The Future of Decentralized Exchanges. A Competitor to Centralized Exchanges, or not?

In the recent light of cryptocurrency and Blockchain hype, decentralized exchanges were positioned by crypto-enthusiasts as the ultimate cure to the financial freedom of millions.

Due to sophisticated technological nature and lack of liquidity of DEXes, there wasn’t a fast and quick adoption of this technology, regardless of its substantial benefits. And the question remains unanswered, will DEXes take over the cryptocurrency market, becoming the primary place for cryptocurrency exchange?

The Current Situation

As we all know, the primary users of these exchanges are mostly programmers, crypto-anarchists, criminals, and other people who are interested in this type of technology. Considering the fact that they are not real traders, nor investors, there simply won’t be sufficient liquidity to serve the market needs. It means that regular traders won’t be coming to a DEX to trade, on the contrary traders will continue working on centralized exchanges due to sufficient liquidity.

On top of that, centralized exchanges provide advanced matching engines, resulting in rapid trades execution which serves the arbitrage needs as well.

Unfortunately, money won’t be coming to decentralized exchanges, because you can’t deposit or withdraw fiat, nor you can’t buy cryptocurrency via credit cards like many centralized exchanges allow their users to do.

Moreover, the liquidity by itself won’t appear overnight, and absence of traders’ initiative draws the whole possibility of positive income back.

Untold Things

From the traders’ perspective, DEXes don’t serve their needs, but who said that this technology should serve only human? Decentralized Exchange by itself can be perfectly used as the automated service for micro-exchanges which take place among Decentralized Applications that should constantly transact for the needs of people.

If this scenario gets played out, then we can see tremendous development of a robotized economy which will be living without any human interaction and influence.

DEX technology will be especially beneficial when there are millions of decentralized applications scattered across such Blockchains as EOS and others.

In the next 3 years, this scenario should play out, and more decentralized applications should flow into the market reviving the decentralized exchanges.

Only then the liquidity as the indicator will be showing the state of decentralized economy.

Government And Financial Institutions

From government and bank perspectives, decentralized exchanges don’t affect financial or national stability in any way due to low liquidity levels and the inability of criminals to launder vast amounts of money quickly.

On top of that, even if some criminals or people will be transacting money through DEXes, it will look like a statistical error for the global economy, rather than a serious threat.

Summarizing all my thoughts, I can definitely say that programs instead of people will use decentralized exchanges technology, and it will have its future but not in the form of crypto-anarchy that everyone has pictured in their minds.

Traders and ordinary people will continue using centralized exchanges due to high liquidity levels and the possibility to use fiat. But anyway, people will significantly benefit from DEXes through decentralized applications and robotized economy that we’ll see in a few years.

Join the conversation in Twitter or LinkedIn. Check out our projects: Attic Lab, Everstake, CODEX Exchange.