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Not super knowledgeable on this but Decentralized exchanges exist why are they not more widely used by the crypto community?

aeternum 4y ago
Usability is still not great. Slippage risk is hard to communicate and txn costs were high since they require on-chain txns.
- SparkyMcUnicorn 4y ago
  It all comes down to usability. ETH transaction costs are high, but L2s and side-chains like Arbitrum, Optimism, and Polygon are all quite cheap still.
RobLach 4y ago
DEXs don't interface with state backed currencies, which makes them have limited utility for typical users who want to engage in economies they actively live in.
AkshatJ27 4y ago
Most people use fiat, there is no way to use a credit card to buy crypto on a DEX. Also, transaction fees are usually higher and some coins just cannot be supported unless wrapped, like trading bitcoin on an ethereum DEX requires you to use WBTC or similar tokens, which are usually costly to wrap/unwrap and might even be centralized.
zeroclip 4y ago
They are widely used and process billions per day.[1] There are other problems with DeFi: protocol risk, transaction fees, speed, UX. They are newer and less known than CEXes and most users who buy and hold crypto on FTX or BlockFi do not know how to use the blockchain. Most of these problems can be overcome, like see L2 development, but it will take some time. [1] https://defillama.com/chain/Ethereum https://defillama.com/chain/Ethereum
- bogomipz 4y ago
  Could you elaborate on what exactly is the "protocol risk" in DEX?
  - zeroclip 4y ago
    A protocol is just code, code can have bugs. Another risk is around governance. Some protocols use proxy contracts, so a single developer or team can upgrade them. But they can accidentally push out a bug in a new version. Other protocols like Uniswap opt for non-upgradeable contracts, users have to opt-in to the new version.
edwnj 4y ago
There is no on/off ramps to the fiat world. Other issues like complexity/bad ux are being rapidly fixed but the on/off ramp issue is one thing that technology can't fix. Its a legal issue.
shmatt 4y ago
BlockFI was offering 8.5% APY on deposits. FTX was offering 8% A true exchange, where you just buy and sell, will never pause withdrawals because they won't be acting with these ponzi-like methods A decentralized exchange won't give you free money, so less people will use it. Also the same with a centralized exchange offering you 0% APY and full liquidity at all times. You could build one, but will people sign up?
- dragontamer 4y ago
  > A true exchange, where you just buy and sell, will never pause withdrawals because they won't be acting with these ponzi-like methods Coinbase is also offering APY on its deposits through Coinbase Rewards, as does Binance. This "true exchange" sounds like the no-true-Scotsman fallacy. Literally no one does what you claim. Everyone in the cryptocoin world is doing this "staking" == crappy loans / bonds business.
  - shmatt 4y ago
    I mean, what are they doing to generate you that money, and how safe is it? FTX gave customer deposits to Alameda, without much knowledge I'd guess they wanted Alameda to generate that 8% APY, but customers weren't in the know "literally no one does what you claim", except in the FIAT world, which I see crypto enthusiasts claim FTX was under just as strict government oversight as a FIAT exchange/bank If your point is to say, even Coinbase are risking traders money, then yeah they are. If someone were to build "the TD ameritrade" of the crypto world, I guess they'd fail because they aren't giving away free money
  - dibt 4y ago
    >Coinbase Rewards You are referring to staking. FTX was giving a static yield on deposits. The funding for this came from their marketing budget. Very different from what Coinbase does. >"staking" == crappy loans / bonds business. Staking is not a loan. It is a component of proof of stake networks to maintain security. Coinbase provides stacking services, but all they do is pass the yield onto the customer while taking a cut for the resources required for staking (e.g. AWS bill). Some token networks may market a mechanism as "staking" when it's just a way to keep people from selling. That's a different topic.
herval 4y ago
they are: https://www.benzinga.com/markets/cryptocurrency/22/11/29584737/study-claims-98-of-crypto-projects-listed-on-uniswap-between-2018-and-2021-were-rugpulls https://www.benzinga.com/markets/cryptocurrency/22/11/295847...
root_axis 4y ago
Decentralized exchanges can't offer 0 fee trading.
shuntress 4y ago
The entire point of a cryptocurrency is to be a decentralized electronic currency. Centralized exchanges exist to handle the problems with decentralized electronic currency. If there was a good way to decentralize a centralized exchange, that solution would just be part of the decentralized currency and the exchange wouldn't need to exist.

aeternum 4y ago

Usability is still not great. Slippage risk is hard to communicate and txn costs were high since they require on-chain txns.

