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Question from someone who hasn't been involved in crypto since baby was born in 2021: We all know that this can happen to centralized exchanges and using a DEX

Question from someone who hasn't been involved in crypto since baby was born in 2021: We all know that this can happen to centralized exchanges and using a DEX will protect your assets (the ones that don't go to $0 on their own like LUNA and FTT). In the past, trading was always much more expensive due to the blockchain overhead compared to trading on a CEX, not to mention liquidity problems with smaller alts and DEXs. Is this still the case? Do folks day trade using DEXs for small amounts or are they still limited to longer-term trading due to the overhead?

wmf 4y ago
AFAIK faster and cheaper DEXes keep coming out every few months but not on Ethereum; they're either on L2s or faster chains like Avalanche.
unicornmama 4y ago
AFAIK based on the data from coinmarketcap virtually all trading happens on CEX. Someone prove me wrong.
- pa7x1 4y ago
  https://medium.com/@Ignas_defi_research/2022-state-of-defi-price-performance-tvl-trading-volume-development-activity-and-more-ad928813a070 https://medium.com/@Ignas_defi_research/2022-state-of-defi-p... DEX volume seems to be around 10-20% of CEX volume. But CEX is easier to overstate as it's cheap, sometimes commission-less. While DEX volume always carries a cost.
miohtama 4y ago
DEX market share as a volume was 25% - 33% of spot market during the peak. It might have taken a hit since Terra went down, though. For some trading pair likes ETH/USD it is actually cheaper to trade on DEXes (Uniswap v3) where you get 0.05% fee as opposite to Coinbase that charges you 0.6%. The events like FTX should prod the markets more towards DEXes. Also now there are futures DEXes available like dYdX, Perp.fi and others making it possible for more professinal trades to utilise DEXes.
- lottin 4y ago
  Do these trades involve synthetic USD crypto-coins that are issued by some central party (so 100% not decentralised)?
  - miohtama 4y ago
    Yes as they trade on spot DEX market. However Frax, TerraUSD (RIP) volume is not that huge AFAIK. I think the only synthetic, or fractionally backed stables left are Ohm and Frax. They do not have any significant market share. Most volume is in - USDT/USDC pairs - ETH pairs - BNB pairs I run a website that tracks this stuff: https://tradingstrategy.ai/trading-view/exchanges https://tradingstrategy.ai/trading-view/exchanges
no_butterscotch 4y ago
> Is this still the case? Do folks day trade using DEXs for small amounts or are they still limited to longer-term trading due to the overhead? I'd like an answer to this too. I've been dollar cost averaging into BTC and ETH since the prices are low. But at the same time every exchange I see has fees that eat a large percentage. I know Coinbase allows you lower fees if you're trading big money each month, but I'm not doing that.
yieldcrv 4y ago
blockspace is plentiful and on every chain that isn't Ethereum mainnet, small amounts are traded, a lot of financial activity occurs on Solana at extremely high volume - with the predictable consensus, security and uptime compromises necessary to do that it also occurs on Ethereum Layer2's and other EVMs
redox99 4y ago
Generally DEX will be more expensive. However big part of DEXes costs, which are gas fees, are a flat fee, so if you move large amounts of money it's fairly cheap as a percentage.
- noxer 4y ago
  DEXes do not have to be expensive at all. This is just a side effect of most people building the wrong stuff on the wrong "blockchain". It seem quite obvious to me that a DEX should be somewhere where there are cheap and fast transactions.
  - ChrisClark 4y ago
    Yeah, basically you should be doing all your DEX trades on L2 rollups. Use the security of Ethereum without paying the large gas fees.
    - noxer 4y ago
      Have a look at https://news.ycombinator.com/item?id=33536736 https://news.ycombinator.com/item?id=33536736 There are ofc other solutions where L1 is cheap, fast and secure, Ethereum is just really not the right tech for a DEX.
  - chollida1 4y ago
    > It seem quite obvious to me that a DEX should be somewhere where there are cheap and fast transactions. Interesting, I would have thought that Centralized exchanges would be cheaper and faster. Cheaper because there are no block chain transaction fees. So assuming a DEX and CEX can charge the same fee structure, then CEX's should win as there is no exchange fee added to each transaction. On chains like ETH that matters alot if you trade alot. And same for speed. On a CEX a trade is a database update, on a DEX its a blockchain update. Hard to see how the later can be as fast as the former.
    - noxer 4y ago
      Why should a centralized exchange be cheaper? There is always a middlemen who removes value from the system. >...then CEX's should win as there is no exchange fee added to each transaction. The other way around, the DEX should win as there is no fee at all. If you could make a decentral Ebay there would be no Ebay to take a part of your profit. The problem with transaction fees in many blochchains is that they actually replaced the middlemen with a decentralized middlemen(s) (the miners/stakes/node operators etc.) Now you have a system operated by people who want high fees and user who want low fees. They operators cant really collude because they compete but they know low fees would hurt them all so they basically form an oligopoly without even talking with each other. Ideal the system should be operated by the user so they would all want fees to be low. I dont know if any such system exists but I know the XRPL solved the problem by burning the fees so node operator have no incentive for high fees. This results in a typical Tx cost of less than $0.0001 USD. Any offer on the DEX is just a special transaction and does not cost anything extra. The fee is only a negative incentive so people dont spam transaction. >And same for speed. On a CEX a trade is a database update, on a DEX its a blockchain update. Hard to see how the later can be as fast as the former. This is true a CEX will definitely be faster with current tech and I dont know if that will ever change but for manual trading this is not really a problem. XRPL DEX executes orders about every 3-4 seconds and the consensus mechanism does not allow front-running.
noxer 4y ago
You can trade on the XRPL DEX[1] (The oldest DEX) essentially for free* since it went online. The DEX works like a central limit order book which limits the way you can trade. There are also liquidity problems for many currency pairs as well as counter-party risk if you trade/hold IOUs with a counterpart like for example Gatehub USD stable coins (Counter-party here would be Gatehub so if they go bust Gatehub USD is likely going to be stable at zero). For a more advanced use of the XRPL DEX there is Sologenic[2] which is build on top of the XRPL DEX. [1] https://xrpl.org/decentralized-exchange.html https://xrpl.org/decentralized-exchange.html [2] https://sologenic.org/trade https://sologenic.org/trade *Free as in no one earns money from your usage. There is a tiny fee burnt to prevent spam for each offer/transaction. A typical fee is under $0.0001.
spaceman_2020 4y ago
I traded my way to 500k from a 7k initial investment and I did not trade even a dollar of that on a cex. Even leveraged trades are very efficient on a decentralized platform like GMX.

