Decentralized Exchange (DEX) Sector Report
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In this report, we provide a brief overview of centralized and decentralized exchanges (DEXs) and discuss two DEXs, 0x, the most popular DEX protocol, and IDEX, the most popular DEX in greater detail. We dig into their structure and explain how they are attempting to address the challenges DEXs experience today.
Today, the majority of crypto asset trading occurs on centralized exchanges like Coinbase, Poloniex, Binance, etc. that aggregate liquidity, custody customer assets, and execute trades. A decentralized exchange, or DEX, is an application built on a dApp platform. The architecture can vary, but at the core, DEXs are non-custodial and facilitate trading via smart contracts. There are currently over 250 DEXs and 30 DEX protocols.
Many believe that assets powered by decentralized technology should be traded on decentralized platforms. This revelation, along with several events (exchange hacks) that have degraded trust in some centralized exchanges, have led to a rise in DEXs.
Today’s DEXs seek to address perhaps the most important pain point in crypto trading — custody of user funds. However, existing DEXs have not yet perfected the custody problem and have simultaneously introduced a plethora of new dangers that need to be addressed before they can begin to compete and coexist with their centralized counterparts.
Read the full report here.
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