SparkyMcUnicorn 4y ago
It all comes down to usability. ETH transaction costs are high, but L2s and side-chains like Arbitrum, Optimism, and Polygon are all quite cheap still.

RobLach 4y ago

DEXs don't interface with state backed currencies, which makes them have limited utility for typical users who want to engage in economies they actively live in.

AkshatJ27 4y ago

Most people use fiat, there is no way to use a credit card to buy crypto on a DEX. Also, transaction fees are usually higher and some coins just cannot be supported unless wrapped, like trading bitcoin on an ethereum DEX requires you to use WBTC or similar tokens, which are usually costly to wrap/unwrap and might even be centralized.

zeroclip 4y ago

They are widely used and process billions per day.[1] There are other problems with DeFi: protocol risk, transaction fees, speed, UX. They are newer and less known than CEXes and most users who buy and hold crypto on FTX or BlockFi do not know how to use the blockchain. Most of these problems can be overcome, like see L2 development, but it will take some time. [1] https://defillama.com/chain/Ethereum https://defillama.com/chain/Ethereum

bogomipz 4y ago
Could you elaborate on what exactly is the "protocol risk" in DEX?
- zeroclip 4y ago
  A protocol is just code, code can have bugs. Another risk is around governance. Some protocols use proxy contracts, so a single developer or team can upgrade them. But they can accidentally push out a bug in a new version. Other protocols like Uniswap opt for non-upgradeable contracts, users have to opt-in to the new version.

edwnj 4y ago

There is no on/off ramps to the fiat world. Other issues like complexity/bad ux are being rapidly fixed but the on/off ramp issue is one thing that technology can't fix. Its a legal issue.

shmatt 4y ago

BlockFI was offering 8.5% APY on deposits. FTX was offering 8% A true exchange, where you just buy and sell, will never pause withdrawals because they won't be acting with these ponzi-like methods A decentralized exchange won't give you free money, so less people will use it. Also the same with a centralized exchange offering you 0% APY and full liquidity at all times. You could build one, but will people sign up?

dragontamer 4y ago
> A true exchange, where you just buy and sell, will never pause withdrawals because they won't be acting with these ponzi-like methods Coinbase is also offering APY on its deposits through Coinbase Rewards, as does Binance. This "true exchange" sounds like the no-true-Scotsman fallacy. Literally no one does what you claim. Everyone in the cryptocoin world is doing this "staking" == crappy loans / bonds business.
- shmatt 4y ago
  I mean, what are they doing to generate you that money, and how safe is it? FTX gave customer deposits to Alameda, without much knowledge I'd guess they wanted Alameda to generate that 8% APY, but customers weren't in the know "literally no one does what you claim", except in the FIAT world, which I see crypto enthusiasts claim FTX was under just as strict government oversight as a FIAT exchange/bank If your point is to say, even Coinbase are risking traders money, then yeah they are. If someone were to build "the TD ameritrade" of the crypto world, I guess they'd fail because they aren't giving away free money
- dibt 4y ago
  >Coinbase Rewards You are referring to staking. FTX was giving a static yield on deposits. The funding for this came from their marketing budget. Very different from what Coinbase does. >"staking" == crappy loans / bonds business. Staking is not a loan. It is a component of proof of stake networks to maintain security. Coinbase provides stacking services, but all they do is pass the yield onto the customer while taking a cut for the resources required for staking (e.g. AWS bill). Some token networks may market a mechanism as "staking" when it's just a way to keep people from selling. That's a different topic.

herval 4y ago

they are: https://www.benzinga.com/markets/cryptocurrency/22/11/29584737/study-claims-98-of-crypto-projects-listed-on-uniswap-between-2018-and-2021-were-rugpulls https://www.benzinga.com/markets/cryptocurrency/22/11/295847...

root_axis 4y ago

Decentralized exchanges can't offer 0 fee trading.

shuntress 4y ago

The entire point of a cryptocurrency is to be a decentralized electronic currency. Centralized exchanges exist to handle the problems with decentralized electronic currency. If there was a good way to decentralize a centralized exchange, that solution would just be part of the decentralized currency and the exchange wouldn't need to exist.