wmf 4y ago

AFAIK faster and cheaper DEXes keep coming out every few months but not on Ethereum; they're either on L2s or faster chains like Avalanche.

unicornmama 4y ago

AFAIK based on the data from coinmarketcap virtually all trading happens on CEX. Someone prove me wrong.

pa7x1 4y ago
https://medium.com/@Ignas_defi_research/2022-state-of-defi-price-performance-tvl-trading-volume-development-activity-and-more-ad928813a070 https://medium.com/@Ignas_defi_research/2022-state-of-defi-p... DEX volume seems to be around 10-20% of CEX volume. But CEX is easier to overstate as it's cheap, sometimes commission-less. While DEX volume always carries a cost.

miohtama 4y ago

DEX market share as a volume was 25% - 33% of spot market during the peak. It might have taken a hit since Terra went down, though. For some trading pair likes ETH/USD it is actually cheaper to trade on DEXes (Uniswap v3) where you get 0.05% fee as opposite to Coinbase that charges you 0.6%. The events like FTX should prod the markets more towards DEXes. Also now there are futures DEXes available like dYdX, Perp.fi and others making it possible for more professinal trades to utilise DEXes.

lottin 4y ago
Do these trades involve synthetic USD crypto-coins that are issued by some central party (so 100% not decentralised)?
- miohtama 4y ago
  Yes as they trade on spot DEX market. However Frax, TerraUSD (RIP) volume is not that huge AFAIK. I think the only synthetic, or fractionally backed stables left are Ohm and Frax. They do not have any significant market share. Most volume is in - USDT/USDC pairs - ETH pairs - BNB pairs I run a website that tracks this stuff: https://tradingstrategy.ai/trading-view/exchanges https://tradingstrategy.ai/trading-view/exchanges

no_butterscotch 4y ago

> Is this still the case? Do folks day trade using DEXs for small amounts or are they still limited to longer-term trading due to the overhead? I'd like an answer to this too. I've been dollar cost averaging into BTC and ETH since the prices are low. But at the same time every exchange I see has fees that eat a large percentage. I know Coinbase allows you lower fees if you're trading big money each month, but I'm not doing that.

