automated market maker with certain features. Former Siemens engineer Hayden Adams turned the concept into a functional product a year later that led to the creation of Uniswap. Today, it is known as one of the first DEXs created on the Ethereum network.
Uniswap’s V1 was launched in 2018 and slowly managed to capture the lion’s share in the market in terms of transaction processed….
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