yieldcrv 4y ago

blockspace is plentiful and on every chain that isn't Ethereum mainnet, small amounts are traded, a lot of financial activity occurs on Solana at extremely high volume - with the predictable consensus, security and uptime compromises necessary to do that it also occurs on Ethereum Layer2's and other EVMs

redox99 4y ago

Generally DEX will be more expensive. However big part of DEXes costs, which are gas fees, are a flat fee, so if you move large amounts of money it's fairly cheap as a percentage.

noxer 4y ago
DEXes do not have to be expensive at all. This is just a side effect of most people building the wrong stuff on the wrong "blockchain". It seem quite obvious to me that a DEX should be somewhere where there are cheap and fast transactions.
- ChrisClark 4y ago
  Yeah, basically you should be doing all your DEX trades on L2 rollups. Use the security of Ethereum without paying the large gas fees.
  - noxer 4y ago
    Have a look at https://news.ycombinator.com/item?id=33536736 https://news.ycombinator.com/item?id=33536736 There are ofc other solutions where L1 is cheap, fast and secure, Ethereum is just really not the right tech for a DEX.
- chollida1 4y ago
  > It seem quite obvious to me that a DEX should be somewhere where there are cheap and fast transactions. Interesting, I would have thought that Centralized exchanges would be cheaper and faster. Cheaper because there are no block chain transaction fees. So assuming a DEX and CEX can charge the same fee structure, then CEX's should win as there is no exchange fee added to each transaction. On chains like ETH that matters alot if you trade alot. And same for speed. On a CEX a trade is a database update, on a DEX its a blockchain update. Hard to see how the later can be as fast as the former.
  - noxer 4y ago
    Why should a centralized exchange be cheaper? There is always a middlemen who removes value from the system. >...then CEX's should win as there is no exchange fee added to each transaction. The other way around, the DEX should win as there is no fee at all. If you could make a decentral Ebay there would be no Ebay to take a part of your profit. The problem with transaction fees in many blochchains is that they actually replaced the middlemen with a decentralized middlemen(s) (the miners/stakes/node operators etc.) Now you have a system operated by people who want high fees and user who want low fees. They operators cant really collude because they compete but they know low fees would hurt them all so they basically form an oligopoly without even talking with each other. Ideal the system should be operated by the user so they would all want fees to be low. I dont know if any such system exists but I know the XRPL solved the problem by burning the fees so node operator have no incentive for high fees. This results in a typical Tx cost of less than $0.0001 USD. Any offer on the DEX is just a special transaction and does not cost anything extra. The fee is only a negative incentive so people dont spam transaction. >And same for speed. On a CEX a trade is a database update, on a DEX its a blockchain update. Hard to see how the later can be as fast as the former. This is true a CEX will definitely be faster with current tech and I dont know if that will ever change but for manual trading this is not really a problem. XRPL DEX executes orders about every 3-4 seconds and the consensus mechanism does not allow front-running.

noxer 4y ago

You can trade on the XRPL DEX[1] (The oldest DEX) essentially for free* since it went online. The DEX works like a central limit order book which limits the way you can trade. There are also liquidity problems for many currency pairs as well as counter-party risk if you trade/hold IOUs with a counterpart like for example Gatehub USD stable coins (Counter-party here would be Gatehub so if they go bust Gatehub USD is likely going to be stable at zero). For a more advanced use of the XRPL DEX there is Sologenic[2] which is build on top of the XRPL DEX. [1] https://xrpl.org/decentralized-exchange.html https://xrpl.org/decentralized-exchange.html [2] https://sologenic.org/trade https://sologenic.org/trade *Free as in no one earns money from your usage. There is a tiny fee burnt to prevent spam for each offer/transaction. A typical fee is under $0.0001.

spaceman_2020 4y ago

I traded my way to 500k from a 7k initial investment and I did not trade even a dollar of that on a cex. Even leveraged trades are very efficient on a decentralized platform like GMX.